Japan’s “parasite singles” flat line spend is causing problems

I am glad it is not just the older consumers who are given strange and in the case of Japan's “parasite singles”, a most unpleasant name.

Today’s FT has an article about this group who are defined as being unmarried women and men in their 20s and early 30s living with their parents with, up until now, lots of dosh to spend on themselves.

Nearly half of Japan's single men and women between the age of 20 and 34 live at home.

Not only are the demographics conspiring to reduce the spend of this group, their absolute numbers declined 5% in the past year, but also they are losing the yen to spend as a result of Japan’s endless period of economic stagnation.

The result of this that sales of those highly priced European-made handbags, shoes and watches are tumbling. Of course none of this should come as a shock for those Japanese marketers who understand basic economics and demographics. Dick Stroud

Britain - vision of Japan’s decade of stagnation

I haven’t written anything about the recession for some while. That doesn’t mean to say that it is no longer important or that it is still not the only show in town for marketers – it is.

There is only so much doom and gloom that you can read and write. Of course recessions create lots of business opportunities but, for most marketers, it is and will be grim.

I am sure you will have seen the countless ads that infected the UK TV for “consolidation loans”. The proposition was simple. You might be up to your neck in debt one of these loans can help by consolidating the debt into a single loan, give you a bit of breather from paying the interest, secure the loan on your house and then charge you an even larger interest rate in the future.

The UK is like the consumer who was duped by this sales line. It has consolidated its debts, into a staggeringly large public sector debt, and the nation is waiting for the first repayment bill to drop through the Treasury's letter box.

Until now it is only the unemployed who have suffered from the recession. The task of paying back the debt will affect everybody.

If you think I am overstating things have a read of this leader in today’s New York Times. Not a happy story. Dick Stroud

Britain may finally be emerging from recession, but many analysts warn that it is a false dawn. In fact, they argue, the economy here is so ravaged by growing debts and ruined banks that it could well be following in the steps of Japan’s lost decade of the 1990s.

The parallels are eerie: Like Japan, Britain enjoyed more than a decade of booming growth, fed by aggressive bank lending and real estate investments. Haunted by the comparison, policy makers have been extra aggressive in using fiscal and monetary levers in hope of preventing the stagnation and banking stasis that plagued Japan for so many years.

Some economic indicators over the last week have been positive: an uptake in retail sales, fewer jobs lost and an export revival. Yet analysts say they may well turn out to be teasers that cloak deeper, more structural flaws in the economy.

In addition to rising debt, the tax base is collapsing and the crippled banking industry has yet to show it can generate profit by lending to companies. And so on and so on and so on…..

Where goeth the UK Residential Care Market

I have a particular interest in the dynamics of the UK residential and nursing care business. It is a business that is part consumer services, part property investment, part B2B and is about to be hit by the UK’s waking nightmare of plunging Government spending.

Mix into this concoction the fact that many care companies are wallowing under a mountain of private equity debt and even more are ill-equipped to tackle the required restructuring of their business models and processes and you have one hell of a mess. But, for the astute and entrepreneurial one hell of an opportunity.

Recently I "What’s going on in with UK residential care” that questioned if the Royal Bank of Scotland supposed £250 million of capital for the Care Industry was for new ventures or to support the numerous ill advised investments it had made in the past. Sorry, I keep writing Royal Bank of Scotland rather than its new name the UK Government (the UK taxpayers are about to own 83% of the bank).

I also wrote “Life’s going to be interesting in the UK care market” that talked about housing 21’s takeover of a domiciliary care company and what this means for the industry.

I have just finished reading two articles in the Health Investor (sorry subscription only). One of these quotes a lot from a report by Colliers that paints a rosy view of the industry, even though the profit margins are in decline.

What interested me was the correlation between GDP per capita and weekly fee for those in residential homes. As you can see the same strength of relationship does not exist with nursing homes. If my future business success was based on the healthiness of the UK's GDP per capita I would be seriously worried. This is exactly the emotion of the other article, as can be seen from this quote.

Professionals are nervous, individuals are nervous and the patients are nervous,” says Robbie Burns, chief executive of Clinovia, a home healthcare firm owned by Bupa. “There is an almost surreal nature to the situation – how banking systems can implode overnight is beyond comprehension to most people.” And the industry has every right to feel nervous. The latest government intervention to part-nationalise the UK’s leading banks is estimated to push public sector debt to above 50% of the annual national income.

Somehow I don’t think this is the last I will be writing about this subject. Dick Stroud

What, more importantly, Who is a Homepreneur?

Homepreneurs are small business owners running viable enterprises from their home that provides at least 50% of their household income by selling products and services not just locally, but nationally and, often, around the globe.
In the US there are 6.6 million such businesses that employ over 13 million people. 35% of homepreneur businesses generate more than $125,000 in revenue; 8% more than $500,000. These are not pocket money outfits!

What interests me is the demographic profile of this group, according to a research study:

• 69% male
• 52% were over 55 or older and only 6% were less than 35.
• 46% of homepreneurs completing college.

This looks to me like a distinct market, somewhere between a mini-SME and a consumer, that is predominantly 50-plus, that companies should be addressing. You can download a report that gives more info about this group or read about them in Business Week. Dick Stroud

Thought for the day – Understand the cumulative effects of the recession

Just in case the sprouting green shouts of the recovery are making you feel too cheerful I thought I would write a few words of doom and gloom.

Seriously, I think there is an issue that we are not discussing and one that will have a big impact on marketers - the cumulative effects the recession on the real wellbeing of people and their perception of wellbeing.

Let me give you an analogy. Most moderately health people can walk 15 miles in a day. At a push most people can do it from two days. Come day ten of continuous walking a lot of people will have a given up, either because of physical problems but most likely they will have run out of stamina.

This recession and its multiple mutations are going on for a long time. Just imagine how things will look at Xmas 2012 if (when) we have had another 2.5 years of high unemployment and anaemic growth and generally bad economic news.

Why do I reckon that we are in for multiple marathons and not a quick 100 metres dash?

This is a summary of an article in today’s FT (Economic cost: Crisis leaves lasting scars). Afraid it is a subscription publication.

The losses caused by the recession (2007 to 2010) is equivalent to 5% of all of the loans and securities held by the financial institutions in US, Europe and Asia and is the same proportion of the value of the total output in the world in 2009. You don’t get over that in a few dozen months.

The IMF states in its latest global financial stability report, “US domiciled banks have recognised about 60% of anticipated write downs, while Eurozone and UK-domiciled banks have recognised about 40%”. In other words there is more pain to come in the financial sector.

From the consumer’s perspective life is just as grim. The IMF reckons that, incomes around the world will be about 10% lower in 2010 than was expected as recently as three years ago.

Any permanent loss of output will hit households hard over the coming years, as everyone has to adjust to the fact that the world is poorer than expected.

But the scars will be permanent and the path of output is likely to be permanently lower than had been expected.

If I am right then you had better be planning for a marathon not a sprint. If I am wrong then tell me why.Dick Stroud

The finances of the over-50s under pressure

Yesterday’s media was full of bad news about the finances of the 50-plus.

The BBC covered the research from Scottish Widows that found that those retirees with outstanding non-mortgage debt owed an average of £7,344, up from £6,732 in the same poll a year ago.

Also, it is getting harder to ditch the financial burden of children with 7% of retirees stating they are still paying towards the upkeep of their adult children

The most concerning ‘fact’ was the finding that 15% of retired people were also still paying off a home loan, with an average debt of £50,100, up £8,000.

The same research is covered in the Daily Telegraph except this time the focus is on the way the Finance Industry is reducing the maximum age they will lend to, with many introducing a cap of 65 years old.

As a result, retired home owners with a mortgage are struggling to find new deals and face being evicted from their properties if they do not have the cash to pay off their remaining home loan with one lump sum. I suspect there is a bit of journalist licence in this statement.

Finally, The Daily Mail reports the way the recession means “millions of people” are having to delay their retirement plans.

The paper says:

Nearly two million people have been forced to put off retirement after seeing their pension funds plummet.

More than a third of those in jobs and over 55 plan to keep working until the stock market recovers, pulling their retirement income back up with it.

Almost a quarter of this age group now expect to work beyond the state pension age of 65, while 32% admitted they were not prepared at all for retirement.

All in all, yesterday was a good day to miss reading the papers. A couple of caveats. Yes, yes there is truth in all of these reports but be beware of PR research since you be sure it will be presented to favour the company involved.

Secondly, don’t generalise from the specific. The UK has a lots of young people who are not in employment or training but a lot more who are.

Still, none of this is good news. Dick Stroud

Are you too young to remember ‘normal’?

I am getting a bit of a reputation for being a doomster. I am not. I hope I am just being realistic about what is happening with the economy – for that read the US and UK. These countries may have very different health systems, if you believe the babble in the media, but unfortunately they share many of the same economic problems.

This comment from Wal-Mart’s CEO (Mike Duke) makes for scary reading.

"Overall, our customers are more disciplined in their spending -there's a “new normal” now where people are saving more, consuming less, and being more frugal and thoughtful in their purchases."

Some economic indicators are definitely looking on the up (Japan, France and Germany are showing signs of life) but consumers are facing weak wages, default, unemployment and eroding asset values.

With private consumption accounting for roughly 70% of U.S. economic activity, a recovery without the consumer doesn't promise to be much of a recovery at all. Remember the US economy has lost over 6.6 million jobs since the recession began, which is way above the job losses that we are used to seeing to reach a peak of 12% by the second quarter of 2010.

I reckon the past dozen or so years have been anything but normal. Once the economic oscillations have subsided, the resting place we reach will be a far more austere than we have known for a long time. That doesn’t mean there will not be loads of marketing opportunities, but marketers basing their strategies on the good times (i.e. the old normal) returning are in for a long wait. Dick Stroud

Don’t take statistics at face value – especially when they are about employment

Last week I wrote about the unemployment data in the UK and gave the impression that whilst all was not hunky dory with the over-50s it was youth unemployment that was creating the major problems. I was, I am ashamed to say, following the media trend of focusing on Yoof. Laurie South, who runs PRIME, contacted me to put the situation straight.

This is a summary of what he said.

Though both groups have a hard time in a recession, oldsters who drop off the employment ladder are having a harder time even than the youngsters taking their first steps onto it. It is this story - about the difficulty that older have finding work, that is rarely told.

Too many commentators appear to have rushed in and grabbed the first figure they could find (I hang my head in shame), so anxious were they to “expose” a huge rise in youth unemployment. They all made the elementary error of assuming that those who were economically inactive were all unemployed and completely forgot that nearly one million people aged 18 - 24 are in full-time education.

When the data is adjusted for full-time education amongst the 16/17 year olds and the 18 - 24 year olds, it is quite apparent that these cohorts are faring betting than others.

That is not to say that everything is rosy - one person in ten aged 18 - 24 economically inactive is not good news. But compare it with worklessness in the 50 to State Pension Age cohort. One in four is economically inactive in this age group according to these data.

So there you are. Thanks Laurie for your note and the detailed analysis of the data. Dick Stroud

Business opportunities in the Care Industry

A UK care charity, providing care homes for the elderly, is the first British charity to attempt the takeover over a listed company.

Housing 21 (the charity) is preparing a share offer to buy Claimar Care, the heavily indebted care services provider. Like a lot of care companies, Claimar was suckered during the crazy period, prior to the credit crunch, when it appeared that credit lines were infinite. It now finds itself wallowing in over £21 million of debt. There are a lot of Claimars around.

So here we have a boring old charity taking over a listed company.

The Care Industry is ripe for more of these acquisitions as the pressure on public spending screws the amounts of funding local authorities can pay for elder care.

Look at this story that shows how local authorities are itching to cut expenditure on care services. This is going to put severe pressure on the business models of the care companies. Dick Stroud

Challenges for the pharmaceutical industry

How about being a marketer in this industry and working in Japan.

You would think that all would be rosy because of the country's fastest, although healthiest, ageing population, but no.

Government policy requires drug prices to be cut once every two years, as part of drive to combat escalating medical costs. In 2006 and 2008, average price cuts were 6.7% and 5.2% respectively. In addition, the health ministry has a target to increase the use of generic drugs – copycat versions of patented drugs – to 30% by 2012, up from today’s 16%.

I reckon there are a lot of governments watching how things work out in Japan since all of the developed world has the same problems.

The financial pressures of the ageing population added to the residual effects of the credit crunch will change the rules of engagement between industry and Government. Certainly in the drug's industry. Dick Stroud

Death of the final salary pension scheme

Understandably, the young think pensions are a complex and boring subject. Not so when your age begins with a 5 or a 6.

One of the top four, maybe the most important, factor affecting the ability of older people to keep spending is the size of the private pension. The state pension, in the UK just about buys the absolute essentials of life; the private pension enables people to live.

The pension that pays the most and has the least risk for the individual is the final salary pension. No worry with this type of pension about the chaos in the stock market, the payments just keep coming, irrespective of what is happening in the world.

There are now only three companies left in the FTSE 100 that provide this type of scheme for new employees - Cadbury, Diageo and Tesco. You don’t need to be a genius to calculate the 97% don’t.

If you add up the total deficit of all of UK FTSE 100 pension schemes you come to an astonishing figure of £96 billion - more than double the amount time last year. The deficit in all of the company schemes is now above £200billion with 88% of the country's 7,400 defined-benefit pension schemes facing a shortfall.

It is not surprising that PricewaterhouseCoopers found that only a quarter of employers offering final-salary pensions intend to keep the schemes open to existing members

A decade ago it was the general view that the UK had one of the best occupational pensions schemes in Europe. We Brits carped on about the fact that we had more money saved in pension schemes than all the rest of Europe put together. What a difference a decade makes.

What went wrong? Back in 1997 the UK’s Chancellor of the Exchequer was a certain Gordon Brown who stopped companies getting tax relief on their pension fund’s investment income. This meant that it became increasingly costly to provide high grade pensions. Result. Companies started closing the schemes. Compound this decision with the decline in the value of the stock market, which is showing a negative real return over the last decade, and you can see why corporate pensions are in such an unholy mess.

If things weren’t bad enough, Gordo, now the Prime Minister, changed the tax treatment of pension plans again, by reducing tax relief for top-rate taxpayers.

Why am I telling you this, other than a tad of personal annoyance? Each age cohort reaching retirement will be materially less well-off than the previous one. Worse than that, to provide even a basic level of pensions, consumers will be forced, via taxation, to increase their contributions. Remember, money paid to pension funds doesn’t buy flat screen TVs.

I nearly forgot. None of this applies to Government workers, who continue to receive the Rolls Royce of pension schemes, paid for by the poor saps in companies.
Dick Stroud

China’s ageing population will big business

Any numbers about the Chinese market are staggeringly big.

For instance, senior citizens in China will spend £122bn in 2010. Some 143 million adults in China were over 60 years of age in 2005. By 2050 this will increase to 438 million.

This article is a rare insight into the marketing challenges of this vast market. Dick Stroud

The Leaner Baby Boomer Economy

This is the title of this week’s US edition of BusinessWeek

I reckon the journalist who wrote the lead article (David Welch) has done a good job. I urge you listen to the podcast of his interview about the article.

The basic premise is that times are bad and despite the optimism of Boomers they are going to be cutting back on their spending. Nobody knows for how long or how deep the cuts will be but it clear it will have a serious impact. There are lots of good examples of how companies are responding including Mercedes and Starwood.

My only issue with the article is that makes the assumption that these companies have been specifically targeting Boomers. The truth is that they have taken Boomer business for granted and are now feeling the pinch when it starts to decline.

As the journalist says, there isn’t much point trying to target other generations since Gen X and Y are equally, if not worse, off. Maybe the result of this will be that companies have to start to really think about marketing to the Boomer generation.

There is another feature on the BusinessWeek site where the guys who started the new US 50-plus agency give their views about Boomer advertising campaigns. Nothing much new but worth a quick look. Remember, listen to the podcast. Dick Stroud

The old have seen it all before

McKinsey has just published a paper about how the spending behaviour of US consumers is changing and concluded that after two decades of unsustainably high levels it is returning to where it was in the past - much lower.

The bit of the research that really interested me was the difference in the expectations of how the stock market will behave over the next 30 years. Of course nobody has the faintest idea, but answering this question is a good proxy for people’s optimism about the future and the extent to which they perceive today’s economic problems as transitory. The chart says it all.

McKinsey concludes.

Finally, the historically poor returns of US equity markets during the lives of investors under the age of 45 may be creating a generation of equity-averse consumers. Less than half of US respondents believe that the stock market will produce returns above inflation over the next 30 years. Eighty-five percent of consumers from 36 to 45 believe that it won’t.

What a fascinating conclusion. Do the young know something the old don’t? Methinks not. This is all about the dent this recession has created to the risk averseness of the younger age groups. A factor that will be around for a long time to come. Dick Stroud

The biggest Ponzi scheme of all time

There’s lots of stuff being published about Madoff and how his Ponzi scheme was the biggest of all time. He might have burnt through 20 Billion, some say 50 Billion, whatever, it's a big number.

Compared with the UK Government, Madoff hadn’t got past page one of the Idiots Guide to Ponzi schemes. He was an amateur, not even worth a footnote in the history of Ponzis.

The article in the Sunday Times by Dominic Lawson spells out the unbelievable mess the UK is in because of the ageing population and the unwillingness of the Government to have done anything about its consequences other than make matters a hell of lot worse.

Mr Lawson quotes a European Commission report, about The Sustainability of Public Finances, dated 2006 (yes 2006) that said:

The United Kingdom has been placed in excessive deficit procedure and the European Council has recommended that the United Kingdom bring the deficit below 3 % of GDP by the financial year 2006/07 at the latest.

As a result of the weak fiscal position in recent years, the debt/GDP ratio has risen by around 5 % of GDP in three years, to 42.8 % of GDP in 2005 (42 % for the financial year 2005/06).

Do you know what the debt/GDP ratio is now? Come on have a guess. You won’t believe it? Trust me it is a big, big number. OK, double the figure in 2005 and add a bit (87%).

Lawson goes on to say that the IMF says that the

Fiscal headache of the credit crunch is as nothing to the migraine which, absent a change in policies, is about to pulverise us: it states that in the period between now (yes, that is 2009) and the middle of the century, the fiscal impact of the credit crunch will be about a tenth of that caused by the demographic crunch.

Let me spell this out for you. The Ponzi scheme we have been living through over the past couple of decades, but especially since the mid 1990s, has been paying Jo Public a ridiculously large amount compared with the money contributed.

Everybody has been living in Alice in Wonderland. The Government was able to position itself as the wise investor and manager of the nation’s wealth and Jo Public has done pretty well with zillions of new jobs created in the Public Sector and a continuous stream of initiatives, interventions, and policies to make everybody feel happy.

It was all a sham. Just as the credit crunch caused Madoff's scheme to collapsed so it has with UK New Labour Ltd. The scheme is collapsing in front of our eyes and guess who is going to pick up the tab. Jo Public, Jo Public’s kids and their kids. What a mess.

Marketers need to start preparing for how the will exist and thrive in a low growth, austere economy. Better start today. Dick Stroud

The Economist survey on ageing.

I reckon The Economist is fantastic value for money.

Each week, in one publication, you get a distilled summary and interpretation of the important things that are happening in the world – all for the princely sum of £100/year.

OK, advert over.

This week’s edition has a special survey on the ageing of the world’s population. I have had a quick scan at the online version and it looks great. Definitely worth purchasing.

In its section about selling to the older demographic it perfectly summed up the situation.

The hardest thing about selling to older people is that they are such a heterogeneous group. Someone in his 70s may be in frail health and living in an old folks’ home; or he may be running for president of the United States, as John McCain did last year. There are many shades of grey.

You can say that again. Isn’t it a terrific photo on the cover? Dick Stroud

Is the public sector a major customer – be worried be very worried

Imagine you are in a boat that has just survived a horrendous storm.

Bits of rigging are broken, the galley is in a mess but you are all still alive. The sun is breaking through the clouds and you and crew give a collective shout of joy. You look over your shoulder and see on the horizon, what looks like a solid black line of clouds.

You look again and it appears to be rapidly approaching. You should be worried but you guess that if you survived one storm what more can go wrong. Big mistake. Big. Huge.

Two stories in yesterday’s press should send a shudder down the spines of all companies that get a significant amount of business from the public sector. That includes a lot of businesses that are dependant on local authority spending to provide services to older people.

Quote 1. PricewaterhouseCooper accountants said that whichever party wins the next election, there will have to be cuts of around 15% totalling a huge £22 billion. PWC’s John Hawksworth said: “Public spending cuts may need to be greater than either party is admitting. “If health is protected then other departmental spending would need to be cut by around 15% in real terms.

Quote2. More than half of UK jobs created in the business services sector during the past five years will be axed by 2011, a study suggests. About 334,000 jobs will be lost in the sector because of the credit crunch and recession, the Centre for Economics and Business Research (CEBR) said. Firms who worked for the public sector would suffer as spending by government bodies are tightened.

The UK has vast array of companies that owe their existence to the past decade of massive government spending. For a lot of these are quasi-marketing companies it is time to batten the hatches, look for new markets and pray. Dick Stroud

Spending power of the 50-plus

I have given up blogging about the economic importance of the 50-plus on the basis that everybody knows all about that and it doesn’t need it to be endlessly repeated.

Yesterday, I had a chat with a marketing agency about some work they are doing for a major international company, I wont say what industry because that will identify the company, but it appears that their marketing staff are unaware of the economic clout of their older customers.

This article in Media Post states again the sort of facts that I had assumed all marketers understand – clearly that is not the case.

• People 50-plus earn $2.4 trillion annually compared to $1 trillion for the 18-34 group.
• According to McKinsey, people 50+ generate 41% of all disposable income.
• They buy 60% of all packaged goods, over half of all new cars and spend 75% more per vacation than consumers under 50.
• In 2007, people over 50 spent 3.5 times the national average holiday shopping online.

I don’t expect these stats will make a jot of difference to marketers who are still institutionally youth-centric but I guess they still need to be repeated. Dick Stroud

50-plus less likely to lose their job during the recession

Thanks to Rick Hartley for telling me about this factlet. A few days back I wrote about the: “Resilience of employment amongst the 50-plus.”

In the UK it appears that the young are having a worse time of things, as far as remaining employed during the recession, than the 50-plus. Getting employed again, having lost a job, might be a very different issue.

The US appears to be following the same course as is demonstrated by this fact

The only segment of the population that is gaining jobs is the 55+ age category. This group gained 224,000 net new jobs in May while the rest of the population lost 661,000. In fact, over the last year, those folks 55 and up garnered 630,000 jobs whereas the other age categories collectively lost over six million positions.

"Moreover, the number of 55 year olds and up who have two jobs or more has risen 1.1% in the last year, the only age cohort to have managed to gain any multiple jobs at all.

I have no idea why this is happening but it is a very important issue for marketers who are trying to understand the result of the recession on their customer base.

It would seem that we can add to the usual list of reasons why the 50-plus are an important group the fact that they are more likely to remain employed. Dick Stroud

Who is having the best recession – the young or the old?

OK, the recession is a nasty thing, we are all agreed upon that fact.
Who's having it the worst - the old or the young?

It is the job of pressure/campaigning groups to paint their members as the people suffering the most pain, but what are the facts?

Look no further and download this brilliant document from the ONS. The answer seems to be that young are the ones who are really suffering. A few factlets.

• Employment rates for people over state pension age continued to rise, driven by increasing employment rates for women: over the year to March 2009, rates for women aged 60 and increased by 0.5%.
• Young people have experienced the largest percentage point increase in unemployment rates compared with other age groups: in the year to March 2009, unemployment rates for 18-24 year olds increased by just under 4% to 16.1%.
• Claimant proportions have increased for all age groups but young people were still the most likely to be claiming Jobseekers Allowance: in March 2009 (7.6%).
• Redundancy rates for young people have increased more than for older age groups: in the three months to March 2009, the rate for 16-24 year olds was 12.7% higher than the previous year compared to a rise of 7.6% for 25-34 year olds.

Looks like life might be getting tougher for brand managers relying on the Yoof Market . Dick Stroud

Recession and ageing population debt

The vast bulk of marketers are not taught (or incentivised) to think strategically. Strategy is the time when this year’s marketing comms budget finishes.

For those marketers who are still employed, which is the large majority, the recession is feeling a bit like a bad hangover that went on longer than normal but is beginning to feel like history. Ahhh

The lead article in this week’s Economist is all about the world of tomorrow that is dominated by debt. I will not do the magazine a disservice by attempting to summarise its arguments. Here are the first 200 words of the editorial.

Marketers had better start thinking about the implications of working in Debtland. Dick Stroud.

The worst global economic storm since the 1930s may be beginning to clear, but another cloud already looms on the financial horizon: massive public debt. Across the rich world governments are borrowing vast amounts as the recession reduces tax revenue and spending mounts—on bail-outs, unemployment benefits and stimulus plans.

New figures from economists at the IMF suggest that the public debt of the ten leading rich countries will rise from 78% of GDP in 2007 to 114% by 2014. These governments will then owe around $50,000 for every one of their citizens.

Not since the second world war have so many governments borrowed so much so quickly or, collectively, been so heavily in hock. And today’s debt surge, unlike the wartime one, will not be temporary. Even after the recession ends few rich countries will be running budgets tight enough to stop their debt from rising further. Worse, today’s borrowing binge is taking place just before a slow-motion budget-bust caused by the pension and health-care costs of a greying population.

By 2050 a third of the rich world’s population will be over 60. The demographic bill is likely to be ten times bigger than the fiscal cost of the financial crisis.

The Economist June 13th 2009.

A joke is a joke but this is a pantomime

This is blog posting is about the marketing environment in the UK and is not specific to the 50-plus.

If you are a Brit you will know that we are living in weird times. Sorry, that is a daft understatement. We are living in terrifying times.

If you are gazing at the UK from overseas you might be picking up on the horror of a country where the 'ruling' political party is in terminal meltdown.

The news is dominated by the comings and goings of Labour MPs as Gordon Brown convulses and staggers to his ultimate demise. It is an unedifying and desperate sight.

During the past month we (Brits) seem to have forgotten that we are living slap bang in the early phases of long drawn out recession. Yes we have lots of “green shoot” stories and indeed things have stopped deteriorating at the same pace. Unfortunately, the UK’s future, for the next 5, maybe 10 years, will be one of a country with a horrendous fiscal deficit (i.e. we are spending far more money than we generate).

Last week Martin Wolf, chief economics commentator for the FT said: “The debate on how to curb public spending is, quite simply, the central issue in UK politics – the issue to be debated; it is not MPs’ expenses. It is how to share out the seemingly inescapable pain.”

Marketers in the UK, and US, had better start living in a world where taxes increase and government spending declines. Not for a year but for a decade. You had better be sure you know how this is going to affect your target markets.

If you think I am being overly pessimistic read this report from Policy Exchange and the IMF’s view of the UK’s future prospects. Dick Stroud

Even more about the recession and the 50-plus

Today’s FT has an article about the “increase in part-time pensioners”. What it is really about is the need for older people to keep or restart working to make ends meet. Here are a few of the tasty bits of information

• Norwich Union said it had seen nearly a 50% per cent increase in people taking income from their pension while leaving it invested in the stock market, compared with a year ago. It believes this is evidence that more people are phasing their retirement.
• Scottish Life and Standard Life are seeing more people than usual were phasing their purchase of an income from their pension.
• A report on the impact of the recession on older workers, to be published next week by Help the Aged and Age Concern, will show 60% of the 50-plus may have to work longer than planned because of the downturn.
• An economist at Architas, Axa's fund management company, estimates that people will have to work a further six years on average in order to have the same level of income in retirement they would have had before markets crashed.

Of course none of this applies the public sector workers who receive their pensions irrespective of what happens to the economy.

Unbelievably, one of the reasons why people in the private sector will have to work longer is to enable government employees to retain their ludicrous pension rights.

If you detect a note of anger/contempt/envy/disgust, you are right! Dick Stroud

US consumers reconsider retirement

McKinsey has just published some research about how the recession has affected Americans views about when they intend to retire.

The company publishes something it calls the Retirement Readiness Index. This measures the financial preparedness of households to retire. It is currently at 63, whilst 100 represent the level necessary to maintain a current standard of living. A figure of 80 represents what is is necessary to avoid making large reductions in spending on basics needs such as housing, food and health care.

The above chart shows the attitude of different types of people to their retirement plans.

Note that the high net worth group is the one intending to delay their retirement the longest.

What does this mean? I guess it is a combination of two things. The high net worth group probably has more opportunities to extend their period of time working AND they understand the dire nature of the way the recession has impacted people’s wealth. The Mass Market is living in cloud cuckoo land. Dick Stroud

The UK recession is good for lots of people

All is not doom and gloom.

The way the recession is affecting consumers in the UK is nothing like the previous bad times.

The economic pundits keep comparing it with the really bad times we had in 1990 but as this chart from the excellent presentation from Lord Turner at the FSA shows, interest payments are now much smaller as a percentage of income than back then.

In his speech he says

The extent to which mortgagees have benefited from this fall has been highly variable.

Some – with tracker mortgages – are enjoying spectacular decreases in mortgage interest payments, some much milder benefits, but only a minority of people (for instance, among subprime borrowers coming off very low fixed-rate deals) are likely to face a material rise in mortgage payments. And on average the effect is very significant, with total household disposable income after taxes and mortgage interest payments, actually up 6% over the year to Q4 2008.

Falling house prices may shift many people into negative equity, and a rise in unemployment will produce an increase in arrears and defaults, but compared to the early 1990s, we are less likely to see mortgage repayment problems among the vast majority of people who, even under the most extreme forecasts for unemployment, will still be in a job.

The distinction between the employed and the unemployed in the UK is huge. You might be employed and feeling grumpy and frightened about the future but actually you are doing financially OK - even more than that you might be doing very well.

If you are unemployed then the chances of you getting a new job is remote and you are really feeling the pain.

Marketers need to understand the difference between real and perceived pain and adapt their campaigns accordingly. Dick Stroud

What do the rich look like online?

Looking for US online consumers with deep pockets – look no further. Over 40% are in the age group 35-54 and 36% are 45+. This is according to eMarketer that has rehashed numbers from comScore.

I wonder how this profile matches up with the target age groups of most online properties?

Thanks to BitBriefs.com for referencing these stats. If, like me, you are interested in factlets then it is worth checking out. Dick Stroud

Retirement at the Tipping Point

This report has been produced by Age Wave with research from Harris Interactive.

Well worth reading since it provides interesting contrasts as to how the recession has affected different generations - as shown in this example.

So there you are Mr & Mrs or Ms Boomer and you find that it will take 6.3 years to replace you net wealth because of losses on the stock market. How do you feel about that?

OK, it will take your Millennial friends and relations a bit longer but then they have time on their side.

I guess you can take some comfort that you are not one of the Silent Generation (dreadful name) who have even less time than you. You can argue with the report’s methodology but it does provide a lot of interesting ideas about the recessionary effects on the US consumer. Dick Stroud

Winners and losers from the recession

Sometime in the future, when the recession seems like a bad dream, which countries do you reckon will be the ‘winners’ and ‘losers’ from these uncertain times?

The latest poll of senior executives, published by McKinsey, doesn’t leave much room to doubt. Looks like the soon to be fastest ageing country on the planet, China, will be where it is at - India not being far behind. Looks like bad news for the US. Dick Stroud

The effects of the recession are tiny compared with population ageing

The International Monetary Fund estimates that the G 20 nations will, as a result of the recession, have increased their national debts by an average equivalent to nearly 25% of gross domestic product between 2007 and 2014. That is a lot of money.

BUT, to 2050, the cost of the economic crisis will be no more less than 5% of the financial impact created by the ageing of their populations. As the IMF says, “in spite of the large fiscal costs of the crisis, the major threat to long-term fiscal solvency is still represented, at least in advanced countries, by unfavourable demographic trends”.

This factlet is taken from a long and detailed article in today’s FT. It is hard to come to grips with the enormity of the effects of ageing on the world’s major economies.Dick Stroud

Residual effects of the recession

I know it is too early to start predicting the residual effects of the recession upon consumer behaviour but that doesn’t stop me thinking about it.

Marketers should certainly be casting their eye to the day when the can stop worrying about keeping their jobs and start to focus upon making sense of the carnage that is their customer base.

Neither of these factlets are specific to the 50-plus but both relate to this age group as any other.

AARP has just published a report: "Economic and Health Insecurity: A Survey of Washington Voters 18+ on Current Legislative Issues.” Interesting to see that AARP has cast its research net outside its customer base.

The report is full of data – here are a few things that caught my eye:

• 45% say they will consider delaying retirement if the economy does not improve over the next 12 months.
• Those currently retired, 18% say they will re-enter the workforce if the economy does not improve.
• 34% are helping a family member pay their bills
  

Research released from McKinsey found that LinkedIn’s year-on-year growth is up nearly 200% in the United States and it now has more than 35 million members as the managers use social networking as a means of finding work or linking in with a network for support to help if the ‘release’ letter/e-mail arrives. It is not just in the US where social networks are being used in this way.

These are a couple of unrelated examples of changes that are stirring in the mind of consumer.

There will be a lot more significant changes to occur before the recession abates. Perhaps we should start talking about the pre-R consumer and post-R consumer. My bet is they will be mighty different. Dick Stroud

Sandwich generation + Credit crunch = Babygloomers

The Daily Telegraph has researched a sample of 1,800 people and discovered that 8% were giving their parents cash. From this it has deduced that: “More than three million people have to help their parents financially as the savings crisis engulfs a generation of Britons”.

Then the argument makes a bit leap of logic to conclude that the reduction of interest rates has meant that a lot of older people are having financial problems that their adult children have to solve. In addition, the same parents have to fund their children.

Bottom line the Sandwich Generation have always had a rough time of it but the financial chaos has made it a lot worse.

I doubt if the Telegraph’s research holds up to much scrutiny but the conclusion is probably right.

What the newspaper didn’t go on to say, as it should, is that this situation creates a horrible multiplier affect if the person in the middle of the sandwich looses their job. It doesn’t just impact them but their kids and parents. What a sorry state.

During these troubled times it is too easy to end a blog post on a negative note. Some companies keep on prospering - especially those that rely on the one thing that never changes - physiological ageing. The division of Smith & Nephew, with the marvellous name of ‘Wound Care’ that makes artificial hips, and stuff like that, is performing well. Dick Stroud

Quantitative easing explained

Central banks have lowered interest rates in the forlorn hope that it will get Jo Public breaking out their credit cards and the banks resuming doshing out buckets of credit. It hasn't worked.

Yesterday the governor of the Bank of England gave a press conference to tell us what we already know – the recession is bad and getting worse.

There was also something else he sort of said but couldn’t exactly get the words out – the UK is about to follow the US and start “the printing presses rolling”. In economics speak it is called “quantitative easing”.

What has this got to do with 50-plus marketing?

Well, the success or failure of this approach could lead to a fundamental realignment in the wealth profile of the generations. If the process goes wrong it will unleash inflation that will devalue the wealth of the older person. It will devalue your wealth as well, but if you are young you are less likely to have as much cash as your parents.

The US has gone down this path, the UK is about to start and my guess is that other countries will follow. What amazes me is how few people have the faintest idea what it will mean and how it will work.

Why not spend 3 minutes of your life looking at this animated explanation in the FT. Even if you have to take a free registration it is worth the effort.

If you want a more personal reason for understanding QE then think about the admiration from your fellow marketers when you drop it into the conversation at your next marketing meeting. Dick Stroud

How is the recession for you?

You have to give to the guys at McKinsey, they really do some fascinating research. I think they are in a league of their own.

This posting is nothing specifically to do with the 50-plus their behaviour will do much to determine how things turn out when the history books of this recession are written.

The table shows how the profitbility of US companies changed during the four previous recessions. Not surprisingly the IT industry had a bad 2001 recession (the dot.com bubble) but then finance did OK. Let you into a secret, Finance will be the IT of the 2008/?? recession. So where do you put your money – Healthcare – Consumer staples? Dick Stroud

The elephant in the room

Another day another Boomer conference.

This morning my inbox contained yet another press release about a “Boomer Summit”. The first few paragraphs contained the usual mandatory stuff demonstrating the importance of the older market.

Business leaders and marketers seeking baby boomer customers will discover new strategies, tactics and markets to reach the 78 million baby boomers at the What's Next Boomer Business Summit.

Baby boomers remain the most important demographic for marketers, according to a survey by the Marketing Executives Networking Group (MENG). Seventy-eight percent (78%) of the executives rated baby boomers the most important demographic -- up from 72% last year.

With today’s economic problems I wonder if anybody really gives a damn about Boomers. They should, but I doubt if they do.

There is a fine line between becoming obsessed with the economic ills and ignoring them, or playing down, as if it were just a tiny perturbation. As I have already written, it appears that the Brits are the gloomiest bunch about the lasting impact of the downturn. If you compound that with being an instinctive pessimist then it probably explains my negative attitudes (with a capital 'N').

But, from all I have read there is only one thing of two things on the mind of companies. For the vast majority: “how to get through this messy time”. For a very few: “how to take advantage of it.” I don’t think there is much in-between.

How companies react to the older market can be pivotal in both of these strategies. Elephants are delightful creatures until they inadvertently stand on your head. My clients are only concerned with avoiding a headache – I cannot believe they are alone. Dick Stroud

Retirement - what's that?

If the following statements from this week’s Business Week are correct, and I think they are, then there is a traumatic change taking place to the dynamics of the market. None of its ideas are new, but when they all appear in the same place it highlights the magnitude that is unfolding.

The recession is making clear what we've suspected for a long time. The concept of not working and embracing leisure for the last third of one's life isn't practical for most people.

Put it this way: Survey after survey has shown that a majority of aging baby boomers plan on working in retirement. Well, that plan is coming true.

A seismic shift in the economy and workplace is making it easier for an aging population to labour longer. An information- and services-dominated economy will ease the transition to longer working lives.

The day of retirement reckoning is here for less happy reasons, too. For the second time in eight years, savers have watched in horror as their pension savings and other retirement savings were hit with sharp declines. This time around, the household wealth destruction is even greater because of the nationwide fall in home prices.

But wait, there's more: The funding of social security is widely acknowledged to be broken and is a strain on family finances. Even with Medicare coverage (in the UK’s case the NHS) after age 65, the elderly are finding it necessary to pay for a greater percentage of their overall medical bill.

The solution: work longer.

The writer of the article throws in a few crumbs of hope.

More than making ends meet, work is physically and mentally energizing. It keeps the mind active and dementia at bay. For many people, the workplace is a social environment, with birthday celebrations and coffee klatches. To be sure, you may want to say goodbye to your current office mates for the last time. But that doesn't mean you won't want to work.

The next article in Business Week is about why “Hard-pressed companies forced to make layoffs tend to cut younger workers while retaining those over 55.”

This seems to be the reverse from what is happening in the UK.

The article continues…

Companies nationwide are laying off workers by the tens of thousands. But many are trying to spare the post-55 set from the axe, a reversal of the top-down trends in past waves of layoffs. They're being driven by legal concerns—since boomers are in a protected age group—and by a need to keep experienced hands in place to keep the companies running and positioned for an upturn. "Seniority matters," says the director of the Sloan Centre on Aging & Work at Boston College.

What the hell is going on?

Sorry, but don’t look to me for the answers. Right now all I can do is try and gather and understand the data.

But, just think about what all this means for a post-recession world. Yes, I know that seems a long way away but it is a place some of us might see. The scars of this recession will take years, decades to heal. What we marketers must do is to try and understand what the new market vista will look like and then get on with the job of modifying our marketing to take advantage of it. Dick Stroud

It’s cool to drink McDonald's rather than Starbuck’s coffee

This blog posting title results from reading the “Boomers Caught in Squeeze Play” article in Adweek.

As recession hits the article lists some of the results.

McDonald's taunts Starbucks, in its hometown, with billboards proclaiming: "Large is the new grande" and "Four bucks is dumb."

De Beers positions its diamonds as something to be passed down among generations in a world of "disposable distractions."

Allstate Insurance has its spokesman standing in front of Depression-era photos talking about how in tough times "people start enjoying the small things in life: a home-cooked meal, time with loved ones, appreciating the things we do have..."

The article ends on a chilling note.

The global financial crisis has slowed growth in previously hot, emerging economies like China. Less obvious may be the population drop in large Western European markets like Spain, Portugal, Italy and Germany. Marketers face not only the possible change toward more conservative boomer behaviour, pre-retirement, they're also going to have fewer customers there in absolute numbers. Marketers are going to have to be relentlessly focused on where value is and on their core customers. It's not going to be like the 1950s where you can throw anything out there and see growth.

Have a nice weekend. Dick Stroud

Gloomy Brits

Maybe you should ignore what I have to say about the recession. This research from Synovate suggests that Brits are the world’s pessimists when it comes to all things credit crunch and recession. The US, Belgium and France are not far behind but us Brits really are a doom laden bunch. The world’s optimists are the Danes, Brazilians and Malaysians.

Do we know something the rest of you don’t? Dick Stroud

Job loss most likely to be among the young

I have talked a lot about the two phase recession. Phase 1, hit the assets of the old. Phase 2, hits jobs – the most keenly felt job losses being amongst the young. This is a gross simplification but bear with me.

Thanks to Rick Hartley for pointing out this analysis from The New York Times that demonstrates this happening. The age group 35-44 lost over a million jobs, the age group 55-64 gained over half a million.

OK, marketers, decision time. You are going to have to start to “picking winners”. One dimension of that is going to be old V young. Of course it is much more complex than it just being an age thing, but this is not a bad place to start.

The days of having the luxury of choice are fast disappearing. Dick Stroud

Puritans versus spendthrifts: recession’s culture war

This is the title of an FT article and poses a simple question.

How should people be persuaded to consume rather than save? How, in a fearful world, where knowing what tomorrow holds has never been more difficult, can you get Jo Public to flash the credit cards and add even more to their unpayable end of month balance. The much quoted Keynes described this as the paradox of thrift – the more people saved, the more demand for goods and services fell, the few people were employed etc etc.

This question is, I am sure, being discussed all over the world and has a special relevance to the 50-plus.

The article argues that the groups most likely to be convinced by government nudging and entreaties are the young and the poor who are already happy living in debt. Those who already have some cash and assets (i.e. the older age groups) are less likely to spend and more likely to save.

The other reason this is likely to be true is that older people have already lived through a couple of recessions and remember how incompetent politicians made the situation worse rather than better and can see the same thing developing.

So what do governments do about this problem of the puritan older person? There are four steps:

Step1. Try appealing to their sense of duty and love of the nation (i.e. spend for Britain / America). When that fails...

Step 2. Cut interest rates so the value of their savings diminishes even faster. When that fails…

Step 3. Spend wads of government debt on “infrastructure projects/investments” that are supposed to stimulate the economy but never do, or at least never do in the right time scale. When that fails…

Step 4. Let the money supply rip and watch the value of debt diminish along with their savings.

Any smart finance company would recognise that this money to be made from this progression. At some day in the next 12 months (my guess) there will be a tipping point when older people realise that their savings are diminishing at an ever increasing pace and at that point will want to lock them into assets. This is a real business opportunity. Dick Stroud

AARP Global Network goes crunch

AARP has a section on its global network site about "the crunch". If you want reassurance that there is somebody somewhere worse off than you then this is site where you will find them.

Some examples

Even France sees recession heading its way
Despite a certain reluctance to believe that France's economic situation is as bad as things are in the rest of the world , the country is now officially heading for recession.Having spent a lot of Christmas Eve, talking to a friend who lives in Paris, it seems that that recession is well and truly there already.

In crunch time, affluent Boomers simplify Too much stuff? Enter “the Simplifier.” The new psychographic, identified by marketing expert John A. Quelch, is a middle-aged affluent looking to downsize during the downturn. This is an important concept that I have already posted about.

Impoverished Italians can use Social Card for groceries, discounts The Italian government has approved the la Social Card, a new program to help citizens over 65 and families in extreme economic need.

And so on and so on. Dick Stroud

Work for a large public company? Bad luck!

This is nothing directly to do with the 50-plus market.

Two weeks ago McKinsey conducted a survey to judge the recession mood of companies and the actions they intended to take.

Not good news. Compared with one month earlier, twice as many executives expect their companies’ profit to fall in 2009, and more than half expect deflation in their countries in the first quarter.

Nearly 70% of respondents were experiencing falling profits and half expect profits to fall in 2009. The share of managers saying their companies are planning to decrease the size of their workforces in the near term had shot up from 35% to 44% in the past month.

Sorry that I cannot give you a link to the paper but it is subscription only.

What really interested me was the difference in the attitudes between managers in large public and small private companies.

As you can see from the chart – small private companies are taking a more positive approach to the recession than the mega public ones. I suppose that is not surprising since a lot of large public companies are in the finance, automobile and retail industries, where we all know that things are not perfect.

So don’t expect much innovative joy from the large quoted companies. It will be fast moving, smaller companies, that will take advantage of the economic mayhem. Some of these opportunities will involve refocusing on sub segments of the older market. Dick Stroud

The Unretired.

This is not a very cheerful article from Business Week that describes the tranche of older people who retired and now find themselves suffering from the results of property and stock market asset deflation.

The proof offered about the scale of the problem are things like RetirementJobs.com, the largest career site for people over 50, saw traffic more than double, from 250,000 visitors in July to 600,000 in November. In April, a survey conducted by AARP found that 17% of responding retirees over 50 were considering or already going back to work. I wonder what that figure is today!

As I have said before, the people who have assets (the 50-plus) have been hit the hardest during Phase 1 of the recession (The ‘credit crunch’). At least most of this group had some assets, unlike most of their kids.

Phase 2 (the real recession) is affecting all ages. It is said that London is 3 meals away from anarchy, meaning that the food logistics relies on a constant flow of refilling of the supermarket shelves. The same applies to the majority of households (at least in the UK) who are 3 pay cheques away from financial hell.

I am afraid the Business Week story is going to be replayed time and time again but with younger and younger people being the focus.

So what is the marketing message in all of this? Be very, very targeted in the groups where you spend your diminishing marketing dollars/pounds/Euros. As the recession broadens to hit all ages and social groups you really need to think if you have identified the “recession proof” consumers in your customer database. Well have you? Dick Stroud

Deloitte's Xmas report - good but could do better

Firstly, well done to Deloitte for an interesting study about the status of UK retail this Xmas.

Three suggestions for how it could be improved. Firstly, if you are going to use a talking head video then select somebody who has a tad more expressive face. Good voice, but the eyes and brain are locked onto the autocue. Either that or the poor chap is in some sort of digestive distress.

Secondly, proof read your reports.

There is a vital word missing from the analysis in the chart. The word ‘not’ seems to have fallen out of its space between ‘it’ and ‘important’. If this statement is correct then the commentary in the report is incorrect, since the conclusion is that young people don’t give a b**r about the recession compared to their parents.

If this statement is correct then our young are in for a nasty shock. According to the study, 45% of 16-24 year olds see the UK economy as “normal or good”. What do they teach kids in schools these days!!

My final suggestion for Deloitte. Don’t lock the PDFs so that the text cannot be selected and copied. Surely you want your words of wisdom to be read by as many people as possible. Why lock them away in the PDF.

Other than these gripes it is a good bit of research. Dick Stroud

During recessionary times do you aim young or old?

Government employment statistics, published yesterday, suggest the answer is that both old and young are being badly hit by the recession that is only just beginning.

The figures showed a 53,000 increase in the number of 18 to 24-year-olds out of work, to 579,000, in the three months to September. This means that unemployment among the younger age group is increasing faster than for the general population - up by 12.8% for those out of work for up to six months.

More than half a million people under the age of 25 are not in education, employment or training. Forget the human tragedy of this; just think of their empty wallets!

But, there had been a 29.7% increase in the number of people over 50 unemployed for between six and 12 months. So oldies are also getting pushed out of the workforce.

So as a hotshot marketer - what do you do with this information? Simple. Ignore the numbers.
There will be nuggets of demographic gold, with protected wealth, in both age groups. You are going to have to be smarter at finding it.

Another interesting statistic from the research was about average earnings for the three month period until September 2008.

The group with highest increase in earnings was the public sector (Government workers) 3.9%. All other parts of the UK economy experienced average earnings remaining static or decreasing. Link this to the fact that public sector workers receive a pension that is unaffected by the financial maelstrom that is enveloping the rest of the population and you can see why they are a prime market segment to attack. Dick Stroud

More analysis less emotion

Sorry if I keep moaning on about the way the media keeps reporting the recession in terms of age cohorts. It was disappointing to read this article in the Wall Street Journal since it has fallen into the same trap.

Many of the arguments it makes have a large element of truth, but they are a one-sided and 'emotional' stating of the case. Take the opening sentence for instance.

Baby Boomers have pumped up the global economy with their profligate ways for nearly two decades. It's been a great party. Now the music's over.

Are we really saying that a whole generation was squandering, excessively extravagant; wanton, licentious; promiscuous or depraved (using the US dictionary definition of profligate).

Of all professions, I am amazed that the media has suddenly developed this puritan attitude to consumer spending.

A couple of sentences further on it says

What Baby Boomers of all persuasions have done, without dispute and to an unprecedented degree, is spend money instead of saving it. During the 1990s, Baby Boomers accounted for about half of all consumer spending in the U.S., according to a recent McKinsey Global Institute study.

Yep, that is true. Isn't it strange how most marketers didn’t recognise the fact at the time and pay them more attention. But all generations, with the exception of the 70+, have spent more than they saved.

And so the article goes on. In so much of the writing these days I detect a large dose of Schadenfreude.

Marketers need a well reasoned analysis of how the recession will (is) impacting their markets. So let’s cut out the emotional stuff and concentrate more on hard analysis.

If you are going to read the article I would do it soon since the WSJ will probably move it into the paid content section. Dick Stroud

It makes you want to weep

I have already written about this silly phase that the media is going through of trying to portray the recession as being bad for the old and good for the young.

This is the most blantant article that has appeared on this subject (from London's Evening Standard). So stupid. Dick Stroud

Overdoing worldwide Boomer gloom

Sitting in Kyoto gives you a different perspective on the world. It is all too easy to become insular and only take a UK perspective. Right now, wherever I look, it seems the world’s media’s take on the current financial mess is that Boomers will be the hardest hit.

The FT says that: “More than 1million Boomers have 10 years left on their mortgage”.

About 1.4 million homeowners, aged 55-plus, have at least 10 years left to run on their mortgages and on average still owe £55,046.

The generation of homeowners aged between 35 and 55 only owe the paltry sum of £92,153, over 13.4 years, suggesting a £850 a month mortgage commitment on a repayment basis.
The study concludes that: “Many Boomers are facing up to the reality of still having a mortgage debt close to or even beyond their retirement age.”

From India we learn that: “Boomers turn into the ‘boomerangst’ generation.”

On a less than happy note the paper reflects that the ‘curse’ for today’s old threatens to come in the form of financial anguish they’d leave behind for the middle-aged ‘baby boomers’ marching in legions towards retirement.

From New Zealand the headline is no less nightmarish:” Fiscal meltdown worse for older people”.

The credit crunch has brought pain to Main St. And it's likely that more anguish will be felt as the effects trickle through to jobs, property prices and returns on equities and bonds. But spare a thought for older people, who have been the worst hit of any generation. The proportion of retired people living on government superannuation had risen by as much as 10% from this time last year.

It is pretty easy to see why these headlines are appearing. Since the 50-plus own most of the wealth it is not surprising they are hardest hit when aggregate wealth decreases in value. The largest owner of property, stocks (either directly or via pension funds) and other investments are the 50-plus, so it is a no-brainer that older people are sitting on the biggest drop in value.

But, and there is always a ‘but’ the world’s financial problems are the first phase of the recessionary problems. The larger problem is the “real world” recession that is lumbering over the horizon. This will have a disproportional impact on employees rather than retirees.

When we move into this second phase it will be those with wealth (older people) having the most resilience. Hoards of younger people are only a few pay checks away from financial armageddon. With virtually no savings and not enough time to build equity in their homes and investments, they are in an exposed position. Watch this space! Dick Stroud

The 50-plus are the best placed to survive crunch

Sorry if I keep going on about this subject but it seems like reports keep popping-up on the subject.

This one is from Lloyds TSB insurance has coined yet another silly name (Generation Flex) showing how resilient older people are to the economic woes sweeping the country. I guess it refers to their flexibility.

Of course the Post Office came up with research showing diametrically the opposite conclusion. So much for the use of PR inspired research!

Maybe Lloyds should have done a bit more research before selecting the 'Flex' name. Back in 2002 another bit of research got their first. Dick Stroud

Economic downturn creates asymmetric generational shock

What a great sounding title? Maybe it’s a tad pompous? What it means is that as the sky falls in and the economic and financial structure of the West disintegrates, the old and the young will be affected in very different ways. This is the first of my muses about this subject. To begin with I thought I would amass some factlets about Europe’s stressed-out 18-34 year olds.

France

The French talk a lot about "Génération Précaire"—the Precarious Generation. A less elegant name is ‘babylosers’. For the first time in recent history a generation of French citizens, aged between 20 and 40, will experience lower standards of living than their parents.

Consider this, a 30-year-old Frenchman (I assume Frenchwoman as well) earned 15% less than a 50-year-old in 1975, today they earn 40% less. Over the same period, the number of graduates, still unemployed two years after leaving college, has risen from 6% to 25%.

The proportion of 24-year-olds now living with their parents has almost doubled since 1975, to 65%.

Not surprising a recent poll showed that only 5% believed young people had a better chance of succeeding than their parents.

Germany

Germans now talk of "Generation Intern". These are well-educated graduates forced to accept unpaid jobs in the quest for full9time and pensioned posts.

Italy

According to the Italian Institute of Social Medicine, 45% of the country's 30-34 year-olds have yet to leave their parent’s home. This may be due to the atrocious cooking skills of young Italian woman but I guess it's more like due to prohibitive cost of going-it-alone.

Spain

Mileuristas are defined as Spanish people aged 23- 43, with incomes less than 60% of the full time average. There are lots of them.

Even during the boom years, when growth outstripped the rest of the European Union, the 'mileuristas' found themselves unable to afford their own homes. But now with the implosion of the housing market their prospects are grim. In the first three months of 2008, Spanish unemployment hit 9.6%, the highest for three years.

UK

The term applied to 18-34 year-olds is the iPoD generation. Not the normal reference to their technical prowess but the fact they are Insecure, Pressurised, Overtaxed and Debt-ridden.

Since 1999 the median annual full time earnings of the iPoD generation has increased by 28%. During this time the price of the average first-time buyers’ property has shot-up 104%. Property prices now 9 times higher than the median earnings of the ordinary twentysomething.

Not surprisingly the age at which people acquire their first home has climbed from 26, in 1976, to 34 today.

The high levels of debt that young people service (with increasing real interest rates) is graphically illustrated by the fact that graduates' post-university debt has risen 300% in the past 7 years.

Time are tough and getting tougher for young people. Unfortunately, the hard times are only just beginning. The costs of health and care, resulting from the aging population, are only just becoming visible.

Older people are not immune from the downturn. The oldest and poorest group are being hit hard, especially by the rising costs of oil and food. More of this in a later blog posting.

Surely Europe’s marketers must see what is happening to the purchasing power of their beloved 18-34 year olds. At an aggregate level it is going to fall. The balance of power between young and old is changing, much faster then most people realise. Dick Stroud

London is different – repeat after me – London is different

Some people think the UK is one country. Some people think it is made up of England, Wales, Scotland and Northern Ireland. Both are wrong.

The UK is made up of the London and the rest. Understanding this is vital when thinking about marketing to the 50-plus or any other age group.

A recent report by the BBC made reinforced this point. Whilst the rest of the UK is in a state of collective economic despair , consumer sales in Central London are going up.

The British Retail Consortium said spending in the heart of the capital was up by 8.7% in June 2008 compared to the same month a year previously. In the same period, the national figure fell by 0.4%.

The mood among central London customers is clearly different from the rest of the UK.

Why is there such a difference? Lots of reasons. London, more correctly parts of London, are extremely wealthy. Also, London is young and it would seem that the young are still spending like there is no tomorrow. When the credit crunch really starts to bite this situation could very quickly change.

If you are not convinced about London’s strange behaviour look at this video. Dick Stroud

Decision time for marketers

According to the IPA Bellwether report marketing budgets have been revised down for the third consecutive quarter, and to the greatest extent since the 9/11 terrorist attacks in 2001.

Doom and thrice doom.

All sectors of marketing reported budget cuts with the exception of the online, but even here it's the smallest upward revision since 2002.
Traditional media -- TV, press, outdoor, radio and cinema -- was worst hit, with budgets dropping at the fastest rate since the first quarter of 2006.

This was followed by "all other" marketing, which includes PR, events and research. Downward budget revisions indicated that growth will be the weakest in these areas for at least five years.

OK guys hit the panic button. All of the woolly thinking and half-baked ideas that are OK during times of boom are now up for the chop.

So when you are asked: “we need to follow the money” what’s you answer? Let me give you a hint. It aint the credit strapped 20-34 year olds. Dick Stroud

The 'Mood of Britain'

McCann Erickson’s 'Mood of Britain' survey is not reading for the faint hearted marketer. You might as well start getting the CV into shape and preparing your response to the “we have to make a few budget cuts” pronouncement.

I wish I could point you to the actual report (of course you willn’t find it on the ME site). This review from Marketing is about the best I can find. The phrase that the report uses, that I think most accurately captures the feeling in the UK, is: “the nation holding its breath'.

The media is awash with doom and gloom, but for most people life is going on pretty much as usual. The sky is has not fallen-in, riots are not taking place on the street, but there is this feeling that all hell is about to break loose. Maybe, maybe not. If you are interested in the UK then this is worth a read – irrespective of your focus on the 50-plus or not. If Gordon Brown happens to be reading this blog - stranger things have happened - then I would give this one a miss. Dick Stroud

Factlet about spendable discretionary income.

Today I came upon this data for the US. It was published in late 2007 by an outfit called The Conference Board and shows the spendable discretionary income by the age of the head of the household.

Born after 1981 ($12,833)
Born between 1965 – 1981 ($22,562)
Boomers (46 – 64) - $29,754
Born before 1946 – (19,500)

I have no idea if it right or wrong but it does give a measure of the realitive spending power of the different generations. Dick Stroud

SKI is alive an kicking

The dreadful term Spending the Kids Inheritance (SKIing) is one of the few age-jargon phrases that has stuck in mainstream language.

I am always very caucsious of taking too much notice of research from organisations with a vestied interest in the outcomes, but I must assume there is a grain of truth in the findings from SAGA’s equity release (reverse-mortgage) group. In summary the survey of oldies found:

12% said equity release products were not an option for them because they believed assets like a home should be handed down to their children as an inheritance.

12% answered that they had released equity from their home to pass on to their family as a pre-inheritance.

25% said they would use the equity tied up in their house to enhance their retirement regardless of their younger relatives' expectations of an inheritance.

What the other 51% thinks remains a mystery – good old SAGA refrained from publishing a press release about the research (daft).

18% of the over-65s said they considered equity release to travel around the world, a figure that doubled in the age group between 50 and 54.

Not that great a reading for kids and grandchildren. Dick Stroud

The Economic Slowdown's Impact on older Americans

A few blog posting back I wrote about the connection between age and financial robustness. To illustrate how difficult it is to be precise about this subject have a look at this recent report from AARP that analyses the response of older Americans to the economic slowdown. You can download the full report from here.

The above chart shows the most often reported changes in behaviour.

Now this type of reporting must come with a big health warning. It provides an ‘average’ measure of reaction but companies don’t always sell to ‘average’ consumers. Your target market might be like the UK’s Charmed Generation who are delighted with high interest rates and the housing slowdown. Their savings are getting a better rates of return and their property investments are pulling in record levels of rent.

Clearly a lot of people are hurting, of all ages. That is what is called a recession. Let's hope it doesn't last for long! Dick Stroud

What is the relationship between income, wealth, disposable income and age?

Wow, what a question for a Saturday morning. Of course there is no simple answer. Whilst marketers get excited about ‘wealth’ and ‘income’ the factor that should really get them going is “disposable income”. As the cost of essentials are going through the roof (i.e housing, food, utilities, debt servicing etc) the question at the top of the marketers "To Do List" should be, who have the spare bucks to spend on anything else?

Shall I give you a hint? Well it isn’t your average 18-34 year-old. The above chart is from the Future Foundation and I guess shows monthly income and expenditure (UK). Sorry, I don’t have any more details about the methodology. Anybody from the Future Foundation who can help out?

It shows the time when income rises above expenditure is older rather than younger. Since this was created I would guess the whole chart has moved to the right and that the expenditure line has increased.

Does anybody have some recent data on this subject ? Dick Stroud

AARP Webcast

“How retirees are managing today and what effect pension trends and other economic factors will have on future retirees?”

Sound interesting? This is the title of one of the sessions being covered during an AARP webcast. If you are in Washington on the May 14th you can go and see the thing live, otherwise contact AARP for the Web version of the event. Dick Stroud

Chase the Silver Foxes

The UK, like the US and the rest of Europe is getting a tad worried about the resilience of consumer spending. More accurately the lack of resilience of consumer spending.

CACI has been analysing the demographics of the UK and concluded that the closer you get to London the more likely consumers are going to be able to plough on through the credit crunch unscathed. The folks living in the frozen north of the country are in for a tough time.

The age group that CACI has identified as most resilient to economic downturns are the over-55s that it terms the “silver foxes” (don’t you just hate these daft names).

This group is 1.5 times more likely than the average household to have an income of more than £100,000. This group accounts for 14% of the population and analysts estimate that they have £23bn to spend on discretionary items, such as clothing, books and CDs, irrespective of a downturn. That is out of total pot of £153bn.

The article in the Observer, where this is all discussed, provides a pen sketch of the foxy rich oldies.

The Silver Foxes are a fifty-something couple living in Epsom, Surrey. He manages the finances; she shops at Marks & Spencer. They are well-informed readers who keep on top of the financial pages. Their favourite food stores are Sainsbury's and M&S, but they also have a penchant for John Lewis.

Most are retired and settled at their financial peaks in pleasant locales, such as Guildford, Winchester and Tunbridge Wells. They are unfazed by house prices as they are mortgage-free and the children have left home. Their savings will be double, often treble, the norm.

I call this group the Charmed Generation. If you prefer Silver Foxes, or rich oldies it doesn't matter - they are a group of consumers that all companies should be targetting. Dick Stroud