Boomers Continue to Be the Focus of Marketing Efforts

The year 2006 will mark an important milestone in marketing: For the first time, more than half of the Baby Boomers will be over the age of 50.

Also in 2006, the first Baby Boomers will turn 60. The 3.4 million Americans born in 1946 signaled the beginning of the boom, compared to the 2.8 million born one year earlier.

Just as their births transformed American culture and marketing, so too will their 60th birthdays. And this is just the beginning. Over the next 18 years, all of the 77 million Baby Boomers will move from middle age to maturity.

They may have lived for 50 or 60 years, but don’t call them old. “Baby Boomers literally think they’re going to die before they get old,” says J. Walker Smith, president of the Yankelovich Partners market research firm. According to Newsweek, the firm found that Boomers define “old age” as beginning three years after the end of the average life expectancy. Even though 60-year-olds today can expect to live to an average of 82.3 years, Boomers expect to take advantage of future discoveries in health care and genomics to live past 100.

This is significant because no previous generation reached their senior years expecting to live active lives for another four decades. Just as in every previous stage of their lives, Boomers will largely define their quality of life by what they can afford to buy. For marketers in several industries, this is a tremendous opportunity.

Boomers aged 50 to 60 have more than $1 trillion in spending power each year, according to a special report in BusinessWeek. They also spent more than twice as much on clothes as teenagers did in 2004: $42.7 billion versus $20 billion, according to the NPD market research firm, as reported in Time.

But contrary to conventional marketing wisdom, Boomers feel less loyal to brands than the average consumer. For example, 48 percent of consumers between the ages of 50 and 59 would switch brands of consumers electronics, compared to 40 percent of all shoppers.

Before we explore the specific forecasts for the opportunities the Boomers will create, let’s quickly review how the “generation wave” makes a predictable impact on consumer spending.

In his best-selling 1993 book, The Great Boom Ahead, Harry S. Dent Jr. showed that we can anticipate the direction of the economy by plotting the impact of demographics on consumer spending. Specifically, we can expect to see one of history’s biggest upswings in the economy over the next few years, with an era of increasing prosperity lasting until the end of the decade.

At the root of this coming economic boom is the Baby Boom, the largest generation in history, which is at the peak of its spending power. In 2000, we told our subscribers, “As the Boomers buy their largest houses, the economy will take off to new heights. As the Boomers take over companies, we will see changes in the way organizations are run. More importantly, the demands of this generation for customized products and services will determine what types of companies will thrive ? and which will have to adapt or close their doors.” That’s exactly what happened.

Dent’s research reveals that every generation follows a predictable pattern known as the spending wave. At specific ages, people of a generation can be counted on to buy specific products and spend at specific levels.

For example, spending on clothes and entertainment typically peaks in the late 30s or early 40s as parents stop spending on themselves and start spending on their teenagers.

Car and housing purchases tend to peak when people reach their mid- to late 40s. The same is true of food purchases, although food consumption at home peaks earlier. As children leave the nest, parents start to eat out more.

Insurance costs peak around the age of 50, by which time many families have paid the bulk of their premiums. But health care expenses continue to rise throughout a person’s lifetime.

We can identify specific opportunities by studying demographics. Every year, the U.S. Bureau of Labor Statistics publishes its Consumer Expenditure Surveys, which reveal per capita consumption levels by age group for a wide variety of products. Using these surveys, you can project the spending wave for any product or service into any country, state, county, zip code, or neighborhood.

When you pair this knowledge with census statistics on the age distribution in an area, you can reliably project their spending on a product. For example, government statistics show that a person spends most on roofing repairs when he is 68. This occurs because people buy their largest homes in their late 40s, roofs wear out in 25 years, and older people are less likely to repair their own roofs. To find a growing market for a roofing repair company, you need only to find a zip code where a large population of people are about to reach their late 60s. They are ready to spend.

Keep in mind that Baby Boomers will upgrade the quality of their belongings as they age. Expect them to buy more expensive cars, bigger homes, better software and home computers, and top-quality furniture and appliances.

Now that we’ve provided the context for this trend, consider the following eight forecasts for what it will mean to businesses:

First, we expect the spending wave to last several years longer for this generation than Dent’s model predicted. This will occur because the Baby Boomers are living longer than previous generations, they have no plans to slow down as they age, and they expect medical advances to provide a “cure” for aging. As a result, Boomers will not stop spending on restaurant meals, cars, or entertainment at the same ages as their parents did. In fact, Boomers are buying plasma TVs, iPods, and hybrid cars because they appeal to the generation’s passion for innovative new products.

Second, as the Boomers begin to leave the full-time workforce, their extra leisure time will provide a huge boom in travel, home renovations, second homes, hobbies, and luxury cars. We’ll also see lots of spending on health care, including cosmetic treatments like Botox. Philanthropy will boom. Eating out will become even bigger, and the growth will be mostly at the higher end of the market.

Third, many of the Boomers will continue to work, at least part-time, after the traditional retirement age. Four of every five Boomers plan to keep working after they turn 65, according to the Merrill Lynch New Retirement Survey. As we’ve discussed previously in Trends, these older workers in the labor force can make a big contribution the economy. For example, as we pointed out in our August 2005 issue, they could add 9 percent to the GDP by 2045. According to an analysis by BusinessWeek, that’s a $3 trillion a year boost to economic output, in today’s dollars. It would also contribute to the solvency of Social Security in two ways: With more people in the workforce at older ages, FICA tax revenues would grow. And, at the same time, Social Security would have to support fewer retirees.

Fourth, to maximize the productivity of older workers, companies and home builders will need to make substantial changes. Employers will need to give them incentives such as flexible hours, the option to work at home, and opportunities for mentoring and research. And developers of housing communities for aging Boomers must keep the new reality in mind as they design floor plans. For example, Pulte Homes, the developer of the Del Webb Sun City retirement communities, found that the average age of its residents was 62. Yet, two-thirds of its Boomer customers plan to keep working beyond the age of 65. So the company redesigned its properties to include home offices, and it schedules classes and leisure activities after business hours, according to Newsweek. It also changed its marketing, according to BusinessWeek. Instead of showing seniors relaxing by the pool, Del Webb’s newest ads depict gray-haired residents exercising or working at home.

Fifth, as the largest generation in history reaches their 60s, one of the biggest markets will be for vision correction. Suppliers of contact lenses, eyeglasses, and Lasik surgery can count on enormous demand, because 88 percent of Americans over the age of 55 have impaired eyesight, according to Newsweek. Popular products that are customized to compensate for aging Boomers’ failing eyesight should also be big hits: One that looks like a winner is the Comfort Optical Mouse from Microsoft. By touching a button on the side of the mouse, the user can magnify the image on a computer screen to make it easier to read, according to BusinessWeek. And next autumn, Microsoft will roll out a new version of Windows called Vista, which will allow users to enlarge the type on the screen to even greater font sizes without distortion.

Sixth, another growth market will be hearing aids. Of the 31 million Americans who need hearing aids, only 7 million use them. Phonak Hearing Systems, a Swiss company with a strong presence in the U.S., believes that Boomers, who have always been quick to adopt new technologies from the TV to the MP3 player, will see hearing aids as “just another electronic [device] that helps you hear better,” according to The Chicago Sun-Times. It is targeting the Boomers by shrinking the components and using Smart-Link digital products that allow hearing-impaired people to chat on cell phones and use wireless Bluetooth technology to listen to iPods. Phonak sells its high-tech hearing devices for $2,500 to $3,000 per ear, which is more than twice the price of standard hearing aids.

Seventh, despite medical advances that are improving Boomers’ health and longevity, they are their own worst enemy, which provides big opportunities for health-care providers. A new report from the government’s National Center for Health Statistics reveals that Americans aged 55 to 64, including the oldest Boomers, are in worse health at that age than people who were born a decade earlier. Researchers found that 50 percent of them have high blood pressure, and 39 percent are obese, according to an Associated Press report. Among people born 10 years earlier, 40 percent had elevated blood pressure and 31 percent were obese when they were 55 to 64 years old. As the younger Boomers age, the number of people in the 55 to 64 age group will rise from 29 million in 2004 to 40 million in 2014. Marketers of prescription medicines, nutrition programs, home fitness equipment such as elliptical machines, and health clubs will all post strong revenues if the Boomers can be motivated to control their blood pressure and get into shape.

Eighth, marketers will learn to be tactful in targeting their products and services to maturing Boomers, never using terms like “senior citizen,” “aging,” and “old.” Because Boomers resist the idea that they are growing old, it’s important to refer to them as “mature” or “experienced,” and to use marketing messages like “renew your energy,” “protect your appearance,” and best of all, “stay young.”

January 2006 Trends Resource List:
1. NEWSWEEK, November 14, 2005, “Turning 60,” by Jerry Adler. ⓒ Copyright 2005 by Newsweek, Inc. All rights reserved.
2. BUSINESSWEEK, October 24, 2005, “Love Those Boomers,” by Louise Lee with David Kiley. ⓒ Copyright 2005 by The McGraw-Hill Companies Inc. All rights reserved.
3. TIME, November 14, 2005, “Boomer Chic,” by Kate Betts. ⓒ Copyright 2005 by Time Warner, Inc. All rights reserved.
4. THE GREAT BOOM AHEAD by Harry S. Dent Jr. is published by Hyperion Books. ⓒ Copyright 1993 by Harry S. Dent Jr. All rights reserved.
5. To access Merrill Lynchs “New Retirement Survey,” visit their website at: www.ml.com/index.asp?id=7695_7696_8149_46028_46502_46635
6. BUSINESSWEEK, June 27, 2005, “Old. Smart. Productive,” by Peter Coy, with Diane Brady. ⓒ Copyright 2005 by The McGraw-Hill Companies, Inc.
7. NEWSWEEK, November 14, 2005, “Turning 60,”by Jerry Adler. ⓒ Copyright 2005 by Newsweek, Inc. All rights reserved.
8. BUSINESSWEEK, October 24, 2005, “Love Those Boomers,” by Louise Lee with David Kiley. ⓒ Copyright 2005 by The McGraw-Hill Companies Inc. All rights reserved.
9. NEWSWEEK, November 14, 2005, “Turning 60,” by Jerry Adler. ⓒ Copyright 2005 by Newsweek, Inc. All rights reserved.
10. BUSINESSWEEK, November 28, 2005, “Boomer-Friendly Gadgets,” by Stephen H. Wildstrom. ⓒ Copyright 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
11. THE CHICAGO SUN-TIMES, December 12, 2005, “Boomers About Ready to Stick It in Their Ears,” by Howard Wolinsky. ⓒ Copyright 2005 by Hollinger International. All rights reserved.
12. ASSOCIATED PRESS, December 11, 2005, “Boomers Not Quite Fit,” by Mike Stobbe. ⓒ Copyright 2005 by The Associated Press. All rights reserved.