Between the 20th and the 21st century there was a transition in the composition of population and discretionary income.
It was the youth that had the maximum spending power in 1965 and now it is the grey consumer. However, the marketing function has shown sluggishness in anticipating and reacting to the changes in the demography. There has been a listless approach in focusing on the grey consumer and this needs to change.
What is required is a detailed market research to ascertain the needs of the grey consumers, new product development and product modifications to meet the needs of grey consumers, appropriate pricing strategies to tap the expanding market of grey consumers, promotions that are apposite to the mature population and distribution strategies that will satisfy the wants of the grey consumers.In the USA and EU the mature market has got some paradoxes. On one side there are individuals who may be sucked into poverty by cuts in social security. On the other side there is the top 20 percent of the segment that is targeted by cruise-ship companies, carmakers and real estate developers (Mathur.A, Sherman.
E, & Schiffman 1998). They show an image of rich, good-looking and lively couples that have plenty of money to spend. As the above 50 segment continues to grow and use newer products, the grey consumer becomes more and more important for the marketer to focus on.Let us consider the income of the grey consumer. His income peaks anywhere between the age of 45 and 54. After the peak has been reached, the spending power remains.
The household size is smaller and the per capita discretionary income is higher than that among the younger group (Lunsford. D & Burnett, M 1992). If we consider the net worth of older consumers, we find that a large portion of their purchasing power is contained in assets like stocks, real estate or term deposits. This provides a real insight into the formidable purchasing power of the grey consumers. This shows that the oldest consumers have more wealth than those consumers in the highest-income age group.
For example, in a period of five years, the average wealth of 70 to 74 year consumers in the US market increases by 20 percent. In short what it means is that grey consumers control a significant and growing portion of wealth. How has this situation emerged? Grey consumers have gained from a spurt in the value of homes and this has increased their wealth, further there has been a gradual but a sustained increase in stock market prices and finally there has been an increase in the number of households that are directly controlled by the grey consumers (Gilli.M, & Zeithami.V, 1985).Let us consider the use of Internet.
Retired persons above the age of 65 are increasingly using the Internet, they are becoming Internet savvy but marketers have not adequately responded to this segment. For example, a study conducted by Nielsen Norman Group, a consulting firm based in Fremont, says that websites are much harder to use for Americans over the age of 65 than those who are between the ages of 18 and 55. Marketing in future should make websites user friendly for the grey consumers. The online marketers should ensure that websites targeted at grey consumers have larger type sizes, have contrast to make reading easy, larger sized links and rolling pull-down menus for the ease of navigation and have links that change color after being clicked.
In fact there are some companies that have already started to target grey segments through their websites. For example, Fidelity Investments targets grey consumers who are affluent and value financial information. It provides its consumers with navigation that is not only easy to read but also easy to click (Bedenheimer. T, 2001).Why should grey consumers be the focus in future? Currently, the manufacturers of electronic goods like iPods, PDA or cell phone are targeting the young, tech-savvy segment to buy their products but this is a mistake. It has been estimated that the 50+ segment has between $750 billion to $2 trillion in discretionary income.
The grey consumer is a segment that cannot be ignored; it has disposable income and should be tapped (Burt. S, & Gabbott. M 1995). This is a segment that has been ignored because the marketers have presumed that the grey consumers do not take adequate interest in technology. Yes, these consumers do not splash on fashion or embrace pop culture but they are determined to keep up with technology.
Why have the grey consumers not been adequately targeted? There are several reasons for this. For one thing, the grey consumers are very difficult to segment. They have diverse characteristics and the population of the grey consumers is too heterogeneous to make segmentation easy.
To make things difficult, aging within the grey consumers is not uniform. The current trend is that a large proportion of the 50+ population will remain healthy throughout their lives. This makes it even more difficult for marketers to target these segments. In sharp contrast marketers have targeted the youth market because they are more similar to one another and this makes them easy to describe and target.
Another reason is that individuals and teams who have not been adequately sensitive to the needs of the grey consumers have carried out marketing research. The result is inefficient positioning of products targeted at grey consumers (Shufelt. B, 1998). The marketers have taken the easy route and have focused on the affluent top 20 percent of the grey consumers ignoring a large majority of grey consumers. Geographical segmentation is important to target the 50+ groups. There is a tendency for the grey consumers to live in moderate sized cities that have been perceived to be livable. For example, Delray Beach, Boca Raton, Daytona Beach, Sarasota and Bradenton in Florida, USA are popular among the grey consumers. However, most marketers do not focus their marketing mix on well-defined geographical segments.
Most marketers do not develop variations of their products targeted at the grey consumers. One exception is the housing industry. The purchaser of single-family dwellings has an average age of 55 years. However, what is important for marketers is that even housing springs up an ancillary demand for furniture, home electronics, security systems, house lighting and appliances. If these products are made friendly to the 50+ age consumers the sales of those products will increase.
The new homes also increase the demand for services like cable and Internet. If these services are designed for the 50+ consumers, they will prefer those services.Further, the marketers have not adequately targeted their promotions to the grey consumers. Most advertisements are directed towards the young and upward mobile consumers. They do not focus on the grey consumers or their needs.
For instance most sporting equipment and clothing manufacturers target the neither under 25 youth nor realizing that the 65 + segment purchases sporting equipment and related equipment almost double the amount purchased by the under 25 youth. Consider the catalogues of watercraft, the brochures show images of young people but it is the 50+ consumers who buy the most watercrafts. Publicity should be directed more at the grey segment. For this press conferences and community events need to be organized at medium sized cities or suburban areas that are popular with the grey consumers.
Continuing with the sporting equipment example, there are more elderly people who play tennis, bowling, golf and even softball than the youth. This difference is related to the health benefits of sport. Finally, sales promotions are not focused on the grey consumers (Kennett. P, Moschis. G, & Danny N 1995). If the gifts and promos are useful to the elderly, the sales promotions will be more effective. The weak efforts of the marketers are an important reason why marketers should focus their promotions on the grey consumers and watch their sales increase.Most importantly, the distribution channels are not targeted at the grey consumers.
Continuing with the US example, some of the towns popular with the elderly are Cleveland, Cincinnati and Columbus in Ohio but marketers have not targeted these adequately. For instance, the grey consumers purchase 48% of all luxury cars but the percentage of luxury car showrooms in middle-sized towns and suburban areas is not sufficient to address this important segment. Many older adults purchase larger vehicles but this is not reflected in the location of showrooms of such cars. In other words, marketers while determining their distribution strategy should focus more on grey consumers.The pricing strategy has also been haphazard in case of grey consumers. The most expensive cruises and cars are premium priced and are somewhat directed to the top 20% income segment of the elderly but companies do not have a coherent pricing policy for the 80% of the grey consumers. A well-directed pricing policy can increase the sales of most products to the grey consumers.In general marketers are unwilling to position their products as those focused on the grey consumers.
One reason is that the grey consumers themselves do not want to be seen as elderly or old. They would rather use products meant for the youth or advertised for the young. Another reason is that traditionally the marketing strategies have always aimed at the youth segment. Ostensibly there were advantages, if the young started using your product he was likely to continue using your products all his life. The other was that prior to the 20th century only 1% of the population belonged to the age group of 65 and above. In 1965, 50% of the population was below the age of 25 and it was then sensible to target that group of consumers. Now the baby boomers have turned into grey consumers.
Fertility rates have come down in the industrialized countries and the growth of older adults is expected to reach a zenith in the 2050. Now it is sensible for marketers to focus more on the grey consumers.There are some distinct advantages in focusing on the grey consumers. First, the older consumers are less likely to move to a new location making them excellent targets for localized marketing efforts including direct marketing. Second, a large proportion of the population of the grey consumers are located in middle sized towns and suburban areas where the real estate prices of showrooms as well as the costs of marketing are less than in large cities.
Third, grey consumers are living separately and as single-family members and it is relatively easy to ascertain their needs and target them. Fourth, the grey consumers have emerged as the fastest growing market for all goods and services among all age groups. Fifth, there is no unshakeable brand loyalty among the grey consumers. They are open to new brands, new products and channels of distribution. Sixth, if there is a product that meets the needs of the grey consumers they will buy it. These are some of the reasons why marketers should focus on the grey consumers (Patalan. L 1995).
While focusing on the grey consumers there are some important factors that marketers should remember. Marketers are used to seeking homogenous segments and targeting the consumers with their marketing mix, in case of grey consumers, marketer will not find homogeneity. Instead they have to master the craft of niche marketing. The marketers need to evaluate the level of aging, income and disability in their targets when designing their marketing mix for the grey consumers. Universal or transgenerational designs of products may not succeed if marketers want to focus on the grey consumers.
Instead those product designs that take into consideration different levels of disabilities are more likely to succeed. The grey consumers will not accept products designed for the youth culture. Instead the grey consumers will purchase products designed for them (Sirgy J 1995). Globally, products related to social security and health care are experiencing a growing demand.
The “baby-boomers” and the “age-wave” are the grey consumers that need to be targeted.Another reason why marketers need to focus on the grey consumers is that as the population of the grey consumers is increasing, so is the fertility rate decreasing all over the world. In the industrialized countries, fewer children are being born. Between 1950 and 2000 the average number of children born per woman fell from 5 to 2. In fact in case of some EU countries there is an acute shortage of schools. Even in the USA the fraction of younger people to that of the older adults is falling. What the marketers need to do is to come out of the inertia-laden mindset of concentrating on the younger market and focus more on the grey consumers. This is unavoidable in the future.
The marketers need to focus more on those societies that are affluent and can pay for their products and services. These societies are found in the industrialized countries. In these countries the population is maturing and needs to be focused on to increase sales.
There is an need to use new approaches to segmentation. For instance, grey consumers who are suffering from Alzheimer’s disease can be treated as one segment and products targeted to Alzheimer’s should be marketed to grey consumers in those segments. Equipment and products designed to make them independent can be marketed to these consumers. Moreover, medical insurance products aimed at policyholders that are likely to turn grey should be targeted. The grey consumers who are disabled may be treated as a segment and products designed for the disabled could be designed just for them (Baker. M 2002). The products should aim at making their lives easier and movement faster.
Marketers should attempt to target the visually challenged segment of the grey consumers. Products can be targeted at the grey consumers who require them when they lose their drivers license.The marketers should take a second look at the lifestyles of the grey consumers when they focus on their needs and assess their market potentials.
More than half the grey consumers live with their spouses. In addition, the education level of the older consumers is increasing. The perception of health and disability is a very important variable that the marketers should not ignore.To sum, marketing has lagged behind in anticipating the growth of the grey consumers, ascertaining their needs and tapping this rapidly growing segment. Marketing has procrastinated in formulating strategies aimed at the grey consumers. The grey consumer has instead been using products that have been targeted at the youth and using them. For example, the grey consumers who are using the Internet are downloading online music and listening to it.
Similarly, the grey consumers in large numbers are using electronic gadgets aimed at young geeks. What the marketers need to do is to identify niches in the grey consumer segment and position their products to meet the needs of the grey consumers. Grey consumers represent tremendous potential. They have discretionary income to purchase expensive and tasteful products. They also have the time at their disposal to use these products.
It is time marketing changes its focus and targets grey consumers in a big way.