Grey matter - making the most of the over 50s

In 1798 a young English demographer by the name of Thomas Robert Malthus
published an influential paper in which he warned of an impending catastrophe –
the world’s population would soon outstrip the world’s agricultural output.

The mathematician’s arguments about population growth made a lot of sense. It
took 150,000 years for the world’s population to hit one billion, but only 123
years for it to reach two billion and then just 12 years to go from five to six
billion. Observing the exponential growth of human populations compared to the
linear growth of agricultural output, Malthus was convinced that eventually we
would run out of food and natural resources.

Fortunately – due to innovations in agriculture and a slowdown in population
growth starting in the 1970s – Malthus was proved wrong. Today we are witnessing
a reduction in the number of young people that hasn’t been seen since the Black
Death arrived at the shores of Italy. According to the US Census Bureau, half of
the world’s population now lives in countries with fertility rates below levels
that are needed to keep the population from shrinking.

‘The developed world is in the process of committing collective national
suicide,’ warns management guru Peter Drucker. And a quick look at a country
like Italy shows why.

The age gap

In the mid 1960s, Italy gave birth to a million babies each year. Today this
figure stands at 500,000 making it the first country in the world with more
people over the age of 60 than under the age of 20. Italy is not alone.

As you read this, the population of Japan – the world’s second largest
economy – is beginning to shrink. Next year, the number of Britons aged over 65
will exceed the number of those aged under 16 for the first time. And by 2030, a
whopping 50% of Germany’s population will be over 65.

The rapid decline in the number of young people and the even faster explosion
in the proportion of over 50s will send shockwaves throughout the economy in the
years to come. Some of these waves are already being felt. In 1979, the basic
state pension in Britain was 23% of average male earnings; by 2000 it had fallen
to 15%. By 2040, it is expected to drop to just 8%. It’s perhaps no surprise,
therefore, that more than 70% of British companies have closed their pension
schemes to new entrants, with some, like Rentokil, freezing their schemes
altogether.

Demographic shifts

But demographic shifts, tectonic as they may be, aren’t all bad news. While
the 16-34 age group is the segment of the population that companies have
traditionally marketed to, it’s actually the over 50s who represent the most
interesting economic opportunity.

Why? Because the over 50s account for 80% of all private wealth in the UK,
have the least financial ties and happen to be the fastest growing segment of
the population.

One company that understood the connection between demographics and the
bottom line was sports shoe manufacturer New Balance. In 1989 the company
decided to ‘bet the farm’ on one segment of the population – baby boomers.

At the time, the company was the 12th largest sports shoe company in the
world. Today it ranks third. Between 1997 and 2002 there was no growth in US
sales of sports shoes. During that same period, New Balance enjoyed average
annual growth rates of 25%.

Though slow to wake up to the potential of marketing to the over 50s, the UK
too has examples of companies who have been smart enough to read the writing on
the wall.

In 1951, Sidney de Haan began offering holiday packs for retirees from his
hotel in Folkstone. Fifty years later, the Saga Group offers holidays, cruises,
radio programs, magazines insurance and financial products to the UK’s over 50s.

Unlike futuristic predictions that may or may not happen, the demographic
changes described here have already happened. The people who will form the bulk
of your company’s target market in the next 20 years have already been born.

And while most people continue to focus on the pension crises and the
implications of a shrinking workforce, the rapid growth of the over 50s
represents a unique opportunity for your business to grow with them – that is,
if you’re willing to listen to your mother.

Ziv Navoth helps organisations improve their performance. He is the managing
director of Verve!
(www.verve.nu) and can be
reached at mailto:[email protected].