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Aging Generation: How Companies Are Responding Baby boomers have long held sway over corporate America, powering the development of such things as hula-hoops, fast food and mutual funds. Now, with the first boomers starting to retire, companies are hiring consultants, creating departments and making strategic acquisitions, all in an attempt to appeal to the retirement-age needs of their favorite demographic group. If the companies are right, the aging boomers will consume ever-more innovative medicines, retire in nontraditional locations and seek new ways to invest their savings. They'll buy low-impact treadmills, easier-grip kitchen utensils and the latest in expandable-waist pants. But despite all their planning, not all companies and industries will be able to ride the wave, experts say. Some will miss it. Some will over prepare. It's tricky to anticipate the desires of a generation that has always defied convention. But one thing is certain: Never before has American business seen a trend this large coming from so far away. BOOMERS' NUMBERS Born: 1946 to 1964 Age this year: 39 to 57 Population: 76 million Number turning 50 this year: 3.9 million Annual spending power: More than $1 trillion Projected ratio of workers to retirees in 2030: 2.1 to 1 SOURCES: Census Bureau; American Demographics; Yankelovich Monitor "You have a group that's far more educated and far more lucrative than other generations," said John McManus, editor in chief of American Demographics magazine. "There's never been a 20-year period of people with as great an impact on businesses. From the moment this generation was born, entire marketplaces started to respond to the opportunity." Plenty to spend Every nine seconds, one of the nearly 76 million baby boomers turns 50. That amounts to more than 3 million Americans this year. To demographers, business executives and marketers, those born in the postwar years from 1946 to 1964 constitute not just the largest generation in America. They also represent the biggest consumer base with the greatest spending power – a mass market that drove demand for baby formula, then blue jeans and then Botox. The oldest boomers are in their peak earning years, and many hold decision-driving, market-making positions with large corporations. These boomers expect to work longer, live longer and spend longer. The total spending power of the boomer population is more than $1 trillion a year, says American Demographics. The median household income for boomers is $59,800, according to Yankelovich Partners Inc., a research and consulting firm. Despite the pounding that boomers received in the bear market and fears about the solvency of Social Security and Medicare – promoting worries that retiring boomers might have more time than money on their hands – the 50-plus group is still an economic force to contend with, experts say. Aging boomers are part of a larger 50-plus market that controls more than 70 percent of the financial assets in the United States, accounts for 50 percent of discretionary income and consumes 74 percent of prescription drugs, according to Age Wave, a demographic research and consulting group based in California. Marketers predict that as more boomers move into the empty-nest stage, they will spend even more money, whether on whitewater rafting, long-term care insurance or a Rolling Stones concert. "Not only is there more money – they'll have more of the money that they earn," at least in the immediate future, said Mark Goldstein, co-founder of Impact Presentations Group, a California consulting outfit that tells businesses about the aging populace's impact on their markets. While not all boomers are going to retire into the lap of luxury, marketers believe that there's enough of them with money – and the urge to spend – to merit the focus of corporate America. Businesses expect that boomers will no longer spend their money – earned or inherited – on just buying big homes and filling them with worldly goods. They'll spend more on travel, health care and assisted living. They'll roll over their 401(k)s, sell their homes, shop for retirement homes and buy burial plots. Polling and wooing Corporations are scrambling to retain their relevance to the "Me" generation – partly because the generation that follows is not as big. Companies also realize that with greater longevity, there is the chance of longer-term business relationships with boomers. Also Online Retirement planning advice comes from all sides "We have a number of clients who are very interested in baby boomers," said Humphrey Taylor, chairman of The Harris Poll. "A lot of people are looking to them in terms of their retirement, investment policies and the impact they'll have." The topic has become a constant refrain in boardrooms, at industry conventions and in training seminars. Take Plano-based retailer J.C. Penney Co. Boomers account for a third of its customer base and more than half of its sales. The retailer says the graying of America is one of the reasons it acquired the drugstore chain Eckerd Corp. in 1997. Even though Eckerd, with 2,710 stores, is performing below the sales and profitability levels of its peers – operating income declined 26 percent to $54 million in the most recent quarter – the management believes that it will serve the company well in the long term. The older boomer population is a core target for Eckerd. Many of the 2,500 or so private-label products at the drugstores – including vitamins, cosmetics, pain relief and personal-care appliances – are geared toward baby boomers. Recently, Eckerd introduced a Senior Rewards Card program at 422 Texas stores. It offers 10 percent cash credit to eligible seniors 55 and older. Transportation options Meanwhile, Ford Motor Co. product managers are hoping to attract the 55-plus customer with a premier minivan coming this fall. The Mercury Monterey – with a folding third-row seat, adjustable power pedals and seats that can be heated and cooled – is aimed at the empty-nester with the time for travel and grandchildren to cart around. While the 55-plus population made up only 10 percent of the auto industry's minivan customer base a decade ago, it now represents 40 percent – thanks to the boomers, experts say. "We are discovering that the minivan is an attractive replacement vehicle for the 55-plus couples," said Mike Sierra, a marketing manager for Mercury's Monterey line. "It projects a more youthful image of the empty-nester." The health care industry is already experiencing a spike in demand for prescription drugs. The Centers for Disease Control and Prevention says seniors and older baby boomers are visiting the doctor more often than any other group in the country. They're seeking care for multiple chronic conditions and to get newly available drugs. Many of those drugs are made by Pfizer Inc., which is researching and developing medicines to treat aging-related disorders. The company's R&D pipeline includes drugs for conditions such as macular degeneration and osteoporosis. Currently, the company is promoting a drug to treat dementia arising from Alzheimer's disease. While businesses are aware of the potential that boomers offer, they also realize that it's a difficult group to get a handle on. Marketers can sense the business opportunities. But anticipating just what will please this generation can be a challenge. "You have to throw the ball where the receiver is going to be," said Ken Dychtwald, a psychologist, gerontologist and author of Age Power: How the 21st Century Will Be Ruled by the New Old. "Anybody who is throwing to where the boomer was yesterday or to an older version of the 55-year-old will miss it. Businesses have to get into the mind, heart and spirit of this generation." Experts say business timing is particularly difficult with a generation that has bucked the prevailing trends at every stage of life. Many married late. Many had kids later in life. Their many career women transformed the workplace. And now they are redefining retirement by planning to work well past 65 – not just because they want to, but because they have to. Many external factors are adding wrinkles to the visions of retirement. The benefits from Social Security are uncertain. Corporate pensions are dwindling. Health-care costs are rising. And savings for many boomers may not be adequate. These changes represent a cauldron of conflicting messages for businesses. While the money situation has gotten tighter, boomers are expected to be more active in retirement than their parents. The Adventure Travel Trade Association predicts that about 60 percent of the 45 million adventure travel customers each year in the United States will soon be older than 50. They'll indulge in activities such as scuba diving, sailing and kayaking. "They have become very health-conscious, and they want to stay physically and mentally active," said Jerry Mallet, president of the trade association. "They also want to recapture that youth, and they are looking for new opportunities." A recent survey by Pulte Homes Inc. found that boomers don't necessarily want to retire to traditional destinations such as Florida or Arizona. So through the Del Webb brand it acquired two years ago, Pulte is looking at developing smaller communities in areas where boomers have lived and worked. Instead of the sprawling, self-contained tracts that it has traditionally developed, the builder is looking at sites in urban areas such as New York and Philadelphia, centered on restaurants and cultural activities. Dave Schreiner, vice president of active adult development for Pulte Homes, says the company is refining everything from land acquisition strategies to home design plans to cater to the boomers' evolving needs. Closer to home, on 2,745 acres in Denton County, Arizona-based Robson Communities Inc. has built an active-adult resort community called Robson Ranch. Only 300 homes have been built, but the company expects to build nearly 7,000 in the next 25 years as more boomers retire. As a mark of the changing times, the developers are styling the homes – with full Internet connectivity – for boomers who plan to continue working from home. But for all the companies isolating the boomers and trying to cater to them, there are many that are not. For instance, Gillette, Levi Strauss and Wal-Mart say boomers use their products all the time so the businesses aren't doing much with them in mind. Other companies, however, are coming up with age-friendly details in their products – Allstate's large-print life insurance pamphlets, Haggar's comfort-waist pants, Honeywell's thermostats with bigger lettering and brighter lighting, Coca-Cola's calcium- and vitamin D-fortified orange juice. The knack could lie in getting the attention of boomers without making overt references to aging. "This is a generation that will break all the rules about getting old," said J. Walker Smith, co-author of Rocking the Ages: The Yankelovich Report on Generational Marketing. "They will promote this new notion of remaining youthful." Companies want to be as subtle about aging as they can. The only industries that seem to openly address it are the financial services and health care sectors. But the effort, even for these companies, is to show adults who are vibrant, active and in control of their lives. Despite all their efforts, experts say, companies could still find themselves playing catch-up. American businesses have been late to react to many waves in the past – the hippie wave, the yuppie wave and, more recently, the new-immigrant wave. On the other end of the spectrum, some experts caution against overpreparing. "It's true that they are a big influence in whatever market they are in," said Margaret Wylde, founder of Promatura Group, a Mississippi consulting firm. "But people in many businesses may be counting their chickens a little too early. They may be premature in thinking the boomers are coming." Mark Goldstein of Impact Presentations Group likens the boomers to an elephant lumbering this way. "Only 10 percent of the businesses can dig a hole in front of it," Mr. Goldstein said. "The other 90 percent will wait for it to pass and shoot arrows from the back." This article is from the Dallas Morning News from August 23, 2003. Back To Mature Market News → Go To The GenerationTarget.com Mature Market Bookstore → |
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