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Changes in value of the Generation 50 plus and the effects on retail marketing

Diploma Thesis 2006 65 Pages

Business economics - Trade and Distribution

Excerpt

Contents

1 Introduction
1.1 Problem Statement
1.2 Way of discussion

2 Analysis of the target group
2.1 Demographic Development
2.1.1 Population
2.1.2 Age Structure
2.2 The Grey Market
2.2.1 Classical image of the seniors
2.2.2 Modern view of the seniors
2.3 The Generation 50 plus
2.3.1 Household Situation
2.3.2 Educational Level
2.3.3 Financial Situation
2.3.4 Segmentation

3 Values of the Generation 50plus
3.1 Maslow’s hierarchy of needs
3.2 Definition of Value
3.3 Change of Values
3.4 Life Styles
3.4.1 Health and Sports
3.4.2 Family and Relationship
3.4.3 Traveling

4 Market Potential
4.1 Purchasing Power
4.2 Expenditure Behavior
4.3 Age-related Changes
4.3.1 Physical Changes and Consequences
4.3.2 Psychological and Social Changes
4.4 Consumer Needs
4.4.1 Quality
4.4.2 Price Consciousness
4.4.3 Brand Loyalty
4.4.4 Convenience
4.4.5 Advice
4.4.6 Services

5 Marketing Mix of the Retail Branch
5.1 Assortment
5.1.1 Product
5.1.2 Range of Goods
5.1.3 Service
5.2 Store Design
5.2.1 Safety and Convenience
5.2.2 Clearness and Accessibility
5.2.3 Readability of Information
5.3 Promotion
5.3.1 Copy Strategy
5.3.2 Communication
5.3.3 Advertising
5.3.4 Media Selection
5.3.5 Sales Promotion

6 Conclusion and Prospects

A Appendix

A.1 Tables

Bibliography

List of Figures

1.1 Demographic Development, 1950 compared to 2050

2.1 Age Distribution in Germany (Destatis, 2003a, p. 30)

2.2 Comparison of a 63 year old woman in 1514 and 1997

2.3 Net Income of private households in Germany, first midterm (Destatis, 2003b, p. 29)

2.4 Inheritance volume in the next decade in Germany (Verheugen, 2004, p. 12)

2.5 Segmentation of the elderly, by TNS Infratest

3.1 Maslow hierarchy of needs

3.2 Hedonism in comparison of time, percentage of the households that agree to the statement: I prefer enjoying my life, instead of saving money all the time (Darkow, 2003, p. 14)

4.1 Buying Power (Verheugen, 2004, p. 12,13)

4.2 Consumer spending in first mid-term 2003 (Destatis, 2003b, p. 35)

4.3 Use of spendable income; private households; first mid-term (Destatis, 2003b, p. 32,33)

4.4 Consumer Spending 55 plus households (index values) (Meyer-Hentschel and Meyer-Hentschel, 2004, p. 22)

4.5 Self-service, local supplier, source: Borco-Hoehns GmbH+Co.KG

5.1 Marketing policy of retail companies (Müller-Hagedorn, 2002, p. 7)

5.2 Age Explorer (Meyer-Hentschel-Institute, 2006, p. 30)

List of Figures

5.3 Left side: underestimated; right side: overestimated (Bovensiepen et al., 2006, p. 20)

5.4 Nivea commercial, source: http://www.seniorenmarkt.de

5.5 Nivea commercial, source: Petra, 08/2006, p. 16

A.1 Travel intensity 1970, 1979, 1989, 1999; age in percentage (Henseling et al., 2002, p. 108)

A.2 Package recycling; source: Institut fuer Demoskopie Allensbach

A.3 Population development in Germany 1991 - 2003; source: Federal Statistic Office Germany

A.4 Part of 60-year-old of whole population (Bovensiepen et al., 2006, p. 6) 54

List of Tables

3.1 Yesterdays and todays values

4.1 Consumer needs (Bovensiepen et al., 2006, p. 21)

5.1 Evaluation of seniors as target groups (Koelzer, 1995, p. 295)

A.1 Different types of households (Germany) (Destatis, 2006b)

A.2 Regular church attendance in West Germany in percent (Kovalev, 2002)

A.3 Population Federal States (Destatis, 2006a)

1. Introduction

1.1 Problem Statement

The situation of constantly growing and increasingly fast developments in society, economy and politics during the past years probably will not change in the next decades. One of the greatest and most significant trends in the society of industrial countries is the demographic change. Many western nations are experiencing a radically demographic revolution in their history which is about to change the age structure of the countries drastically (Gassmann and Reepmeyer, 2006, p. 2).

The fact of an increasing life expectancy is enhanced by a concurrently decreasing birth rate and leads to an obsolescence of the society, and therefore to a shift of the proportion between the generations from younger to older people. Only in a few years, for the first time, Germany’s population will consist of more old people than of younger ones (Gassmann and Reepmeyer, 2006, p. 2,5). In 2050, more than one third of the population will be over 60 years and only 16% under 20 years old, whereas 100 years before, in 1950, just 14.6% were between 60 and 80 years and

30.4% of the inhabitants under 20 years old (see Fig. 1.1) (Destatis, 2003a, p. 31). In consequence of this mentioned development, the main regarded issues are:

- Analyzing the therewith connected shift of the value system of the older people and
- Priority of rectification of the marketing concepts in retail, based on the new circumstances.

Shift of the Value System

In conjunction with the rising expectancy of life, the calendar age is not an ap- propriate criterion for splitting up the generations anymore, as in the past the age

illustration not visible in this excerpt

Figure 1.1: Demographic Development, 1950 compared to 2050

between 50 and 55 separated the older from the younger persons. Nowadays it is the functional age that is deciding. Today’s Generation 50plus and their values and needs are greatly varying from those of the people aged 50 in the past. The mental attitudes and wishes of the so called Best Agers are much closer to those of a 45- year-old than a 75-year-old person. It turns out that older people are more active, autonomous, wear more jeans and drink more Coke than their antecessors (Hunke and Gerstner, 2006, p. 25) (Carrigan, 1998, p. 43). A significant change has taken place in the last years and decades as the expected older generation does not consist of a homogeneous group, but has increasingly various feelings, thoughts and point of views about the way of living (Gassmann and Reepmeyer, 2006, p. 8). Depending not only on the eventfully past of yesterday’s older generation like war, hunger and diseases, their behavior and attitudes greatly differs from those of the seniors of today (Hunke and Gerstner, 2006, p.35).

Rectification of the marketing concepts in retail However, despite of the gradual demographic development in the previous centuries, the societies, economies and markets have not been prepared for the growing number of seniors and their changed values and needs. The main focus of marketing is still on the market of younger people, even if it is especially the Generation 50plus that develops a completely new, active and vital target group. The high potentials of the Best Agers and their great market power become increasingly more important for industry and retail. That is why a special marketing concept focused on the individual values and needs of the seniors turns out to be more and more essential. Especially in retail marketing, necessary consequences arise from the increasing and altering circumstances of the Generation 50plus. The point is to recognize opportu- nities and thus keep competitive advantages opposed to the business rivals (Meyer- Hentschel and Meyer-Hentschel, 2004, p. 17).

1.2 Way of discussion

In order to look into the mentioned subject and its connected problems, it is im- portant to observe the root of the development of the economy in Germany - the demographic change. The future trends are considered from different angles and the conspicuously but constantly tendency is described. Besides the expansion of the population, the development of the changed proportions of young and old people is shown.

In the course of the demographic changing, the meaning of the Grey Market is defined, before the classical as well as modern image of the seniors is introduced. As the behavior of the Generation 50plus has changed enormously in the last decades, their general life situation in terms of educational level and financial situation are described. After discussing the shift of the values and their comparison between today and yesterday, the various life styles of the seniors are demonstrated in respect of their physiological and psychological changing.

Since the first part deals with the market of the seniors, the next section is about the marketing, particularly in regard to the Generation 50plus. Seniors have to be seen as a new mature target group on the market of retail as they have an amazing purchasing power. Since also the age-related changes have impact on marketing instruments, their physiological, psychological as well as sociological changes are described. Afterwards, emphasis is given to the consumer needs of the elderly which they have developed during their life. By means of the particular marketing policy of retail companies, the deficits of the current retail marketing have to be set up and modified to gain advantages against the competitors. Which strategies can be accomplished concretely, is worked out in this thesis.

2. Analysis of the target group

2.1 Demographic Development

As in most countries that are industrially high developed, Germany is also affected by the progressive movement of the demographic change. The German population is increasingly aging which is enhanced by two incidents: The life expectancy of the people is increasing while the birth rate is decreasing. This occurrence leads to a shift of the quantitative relation between younger and older people in the next few decades and therefore calls for a special consideration of the new situation (see Fig. 2.1).

2.1.1 Population

The total population of the Federal Republic of Germany was 82,438,000 on December 31st, 2005 and has decreased by 63,000 since the end of the year 2004, by 31,000 in 2003 respectively. The number of inhabitants will shrink in the long-term and therefore leads to an augmenting declining German population. The main criterion therefore not only is the concurrently decreasing birth rate but also the growing amounts of deaths which are not compensated by the assumed rates of immigration from abroad. The major reason for the declining population is that the annual births are not half the amount of yearly deaths while the immigrant excess cannot consequently compensate the deficit of births (see Tab. A.3).

In order to keep the population stable, every woman would have to get 2.1 children in her life whereas in reality, the average German woman only gives birth to 1.4 chil- dren. Therefore, until the year 2050, the German population will decrease by 12 to 17 million people which approximately corresponds to the population of the former West German part when Germany was reunited in 1990 (Gassmann and Reepmeyer, 2006, p. 5) (Destatis, 2003a, p. 40-49).

2.1.2 Age Structure

Germany’s population is getting old. At the beginning of the last century the ex- pectation of life was between 40 and 45 years. In 1950 people passed away at an average age of 67 years and nowadays a new born boy can expect to live for 75.6 years while females average 82 years. (Hunke and Gerstner, 2006, p. 23). This noticeable trend of an aging population is not a new occurrence but has gradually developed for decades.

Today a 60-year-old woman has averaged 23.5 more years to live whereas a same- aged man 19.2 years. In contrast, in the year 2050, those further age expectations are expanding to 28.2 for women and 23.7 years for men (Destatis, 2003a, p. 16). In the future this movement is even enhanced by the fact that the average lifespan of a person will increase three months per year. Hence, in about 50 years, the number of the 80-year-old people will increase by 200% (Gassmann and Reepmeyer, 2006, p. 4,5). Furthermore Germany will develop into a woman society. Today already2

Figure 2.1: Age Distribution in Germany (Destatis, 2003a, p. 30)

illustration not visible in this excerpt

2.2 The Grey Market

Despite of, or rather due to the growing number of older people in Germany, it is imperative to have a closer look into the category of the elderly. During the last decades, the image of the seniors has changed in society. In a line with the increasing life expectation, the actual aging which comes along with frailty and diseases occurs at an increasingly later date. Therefore the new generation of the Best Agers has other preconditions and possibilities to act than their ancestors (Gassmann and Reepmeyer, 2006, p. 9) (Henseling et al., 2002, p. 102). How the classical image of the elderly was yesterday and the modern view is today is discussed in the following.

2.2.1 Classical image of the seniors

Associated with the aging population is the grey and negative image of the seniors. In the recent years, the word age was equated with being inactively, senile and not interested in the general public. The elderly are supposed to live in their own small world. There is a pessimistic mood regarding the aging of Germany’s society. Furthermore, reproaches appeared that Germany is developing into a methusalem society and decreasingly young people must care for an increasingly number of seniors (Bovensiepen et al., 2006, p. 6). However, this obsolete perception is not working anymore today. The image of a grandmother and grandfather in the rocking chair is outdated. The elderly significantly improved their former image of being old- fashioned and wearing grey clothes (Haertl-Kasulke, 1998, p. 22,23). The Generation 50 plus has changed and therewith the view by society.

2.2.2 Modern view of the seniors

Besides the continuously increasing life expectation, a change of age structure in the German population is observable. When people retire today, they are averagely 59 years old and have about 15 to 20 more years to live. This health improvement is led back to the innovation of pharmaceutical industries, higher hygienic standards as well as sufficient food supply. The older people stay powerful and healthy until a higher age and can use the aging period more actively than their former genera- tions. Therefore, the self-evaluation of being old is made at an increasingly late point of time as they feel conspicuously younger (Henseling et al., 2002, p. 103). Their sensed age does not incessantly match with the actual age. A 55-year-old person’s consumer needs, recreational activities and value orientations rather resemble a 45- year-old than a 75-year-old person. Nowadays, the seniors arrange their relatively long period of retirement differently from the seniors in the past. They like watch- ing a movie in the cinema, are interested in fashion, work out in the gym and book their journey over the internet. Yesterday’s seniors cannot be compared to those of today. A good example for the extensive change of the elderly over the years is shown in Fig. 2.2. The image shows Duerer’s mother at 63 in the year 1514. At that time the perception of a 63-year-old person corresponded to the classical view of the older people as it is described above. Opposite, Sophia Loren shows how vital and good-looking a 63-year-old woman can be today and to what extent the values and life style has changed over the last decades and centuries. As the German Federal Statistical Office states, the decrease of the German inhabitants does not only lead to a problem in 50 years, but will already allegorize a challenge in the next two decades, when the so-called baby boomer, the birth intense age-groups of the 60ies, get old (Destatis, 2003a, p. 10-13). In the meanwhile, the baby boomer generation to which persons like Sharon Stone, Robert Redford or Mick Jagger belong, has al- ready entered the Generation 50 plus. They are the best examples that prospective seniors do not only buy ankle braces and denture cleaners, but are new-fashioned, actors or rock stars. They are representatives for a cohort that is healthy, dynamic as well as open-minded towards new ideas and do not correspond to the traditional image of the seniors (Gassmann and Reepmeyer, 2006, p. 4).

illustration not visible in this excerpt

Figure 2.2: Comparison of a 63 year old woman in 1514 and 1997

2.3 The Generation 50 plus

The complexity of the new older people as well as their hard apprehending is pri- marily becoming apparent by the numerous existing expressions. Marketers tried to specify this special target group with the introduction of several creative terms in order to give a realistic illustration. Besides the innovative terms Generation 50

2.3. The Generation 50 plus 9

plus, Silver Surfer or Golden Ager, they are also named Whoopies (well off older people), Third Ager or Selpies (second life people). Since some phrases often come along with a negative hint, in the following the group of older people is basically called Best Agers, Generation 50 plus or just Seniors which is an increasingly ac- cepted term.

A further challenge is the categorization of age from that a person is considered as old. Usually between 50 and 55 years people enter the group of the Best Agers when they look into the retirement for the first time and think about how the new period in their life can be arranged (Gassmann and Reepmeyer, 2006, p. 8,9). In the following the distinctive Generation 50 plus is particularized. After surveying the issues of the sociodemographical criteria regarding the structure of households, the educational level as well as the financial situation of the elderly are discussed.

2.3.1 Household Situation

Despite of the decreasing German population, in the last years the total number of households has increased from 38,944 family units in 2003 to 39,178 homes in 2005 with an augmented tendency. The one-person-households will further rise while the more than 4-person-households are shrinking. Today in nearly every third house- hold in Germany lives only one person (see Tab. A.1). Decades ago, 3-generation- households were very common whereas nowadays they are only 1.1% and the seniors tend to live on their own. At the same time and due to the rising life expectancy, families consisting of 3 to 4 generations are increasing. The Best Agers nowadays are the sandwich-generation that has both to care for the children, and grandchil- dren and their old parents (Hunke and Gerstner, 2006, p. 29,30). However their children are in their mid-twenties and are about to move out of the parental house- hold. Therefore, the so-called Empty Nesters are typically living in a one-generation household.

2.3.2 Educational Level

Since the beginning of the last century, the school graduation and training level have continually improved in Germany. According to the Federal Statistical Office, the Certificate of Secondary Education dominated the High School Diploma up to the fifties. In 1925, 49% of the women and 21% male persons did not have a qualified degree whereas at the end of the 2nd World War, the number of people has halved. That is why the older seniors today have a lower educational level than those of the younger generation. In future, the educational level will considerably rise while the educational level in the younger segments is higher than at the older people (Federsel-Lieb, 1992, p. 21).

2.3.3 Financial Situation

In average, the financial situation of the older people has significantly improved in the last years. The average net income of Germany’s private households was 2,771 Euros per month in 2003. According to a study of the Federal Statistical Office of Germany regarding the net income of the private households, the 45 to 55-year-old people have the highest net income with 3,383 Euros per month. As stated in the chart (Fig. 2.3), this amount is almost two and a half times more than of those since they are under 25 years who only made averagely 1,360 Euros a month.

Figure 2.3: Net Income of private households in Germany, first midterm 2003 (Destatis, 2003b, p. 29)

illustration not visible in this excerpt

Although the senior households are burdened with increasing contribution of nurs- ing care insurance as well as dental additional insurance, the seniors get more money from the social pension fund than the following generations (Haimann, 2005, p. 47,48). The younger Best Agers aged 55 to 65 however had a relatively big amount of 3,015 Euros. The retired 65 to 70-year-old-people still got about 100 Euros more money than the 25 to 35-year-old working people. Households with a main income earner between 70 and 80 years still had 2,025 Euros to spend and the over 80’s ob- tained 1,853 Euros (see Fig. 2.3). All in all, the average net income of seniors from 65 years on has risen by 11% between 1999 and 2003 (Gassmann and Reepmeyer, 2006, p. 33) (see Fig. 2.3). In addition to the income, personal funds are also dependent on the situation of assets. Coming along with the increasing life expectation, the number of seniors with houses, properties or real estates which are almost 50% of all heirs is rising, too. Best Agers not only have the most free available income, but are also the winning heirs from their ancestors. No generation inherits more money than people aged 65 and older.

The asset situation is furthermore positively influenced both by inheritance and dis- bursement of life insurance. They are 57% of all inherits who are Best Agers between 45 and 65 years,1 are older seniors over 65 years. Interestingly the average heir is 59 years. The devisee volume is very high in Germany and permanently increasing. While 20 years ago the inheritance amount was 405 billion Euros, it will rise up to 1,250 billions by 2010 according to the BBE Unternehmensberatung (see Fig. 2.4). As stated by BBE by the year 2010 four persons out of ten households will become heirs (Verheugen, 2004, p. 13).

All in all the Best Agers possess financial resources like no other target group. The group of people over 55 years even owns approximately one half of the total assets in Germany (Meyer-Hentschel and Meyer-Hentschel, 2004, p. 7).

illustration not visible in this excerpt

Figure 2.4: Inheritance volume in the next decade in Germany (Verheugen, 2004, p. 12)

2.3.4 Segmentation

In the past, the group of the Generation 50plus which approximately counts 30 mil- lion people in Germany, often was neglected and allegorized as one large uniform fraction. However, the term Generation 50plus on its own demonstrates that the seniors do not and cannot show up as a homogeneous group. In opposite to the seniors in the past, the target group of today’s older people is very heterogeneous, but vastly diverse in their values, attitudes and behaviors like any other population group. In times of yore, the people aged between 50 and 55 years separated the juvenescent from the senior part. All the same, this cursory and simple sociodemo- graphical classification is too rough and does not allow for the diverse and various attributes of this target group (Infratest, 2005, p. 4). Nowadays the calendar age is not a fitting criterion anymore for segmenting the population, but it is the func- tional age that is deciding. The functional age is the ability of physical and spiritual skills which increasingly differs from person to person. These skills are therefore not dependent on the chronological age but rather on biological and social factors like life style, vitality, education or occupational training (Gassmann and Reepmeyer, 2006, p. 9) (Hunke and Gerstner, 2006, p. 25).

Due to this heterogeneity, it is enormously difficult to describe the market for older people and a sophisticated analysis is necessary. The increasing relevance of the se- nior market made sure that several institutes of market research have concentrated on the rising grey world. Therefore, depending on the gerontology of the respective institute, the life styles of the Generation 50plus can be segmented in exceedingly different manners. Therefore, for example according to Opaschowski, the seniors are classified into the young seniors that are between 50 and 64 years old and grew up during the postwar period as well as the seniors aged 65 to 79 that have actively experienced the National Socialism and the war. The third group are the old seniors who are over 80 years old and survived or grew up during the First World War (Opaschowski, 1998, p. 25).

Another classification is made by the market research company to be consolidated TNS Infratest that explored the typology of the Generation 50plus by means of a semiometry model in 2005. Semiometry is a method to qualitatively describe partic- ular target groups by evaluation of their specified psychographical value system. In opposite to the classical sociodemographical data, by use of the semiometry model, a more differentiated characterization of the target group can be performed (Infratest, 2005, p. 9).

As a result of the TNS Infratest study, the seniors can be divided into three heterogeneous but in itself homogeneous subgroups, each with individual moral concepts, value systems and personal life styles: the passive elderly, the cultural actives and the experience-orientated actives (see Fig. 2.5) (Infratest, 2005, p. 4).

Passive elderly

The group of the passive elderly which are 37% of all seniors embodies those attributes which were commonly associated with the old, grey image of the seniors in the past. There are 40% within the passive elderly that are 70 years or older and therefore they compose the oldest fraction of the three Best Ager groups. The passive elderly do not practice any leisure activities. Media, radio, books and magazines are used below average. Due to a lower education and a lower income, their interest in products and joy in consuming goods is little. Regarding computers, mobiles and fashion, this group of older people shows the lowest interest.

Cultural actives

Regarding to the semiometry and in the opposite of the experience oriented elderly, the cultural actives are mainly women. It is one third of the Best Agers that belongs to this group that is interested both in reading books and magazines and visiting the theater. Their cultural background is diversified which enforces their concentration on religious beliefs as well as on ethical aspects. However, their sense for family and social affairs is ranked first. Furthermore their interest in fashion, beauty, life style and wellness is very high.

Experience-oriented elderly

The assembly of the elderly who are oriented in experience contains 30% of the Gen- eration 50plus and is basically the youngest part within this group. The majority of this Best-Ager group are men that are interested in entertainment electronics, surf- ing the internet or playing PC games. Already today, 13% of all Germans over 50 years play computer games regularly (without author, 2006a). In their leisure time, the experienced elderly go to the cinema, go out with friends or do sports. There- fore the younger elderly do not greatly differ from the under 50-year-old persons regarding engagement, open-mindedness and interest in information and products. Regarding their attitude towards values these Best Agers are critical in the direction of consumption and lust oriented.

Figure 2.5: Segmentation of the elderly, by TNS Infratest

illustration not visible in this excerpt

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Pages
65
Year
2006
ISBN (eBook)
9783638568999
File size
7.7 MB
Language
English
Catalog Number
v63975
Institution / College
University of Cooperative Education Ravensburg
Grade
1,6
Tags
Changes Generation

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Title: Changes in value of the Generation 50 plus and the effects on retail marketing