Continuing each Monday, another section from my 2001 book. While we are all a bit older now, the basic concepts examined here remain valid:
For a very simple starting point, think of the members of the baby boom generation as being born together in 1960. (Obviously, the generation started sooner and ended later than 1960, but it’s an easy starting point for our analysis to pick a single year as the “center” of the mass of boomers.) Assuming the 1960 starting date and using age 25 as a stand-in for “people in their twenties,” 35 for “people in their thirties,” and so on, you can develop a simplistic table of peak activities that looks something like those on the following table. (Note that you should develop your own table for your own industry. And your own enterprise – if you work at Target, keep those 45-year-olds shopping at Target, not Macy’s!)
The implications of the aging of the baby boomers are many. Every aspect of life from cars to stores will change. Retail stores currently dependent on customers driving twenty minutes to shop there (called “trade area radius”) may find their reach shrinking as aging people are less willing to drive. The demand for taxis and tour busses could increase significantly. Buttons and zippers may go the way of the slide rule as arthritic hands reach for Velcro.
Some sports will die off, others will rise in prominence. Shuffleboard, anyone? Less physically intense activities like card playing and stamp collecting may return to favor. The American Association of Retired Persons (AARP) will continue to grow in influence, ultimately becoming a political force as powerful as the AFL-CIO was in the 1950s. If changes are to be made to the Social Security system, they need to be made today, before the aging baby boom becomes a totally politicized, entrenched recipient of transfer funds rather than the tax-paying generation they are today. Levels of charitable contributions will skyrocket.
In particular, I believe the aging of the baby boom will result in dramatic expansion of four key industries: health, education, travel, and financial services. The next fifty years will be golden years for these industries. I’ll have more to say about these industries later in the book.
In all of these possibilities lie major opportunities for enterprises old and new, both for-profit and not-for-profit.
In the Gateways sections in this chapter are listed some books which study the aging of the population in depth. While many Wall Street observers ignore the importance of demographic factors in forecasting corporate profits, other experts believe that demographics alone explain every social and economic trend. I believe a careful analysis of the facts and how they apply to your industry and company will probably put you somewhere in the middle. For most enterprises, there is no single factor as important as the demographics of the customer and how they are changing over time. But there are other factors at work, and to ignore them would be a mistake.
In weighing the social and economic impact of the baby boom, I would list four caveats.
First, the aging of the baby boom is not a single-point trend. Placing the baby boom at age 40 is not like placing the Dow Jones average at 10,000. In the above analysis, we’ve assumed that the baby boomers were born in 1960 and therefore that they turned forty in the year 2000. But millions of baby boomers were younger and older in 2000 – as young as 27 and as old as 54. That’s a big spread.
Similarly, while the average age at which people first marry may be 26, the range is from the teens to the nineties, with millions married before and after age 26. So when you build up the whole curve, the first baby boom marriage occurred in the early 1960s, while the last one – a 90-year-old on Viagra – won’t occur until about 2060. Furthermore, there were and will be millions of baby boomers getting married for the first time every year between (say) 1968 and 2006. (Statistics show that the annual number of marriages remained at about 2.4 million throughout the 80s and 90s.) That’s a long time for a peak.
The fact that the baby boom is not a one-year phenomenon means you must interpret its influence with care. Nonetheless, the influence of the boom is still enormous. You may not be able to use the boomers as a guide to the exact year when you should get into the bridal business and when you should get out. But 2008 is probably not the best year to get in.
Second, be careful not to confuse age-related trends with generation-related trends. When I was a stock analyst on Wall Street in the mid-70s, common wisdom was that it was time to start selling Coca-Cola stock and start buying General Foods. The logic was, “Soft drinks were for kids, but adults drink coffee.” And with an aging baby boom generation, people reasoned, General Foods, the largest coffee maker (including the Maxwell House brand) was surely poised for a long-term rise.
The prediction turned out to be wrong. People thought that drinking preference was an age thing. But it wasn’t – it was a generational thing. The baby boomers kept right on drinking soft drinks, and never made the anticipated en-masse switch to coffee. Thus, coffee lost share while soft drinks stayed strong.
Today the phenomenal marketing power of Starbucks and the rise in coffee-loving among members of Gen X have turned coffee consumption up from its 1995 low. Even so, per capita 1997 US consumption of coffee is down 12% from 1980, while per capita soft drink consumption has risen 51% in the same time frame. Soft drinks were the right place to put your bet 25 years ago.
Similarly, when I was a teenager, movies and music were for kids. My parents and most of their friends did not go to movies very often, and they certainly didn’t buy many record albums or cassette tapes. Today, my baby boom friends and I, all well past 30, are going to movies in droves and buying CDs like crazy. While the peak years for movies and music are still the teens and 20s, baby boomers remain an important part of the market. Baby boomers have also demonstrated a lifelong interest in learning. Unlike their parents, they kept on reading books after they graduated from school.
The bottom line is that, for each age-related trend, you need to ask yourself, “To what degree is this something that will pass as these people age, and to what degree is this going to stay with them for life?” Who knows – maybe the members of Gen X will be buying $5,000 Sony Playstations when they are 50. Weirder things have happened.
Third, historical age-related consumption patterns can change. Today the peak for spending on motorcycles is by people in their forties and fifties. This was not true forty years ago. Long-distance cruisers popularized by Japanese makers and brilliant history-aware manufacturing and marketing by Harley-Davidson have changed the shape of demand.
Many other patterns have shifted in similar ways. Over time, as more people have pursued more degrees, people have started working later, and the age of first marriage has risen. For decades, the average retirement age fell; now it may rise again as Social Security evolves and as more people opt for second or third careers in later life. Demand for expensive trips and resorts has historically peaked among people in their fifties and sixties, but today more and more people are able to buy these things when they are younger.
The sheer size of the aging baby boom generation may change some basic assumptions. They will be healthier and live longer, maintaining more varied interests than the senior citizens of prior times. I believe that we will see a significant rise in demand for college and other educational services by senior citizens. We think of suburban apartments as starter homes for people in their twenties. But if there are not enough people in their twenties to fill them, landlords and developers may figure out ways to make them attractive to senior citizens – like hiring an on-call nurse for every twenty units, or providing pickup services for groceries.
In coming years, the number of people over 80 will grow faster than any other age group. Whole new industries will be born to serve these people. In the past, few marketers have studied how people in their 90s differed from people in their 70s. Such analyses will become very important to enterprises everywhere. Author Ken Dychtwald thinks the average lifespan could hit 95-100 by mid-century, with many living beyond 120.
Fourth, the aging of the baby boom is a phenomenon of the developed world. As the world becomes more globally integrated, this one is the real kicker. The US age structure described above, with a huge bulge of people born in the years after World War II, is also present to one degree or another in Japan, Canada, Australia, New Zealand, and most of Europe. But this bulge, with a decline in births afterwards, is not true in the Middle East, Asia outside of Japan, Latin America, and Africa. So the aging of the baby boom is really a “first world” phenomenon. (I put “first world” in quotes because I do not find it a very appropriate term, though it’s a familiar one.) The rest of the world covers a broad range. Below you’ll find a list of some of the world’s largest and most representative nations, arranged by increasing proportions of kids under 15.
Percentage of Population Under Age 15 and Population Growth Rate in Selected Countries
This division of the world into young countries and aging countries will result in a newly defined “new world” (or “young world”) and “old world.” While the US, Japan, and Europe will be great places to sell Viagra, wheelchairs, golf clubs, and museum passes, most of the world – from India to Brazil – will still be consuming diapers, bicycles, video games – and condoms. If you are running BMG (Bertelsmann Music Group), Warner Music, or Sony Music, you cannot focus on the aging baby boom alone; you will have half your market waxing nostalgic over Sinatra, Elvis, and Led Zep while the other half (or more) wants hip-hop and the latest techno tunes. Brand management – determining who you are and who you serve – will become a major challenge for any global company, from DaimlerChrysler to Hilton, from Coke to Sony. A nightmare for some, an opportunity for others.
These population curves will intersect in millions of ways, and at each intersection there will be both risks and rewards. Americans will be stock-owning 65 year olds when Mexicans are consuming 25 year olds. Will US mutual funds seize the opportunity to invest in Mexican consumer product companies? One country may be at the perfect age to create and market animated cartoons while a neighbor is only old enough to watch them. Americans too old to drive Harleys and Corvettes may find ready markets for their used vehicles in other nations.
You need to know the population and age structure of any nation you do business in, be it producing or selling. And you need to think about how that structure is going to change and how your enterprise will need to change in response. What can we predict about the future of younger countries from the patterns demonstrated in the “old world” countries like the US?
The aging of the baby boom is not the only important long-term change under way in the world today.