Should we forget about ‘the older consumer’? An expert roundtable on market segmentation - 22.10.2013

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In an ageing society, understanding and engaging with ‘the older consumer’ is of pressing interest for businesses who want to realise the potential of the market. But it is not an easy market to …

In an ageing society, understanding and engaging with ‘the older consumer’ is of pressing interest for businesses who want to realise the potential of the market. But it is not an easy market to understand or describe.

A key issue to be addressed by marketers is to avoid a homogenisation of older people. The diversity of consumer spending of this group is often lost in ageist perceptions of ‘what older people want’. Despite this however, it remains to be seen if the commonalities of ageing – such as wealth depletion and physiological changes – nudge older people to gravitate to a norm.

In Dec 2010, ILC-UK and the Personal Finance Resource Centre (PFRC) at the University of Bristol published a report which explored what and how older people spent their income (Consumption Patterns Among Older Consumers). The evidence from this report fed into the ILC-UK report for Age UK on older consumers (The Golden Economy).

ILC-UK and PFRC have teamed up again to further explore issues around consumption and old age, funded by the Economic and Social Research Council Secondary Data Analysis Initiative. At this seminar we presented new evidence which explores patterns of expenditure among older people and considers what explains these.

During the seminar we:

Considered how our spending varies as we age, including setting out average and overall spending by age group;
Segmented older households based on their patterns of expenditure;
Considered the validity of a single ‘older consumer’ model.

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  • Little variation in expenditure on alcohol & tobacco and household goods & services

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  • 1. Should we forget about ‘the older consumer’? An expert roundtable on market segmentation 22nd October 2013 This event is kindly supported by PFRC
  • 2. Welcome David Metz Visiting Professor Centre for Transport Studies, University College London This event is kindly supported by PFRC
  • 3. David Sinclair Assistant Director of Policy and Communications ILC-UK This event is kindly supported by PFRC
  • 4. Laurence Miklichansky-Maddocks Director of Brand and Business Insights for Europe Brown-Forman Beverages This event is kindly supported by PFRC
  • 5. Spending by older people David Hayes Research Associate PFRC This event is kindly supported by PFRC
  • 6. Exploring patterns of expenditure: Segmenting the older UK consumer using the Living Costs and Food Survey David Hayes and Sharon Collard Brown-Forman 22 October 2013 www.pfrc.bris.ac.uk/esrc 6
  • 7. Our Approach • Using the Living Costs and Food (LCF) Survey, we: 1. Describe average household expenditure by age (using descriptive analysis); 2. Segment older households based on their patterns of expenditure (using cluster analysis); 3. Explore cluster membership (using descriptive and CHAID analysis). www.pfrc.bris.ac.uk/esrc 7
  • 8. Standard LCF expenditure categories • • • • • • • • • • • • Alcohol & tobacco Clothing & footwear Communication Education Food & non-alc. drinks Health Household goods & services www.pfrc.bris.ac.uk/esrc 8 Housing, fuel & power Recreation & culture Restaurants & hotels Transport Miscellaneous goods & services
  • 9. Data Considerations • Good sample of household heads aged 50+ • To cover transition into and beyond retirement • Total sample size of 2,769 • Good distribution of age groups (even 80+ ~ 12%) • Equivalised expenditure • To take account of household size www.pfrc.bris.ac.uk/esrc 9
  • 10. Absolute and equivalised expenditure by age 600 Pounds per week (£) 500 510 400 300 Absolute 286 189 200 160 100 0 50 but under 55 yrs 55 but under 60 yrs www.pfrc.bris.ac.uk/esrc 60 but under 65 yrs 65 but under 70 yrs 10 70 but under 75 yrs 75 but under 80 yrs 80 and above Equivalised
  • 11. Proportion of total expenditure by age ↑ Food & non-alc. drink increases: 12% to 19% ↑ Housing, fuel & power doubles: 12% to 24% ↔ Communication constant: 3% ↓ Clothing & footwear halves: 6% to 3% ↓ Transport decreases: 18% to 7% ↓ Recreation drops: 16% to 11% www.pfrc.bris.ac.uk/esrc 11
  • 12. The segmentation (clustering) process • Exploring how types of expenditure co-vary • Identifies dominant patterns • Classifies people into segments based on these • Clustered on the 12 expenditure categories • ...the optimal solution contained six clusters www.pfrc.bris.ac.uk/esrc 12
  • 13. Drivers of cluster membership • Highly statistically significant variations in expenditure for all 12 categories • Three categories were particularly strong • Alcohol and tobacco • Clothing and footwear • Housing, fuel and power www.pfrc.bris.ac.uk/esrc 13
  • 14. The clusters Percentage in cluster (%) Mean weekly expenditure ‘Conservative consumers’ 46 138 ‘Foodies’ 19 228 ‘Burdened by bills’ 11 231 ‘Smokers’ 9 245 ‘Recreation and clothing’ 4 392 ‘Socialites’ 12 405 The average equivalised expenditure across the sample is £217. www.pfrc.bris.ac.uk/esrc 14
  • 15. Spend far below average on non-essentials (such as recreation and hotels) Conservative Consumers • • • • • • Spent £138 on average Transport (£18) much lower than average (£32) Only 47% connected to the internet More likely to be the oldest old (22% cf. 15%) 38% in the lowest income quartile; 60% retired 56% gave benefits as main source of income www.pfrc.bris.ac.uk/esrc 15
  • 16. Very high expenditure on food (£58 compared to the average of £34) Foodies • • • • • • Spent £228 on average Close to average expenditure in most categories A half (54%) live in two-adult households Very few households are renting (12%, cf.25%) Only 18% in lowest income quartile Larger houses (58% cf. 50% with 6+ rooms) www.pfrc.bris.ac.uk/esrc 16
  • 17. Very high proportion of expenditure on housing costs (£4 in every £10, twice the average) Burdened by Bills • • • • Spent £231 on average All other expenditure is relatively low Low transport costs (lowest petrol expenditure) 70% in rented accommodation (cf. 24%) • Including 45% from a social landlord • More single households www.pfrc.bris.ac.uk/esrc 17
  • 18. Spent £28 a week on tobacco products Smokers • Spent £245 on average • Very high spend on alcohol and tobacco (£36 per week/15% of total expenditure, cf. 3%) • One of the ‘younger’ clusters (62% under 65) • Almost a third still in full-time employment • Home-ownership is relatively low (42% cf. 54%) www.pfrc.bris.ac.uk/esrc 18
  • 19. Recreation and Clothing • • • • • • At £65 each week, these fashionistas spend more on clothing than all the other groups combined! One of the two high-spending clusters (£392) High spend on recreation (£65) & transport (£53) Only 21 per cent of this cluster are 70 and above Two-thirds in larger houses (6+ rooms) 20% say benefits main income (cf. 10% socialites) Half of the cluster in the highest income quartile www.pfrc.bris.ac.uk/esrc 19
  • 20. Enjoy the finer things in life, spending £131 per week on eating out, holidays and recreation The Socialites • • • • • • One of the two high-spending clusters (£405) Spent £96 on transport costs (24% cf.15%) Three quarters under 65; 41% working full time Income – 57% earnings; 33% investments More than half in highest income quartile 90% of households connected to the internet www.pfrc.bris.ac.uk/esrc 20
  • 21. Important socio-demographic characteristics • Tenure: 97% of Socialites were homeowners • Compared with 29% of Burdened by Bills • Age: 40% of Smokers aged under 60 • Compared with just 26% of Conservative Consumers • Income: 7% of R&C in lowest income quartile • Compared with 39% of Burdened by Bills www.pfrc.bris.ac.uk/esrc 21
  • 22. What does this research tell us? • • • • • • Equivalised expenditure decreases with age... ...but other factors important No such thing as the ‘older consumer?’ Depends on preferences, resources, mobility However - Smokers are young (stop/morbidity) Housing costs key in wellbeing (+/- constraints) www.pfrc.bris.ac.uk/esrc 22
  • 23. But, we only know so much... • Conservative Consumers are a diverse group • And need unpacking further to understand why they spend comparatively little • Hostels, boarding houses, and institutions such as rest/care and nursing homes are excluded • The true effect of ageing vs. generational effects remains unclear – further analysis needed www.pfrc.bris.ac.uk/esrc 23
  • 24. Exploring patterns of expenditure: Segmenting the older UK consumer using the Living Costs and Food Survey David Hayes and Sharon Collard Brown-Forman 22 October 2013 www.pfrc.bris.ac.uk/esrc 24
  • 25. Response Dick Stroud Managing Director 20plus30 This event is kindly supported by PFRC
  • 26. Debate and Q&A This event is kindly supported by PFRC
  • 27. Should we forget about ‘the older consumer’? An expert roundtable on market segmentation 22nd October 2013 This event is kindly supported by PFRC