Should we forget about ‘the older consumer’? An expert roundtable on market segmentation 22 nd October 2013 This event is kindly supported by PFRC
Should we forget about ‘the older consumer’? An expert roundtable on market segmentation - 22.10.2013
Nov 12, 2014
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.
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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Should we forget about ‘the older consumer’? An expert roundtable
on market segmentation
22nd October 2013
This event is kindly supported by PFRC
Welcome
David Metz
Visiting ProfessorCentre for Transport Studies, University College London
This event is kindly supported by PFRC
David Sinclair
Assistant Director of Policy and CommunicationsILC-UK
This event is kindly supported by PFRC
Laurence Miklichansky-Maddocks
Director of Brand and Business Insights for Europe Brown-Forman Beverages
This event is kindly supported by PFRC
David Hayes
Research Associate PFRC
Spending by older people
This event is kindly supported by PFRC
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
6www.pfrc.bris.ac.uk/esrc
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
• Alcohol & tobacco• Clothing & footwear• Communication• Education• Food & non-alc. drinks• Health• Household goods &
services
• Housing, fuel & power• Recreation & culture• Restaurants & hotels• Transport • Miscellaneous goods &
services
www.pfrc.bris.ac.uk/esrc 8
Standard LCF expenditure categories
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
Absolute and equivalised expenditure by age
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50 but under 55 yrs
55 but under 60 yrs
60 but under 65 yrs
65 but under 70 yrs
70 but under 75 yrs
75 but under 80 yrs
80 and above0
100
200
300
400
500
600
510
189
286
160
AbsoluteEquivalised
Poun
ds p
er w
eek
(£)
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%
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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
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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
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The clusters
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The average equivalised expenditure across the sample is £217.
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
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
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Spend far below average on non-essentials (such
as recreation and hotels)
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)
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Very high expenditure on food (£58 compared to the average of £34)
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
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Very high proportion of expenditure on housing costs (£4 in every £10,
twice the average)
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
Spent £28 a week on tobacco products
Recreation and Clothing
• 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
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At £65 each week, these fashionistas spend more on clothing than all the other groups combined!
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
Enjoy the finer things in life, spending £131 per
week on eating out, holidays and recreation
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
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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)
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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 neededwww.pfrc.bris.ac.uk/esrc 23
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
24www.pfrc.bris.ac.uk/esrc
Dick Stroud
Managing Director20plus30
Response
This event is kindly supported by PFRC
Debate and Q&A
This event is kindly supported by PFRC
Should we forget about ‘the older consumer’? An expert roundtable
on market segmentation
22nd October 2013
This event is kindly supported by PFRC
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