October 30, 2013

Battle For World's Most Valuable Consumer

Last week, I was invited to speak at a conference sponsored by the 4A's and the law firm of Coblentz, Patch, Duffy & Bass LLP. The topic was "The Battle For The World's Most Valuable Consumer."  I published my remarks on my company website and received some nice comments, so I thought I'd publish them here. 

Good morning boys and girls.

I’m going to try something amazing today. I’m going to try to talk and change Powerpoint slides simultaneously. This is not a core competency. It's sad. A few months ago I was the ceo of an ad agency. I had departments full of people who did nothing but advance powerpoint slides for me. Now look at me.

Okay, my talk today is entitled The Battle For The World’s Most Valuable Consumer.

Who is the world’s most valuable consumer? Actually, it’s my wife. But that’s a whole other slide show.

The world’s most valuable consumers are people over 50. And the title of this talk is a big fat lie because the truth is that there is no battle for these people. But we’ll get to that in a minute.

Let’s start at the beginning. Before I began my advertising career 130 years ago, I was a science teacher. I taught science in the NYC public schools for 3 years. This, by the way, is a very compelling argument for home schooling.

I was not much of a teacher and really didn’t know much about science, but one of the things teaching science taught me was a very deep respect for the scientific method.

Scientists work really hard until they are able so say that they know something. They have to do experiments, and repeat their experiments, and then their peers review their methods and assumptions, and then their peers repeat their experiments, and then they publish the results and then people can comment and question and look for flaws. And after all this torture and scrutiny, if their results hold up, then they can say that they actually know something.

Knowing something, it turns out, is completely different from thinking you know something.

So then I left teaching and got into the advertising business. And the first thing that struck me was that in the ad business we didn’t really seem to know very much.

We thought we knew things…we had all these rules and principles and philosophies and ideas about what made good advertising…but I couldn’t find any facts.

We did things that looked and sounded like science…we used the language and the tools of research… we had clip boards and questionnaires and lab coats … but we didn’t use the scientific method. We rarely if ever used controls. We didn’t repeat our experiments. We didn’t have peer review of our methods. And no one ever repeated our work to validate it.

Now, I’m not here to pick on market researchers. Our lack of rigor is not their fault. We simply don’t have the time, money, or inclination to do the type of rigorous experimentation that academics and scientists and some industries do before they can say they really know something.

Over time, making a nice living helped me accommodate myself to the idea that we didn’t really know what we thought we knew. But it never stopped bothering me. And so I developed a very annoying habit – I stopped believing advertising experts.

I don’t care what school you went to, or what credentials you have or what awards or medals you’ve won. If you don’t have the facts, and you can’t explain them to me simply and clearly, I’m sorry, I'm skeptical. I will defer to a certain professor Einstein on this subject who once said, "It should be possible to describe the laws of physics to a barmaid." 

Now one of the doctrines of the ad industry that fell into this category of things I never fully believed was why we spend so much of our time, money, and energy talking to young people and so little on older people. I always assumed that there must be some pretty good facts to justify this somewhere and I just hadn’t run into them.

So about 6 months ago when I retired from my agency I had some time on my hands and I started to look into this issue. Now I stipulate that there are certainly some things that I haven’t found or read. But what I have seen and what I have read leads me to believe that we don’t know what we think we know.

In fact, I have come to believe that most of us target young people because we see everyone else doing it and we assume that somewhere there must be someone who knows why the hell we're doing this and has a good reason for it. In other words, somewhere at the end if all this there’s a smart person with facts.

Well, if there is a smart person somewhere with the facts on this, I haven’t found him yet. Here’s what I have found.
  • People over 50 have about about 70% of all the wealth in the country
  • They are responsible for about half of all consumer spending
  • They buy 62% of all new cars
  • Despite the fact that many are retired, they still have 55% higher annual income than some other adult demo groups.
  • And on average they have a net worth about 3 times that of the rest of the people
  • They dominate 94% of CPG categories.
  • They are the internet’s largest demographic constituency.
  • They are much easier and much cheaper to reach than any other demographic group.
  • And, according to Nielsen, they are the target for 5% of all advertising.
Let me repeat the key fact here. Despite the fact that people over 50 are responsible for about half the consumer spending in the country, they are the target for 5% of all advertising.

I have stared at this slide for weeks, and it just doesn’t make any sense to me.

According to Nielsen, they are “The most valuable generation in the history of marketing.”

Forbes calls them “the most ignored wealthy people in the history of marketing.”

I submit to you that if I could get you to forget for a minute that you’re in the advertising or marketing business and I showed you this slide, you’d say there is something radically wrong here.

Usually, when I give this talk it is 45 minutes long and I give several examples of the inexplicable disregard marketers have shown for older people. But I only have 18 minutes today so let me give you one recent example.

In a piece last month, the The Wall Street Journal reported on so-called “youth cars.”
According to the Journal:  
"Appealing to the young has auto makers designing and marketing to the "millennial generation"—that group of consumers in their 20s and 30s... But senior citizens are making Swiss cheese of those efforts."
The percent of sales of youth cars that are actually sold to the youthful target of 18-34 year olds is 12%. Meanwhile we are substantially disregarding the 88% of the population who actually buy these cars.

 Of course the people responsible for this have to justify it. How do they explain this anomaly?
"The baby boomer generation is the largest cohort in the marketplace," said one automotive marketing executive. "Just by virtue of their numbers being so large, we'll continue to see them skew the data for a long time."
So, you see, older people aren't really customers. They don't really buy things. They don't spend real money. All they do is "skew the data." In the same article, the president of a market research firm had this to say:
"So when marketing messages are for millennials, there are a lot of things that are attractive to the older generation."
Sorry. Older people are buying these cars in spite of the mistargeted marketing and advertising, not because of it.

Can you think of any other demographic, ethnic or social group that anyone would claim is best influenced by targeting someone else? The whole science of marketing is based on finding the most relevant message and delivering it to the most probable buyer. Except when it comes to people over 50. Then all the rules are suspended. Because these people don't count. They just "skew the data."

So why are marketers and advertisers ignoring people over 50?

There are a lot of reasons. It starts with the demographics of our industry. 80% of all workers in the professional and business services sector are under 55. Can you imagine what that number is in advertising agencies and marketing departments?

Go into any creative department in any ad agency in America and it is a miracle to find anyone over 50.

And yet, in every serious creative field you can think of older people completely dominate.
 • Last year, the five Oscar nominees for Best Director were Woody Allen, Michel Hazanavicius, Terrence Malick, Alexander Payne, and Martin Scorsese. Average age: 62.

 • The Pulitzer Prize and National Book Critics Circle Award for Fiction went to Jennifer Egan, age 50

 • The Pulitzer Prize for Drama was awarded to Bruce Norris, 52
 • The Prize for Music went to Zhou Long, 59

 • The Poetry award was won by Kay Ryan, 67

 • The Noble Prize for Literature went to 83-year-old Tomas Transtromer. And this year’s prize was just announced. It went to Alice Munro, 82

 • The Emmy for Best Comedy went to Modern Family, created by Christopher Lloyd, 52 and Steven Levitan, 50
I guarantee you, not one of these brilliant people – not one -- could a get a job in the creative department of an advertising agency today.

We have all the numbers and all the data, yet we are blinded by things we think we know that we don’t really know-- myths that we have been taught, and fairy tales about people over 50.

Let’s look at some of the fairy tales.
Fairy Tale #1: People over 50 are downsizing 
Here’s the reality. Between 1999 and 2009, spending by people 55 to 64 grew 45%. People aged 55-64 outspend average consumers in virtually every consumer products category. In fact, people 55-64 buy 30% more new cars than people 25-34. In fact, people 75 to dead buy more new cars than people 18-34.
Fairy Tale # 2: Older people are dying out 
The reality: Between now and 2030, the population over 50 will grow at about 3 times the rate of adults under 50. We are not losing our old people, we are losing our young people.
Fairy Tale # 3: By advertising younger, you automatically reach and influence people over 50
Advertisers believe that by advertising to 25-49 year olds we will reach the 50+ market as “spill.” But a study done by one of our associates recently showed that a typical media plan directed at 25-49 year olds had a 50+ component of only 15%. It is not just the media thinking that is wrong, it is also the message. According to The New York Times, the generation gap is wider than at any time since the 1960’s. 2/3 of people over 50 say they are less likely to purchase a product if they find the advertising offensive. And guess what, the same 2/3 say that advertising has become cruder and more offensive.
Fairy Tale # 4: People over 50 are “stuck in their ways” and will not switch brands
The reality is baby boomers are just as likely as young people to try new products. 61% say that “in today’s marketplace, it doesn’t pay to be loyal to one brand.” Guess what the number is among people 18 - 41. Exactly the same.
Fairy Tale #5: If you get them young, you’ll have them for life.
This is the “lifetime value” delusion. A few months ago, the wrongness of this argument was exposed in a study published by the journal Science. 
A team of psychologists released a study which discredited what we call “Lifetime value” and the scientists call "the end of history illusion" i.e., the illusion that things will remain as they currently are and we will stay like we are now.   According to one of the authors of the study we simply do not realize "how transient our preferences and values are..."  And if you think that targeting millennials now means you’ll have them for life, here’s some sobering news. A study last year reported that 80% of millennials looked for the lowest price possible when shopping, and that 60% are more inclined to bypass their favorite brand if a cheaper alternative is available.
Fairy Tale # 6: People over 50 want to be like young people.
This may be the oldest and perhaps the most damaging of the fairy tales. Do older people want to be youthful? Yes. Do they want to be like young people? No. This is a crucial distinction which seems to be completely lost on our industry. People over 50 have their own idea of what it means to be youthful, and I promise you it has nothing whatever to do with Justin Beiber, Miley Cyrus or the young, hip doofuses we are bombarded with in advertising.

People over 50 are not who we think they are. They grew up smoking weed and listening to James Brown. They invented the personal computer. They helped develop Google. They didn’t invent sex, but they invented the sexual revolution.

For the most part, they are healthy, wealthy and wise. They are not grandma and grandpa.

They do not look like this...

They look like this...

In my opinion, the idea that people over 50 want to be like young people is simply the narcissistic excuse that the young people who dominate our industry use to not bother learning or understanding older people.
I have come to the conclusion that the rationales we use for targeting young people are highly questionable and that there is little to no factual evidence to support these practices.

I believe we do not ignore older people for the reasons we give. These are just rationalizations we use because we prefer to identify with the excitement of youth than the dullness of middle and older age.

I have come to the conclusion that we are spending 10’s of billions of dollars on questionable practices based on questionable assumptions.

Now maybe I’m wrong. Maybe there is a logic that I can’t see in which half of the buying power of the country is only worthy of 5% of our effort. But I don’t think I’m wrong. I’ve been around advertising too long to accept the idea that there are mysteries about it that average people like me can’t understand.

Now please don’t get me wrong. I am not saying that there is no place for advertising to young people. There certainly is. But at 95 to 5, I believe we are way out of balance.

The 50+ generation is not just a niche that needs sidebar attention. They are the mainstream. There are now 101 million people over 50 in America. In just 5 years, half of all American adults will be over 50. They are the hard core of our economy. They are the group that determines the success and failure of most products.

It’s time to think outside of health care, financial services and erectile dysfunction -- to all the other mainstream product and service categories that are heavily patronized, and often dominated, by people over 50.

The sooner we recognize this and adapt our marketing and advertising thinking to this reality, the sooner we will all enjoy the attention and the financial benefits of the most valuable consumer group in the history of the world.



George Tannenbaum said...

Thank you for this. --George (America's 11th oldest copywriter.)

Carl Zetie said...

Sometimes it seems that the only competent, likeable men in TV ads are the ones in erectile dysfunction ads. Most of the men in car ads should clearly not be allowed to operate machinery, and fathering children apparently causes men's brains to leak out their ears.

PaulGBurke said...

Sorry to nitpick, but faulty math TAC:

"The percent of sales of youth cars that are actually sold to the youthful target of 18-34 year olds is 12%. Meanwhile we are substantially disregarding the 88% of the population who actually buythese cars."

You're mixing % of car sales with % of population. I think you mean something like "Meanwhile, we are substantially disregarding the population making 88% of car purchases."

Cecil B. DeMille said...

Another battle in the ongoing war for the World's Most Dysfunctional Profession. Advertising is winning something after all. Sad days.

Rob Hatfield said...

George, If you are the 11th oldest, then at 58 I must be in the top 5!

Kate Richardson said...

The biggest challenge is that because so few marketers are targeting this audience, no one seems to know how to do it. It's easy enough to copy what other advertisers are doing in the youth space. It's a little bit harder when you need to be original.

Steve Allan said...

As a result of "marketers" ignoring the over 50 crowd - because they have convinced their clients of this fact - media has responded by ignoring them as well. Look at radio. For years it has been trying to get younger. The irony is that the younger demos don't care. Look at the median age of the FNC. They certainly get revenue...though it is interesting to see who is actually there. "Marketers" rush to the digital platforms because that's where all the kids are. I would love to see one major brand make a serious effort at marketing to the 50+ crowd and see what happens.

Smithhammer said...

True enough, but if you're not capable of creativity and at least some originality, maybe it's time to find another line of work.

Rob Hatfield said...

I don't know if it's ironic or just weird, but a lot of the TV spots I see targeting younger people are sound tracked by the songs of our youth (I'm 58). Music from the 60s and 70s is predominantly the music of choice for today's commercials. Is it because it was rebellious and in your face, is it making a comeback because today's music is so damn bad, or are they subliminally trying to target boomers while visually targeting the young? Anyone?

Kate Richardson said...

This would put about 90% of the industry out of work ;)

Smithhammer said...

That sounds about right. ; )

Emmett said...

" I have come to believe that most of us target young people because we see everyone else doing it"

Or they are a more easily manipulated demographic?
An older, more discriminating consumer is a pickier, more inclined to be informed consumer.

Who requires more than sexy images to make a buy decision?

Jim Powell said...

Chill our Russell Brand

Jim's Friend said...

I know right, how dare somebody criticise the way the world is, let's infer that they think they're some kind of jumped up blathering messiah to discourage them from thinking for themselves in the future. Opinions aren't for the little people, am I right!

Bruce Smithhammer said...

Another recent whopper to add to the list - "If you like your health plan, you will be able to keep your health plan." Tell that to millions of Americans who have been served notice in recent months that they will need to find new health plans...

Shanghai61 said...

I'm in two minds about him right now.

Part of me admires his passionate exposition of the problem. And then I'm disappointed that he doesn't offer any ideas about possible solutions.

I haven't either got any either, so I can't really criticise him, can I?

Jim Powell said...

Russell Brand a little person?

Bruce Smithhammer said...

I think the solution is pretty simple, really, and comes down to the individual - be aware of the lies, don't fall prey to them, and don't perpetuate them. Like lying itself, one can only hope that truth-telling might be contagious.

Not Jim's Friend Anymore said...

+ inquisitiveness
- reading comprehension

TCWriter said...

We got one of those letters. Turns out the insurance company doesn't *have* to discontinue our plan, but did. Why? Because the letter barely mentions the exchange, but does say (about eight indecipherable paragraphs in) that if we do nothing, they'll (very quickly) enroll us in a plan costing $400/month more.

Without any hope of a tax break. Nobody's forcing the insurance companies to drop any plans save those that don't meet the minimum requirements (ours certainly exceeded them). The rest is insurance company greed.

Mariel L. said...

Oh I used lying sometimes for special reasons with good intentions. But yeah if someone lied too much it becomes a lifestyle. I know some work at home people who lied about their education degree since clients will not ask about it. HHhhhmmm so it is for their personal purposes?

Party-sleuth Debbie said...

"These are just rationalizations we use because we prefer to identify with the excitement of youth than the dullness of middle and older age.
Surely if you are trying to make a product look or sound attractive to anyone, even those over 50 and particularly those pictured above, would it not make sense to promote "excitement" rather than "dullness".

Trends go in cycles, as Rob says below, adverts are choosing music from the 60's & 70's, music that will appeal to over 50's yet be on trend for the younger generation. Two birds one stone???

Bruce Smithhammer said...

I have a feeling that's the real reason behind my cancellation as well. I will be calling Blue Cross this week and asking for a detailed explanation of what specific parts of my existing plan do not supposedly meet the new guidelines. I'm guessing I can expect an obfuscated answer to a clear and simple question...

Terry Stringer said...

The reason 50+ year-olds aren't advertised to is because they are sick and tired of being interrupted with cheesy advertisments. They've gotten wise over the years and no longer respond to ads. If they want to learn something about a product or service they'll do it on their terms.
I also agree that these young punks employed by ad agencies are too selfish to think about anyone else. It's as if they create ads only to impress their online colleagues.