Do you watch The Late Show with David Letterman, or do you watch Ted Koppel's Nightline? This question, which generated a lot of controversy earlier this year, is at the heart of a great marketing paradox. While the audiences of the two shows are approximately the same size, The Late Show generates $100 million more in advertising revenues than Nightline.
Why the difference? Marketers are obsessed with targeting the 18 to 49 demographic segment, which heavily watches David Letterman. Ted Koppel, on the other hand, attracts an older crowd.
Willy Sutton, the famous bank robber, was asked why he robbed banks. His reply was: "That's where the money is!" Why advertising to the young is so paradoxical is that the older group, the group that is largely ignored, has most of the money and spends it.
The baby boom generation is the largest and most significant cohort in the U.S. population. More than 70 million people were born in this country between 1946 and 1964. Currently, Americans over the age of 49 constitute 38 percent of the population. In 2020, Americans over the age of 49 will comprise more than 47 percent of the population. Marketers ignore this segment of the population at their peril.
In its October 2000 Consumer Buying Trend Report, Abacus, a division of Doubleclick, Inc., noted that of the households with individuals aged 25 and older who had bought from a catalog, those aged 66 to 75 had the highest number of transactions (4.0) for the one-year period. Households with individuals aged 56 to 65 were a close second with 3.9 transactions. The group with the highest amount per transaction ($112) was that with households headed by someone aged 46 to 55. Abacus also discovered that those 40 years of age and older account for 73 percent of all catalog sales.
Why do advertisers covet the part of the market with the least amount of money? According to Melissa Pordy, senior vice president and director of print at Zenith Media, owned by Cordiant Communications and Publicis Groupe, "With marketing dollars so limited and precious, you want to ... bet on the future."
Part of the rationale for targeting the young is the common belief that older people have already developed brand loyalties and it's unlikely that they will switch to another brand. Attracting young people to one's brand and keeping their business through well-oiled customer relationship management (CRM) programs is thought to promote a huge payoff in lifetime value (LTV).
|Consider these facts about the U.S. population over 40. These households: |
However, are mature consumers more brand-loyal than those aged 18 to 25? AARP and RoperASW surveyed 1,200 people aged 18 and older and found that consumers over 44 are receptive to marketing appeals. They discovered that loyalty is more dependent on product categories than age.
Mark D. Uncles and Andrew S. C. Enrenberg, professors at the London Business School, studied a year's worth of data from the Market Research Corporation of America's (MRCA) national consumer panel. In frequently purchased categories, they discovered the "somewhat smaller number of brands bought by older households is due in part to them buying less often ... compared with ... younger households." Over a longer time period, "older households would buy as often ... [and] then have as wide a repertoire of brands as do younger ones."
Another myth that drives marketing is the belief that the baby boomer cohort is generally different from the other older cohorts. Generalizing baby boomers as individuals having better health, greater vitality and more optimism than their elders is too simplistic. This generalization is likely to lead to bad conclusions about this market.
In fact, there is no average baby boomer. As with any group of people, some are richer than others, some more educated and some more proactive about their futures. There are a host of other differences among individuals in this cohort as well. Yet a survey of articles shows that most marketers are targeting this large heterogeneous mass of people as though all within are homogenous. This strategy is a big mistake. Sociologists have made the point that as we age, we become more dissimilar, having had very different life experiences.
As Adrianne Miller, writing for the Baltimore Sun, says, "Companies looking for foolproof strategies to market products and services to older Americans have learned the hard way that there's no one marketing formula, no one medium, no one message."
Segmentation is necessary to exploit the differences in this market. Ford Motor Company studied empty-nest boomers, finding they purchased 1.2 million new vehicles in 1998. By concentrating on boomers without children at home, the company will be able to focus resources more precisely than if they had to take children into consideration.
By segmenting the baby boomer segment into to more finely tuned niches, marketing becomes much more efficient. For example, Canadian banks are targeting affluent baby boomers who will likely inherit their parents' estates.
In 1999, the J. Jill Group changed its business model from being a multiple-catalog direct mail retailer to that of a single-brand retailer with multiple distribution channels. The company believes the apparel industry lacks focus on the mature woman. Consequently, they have chosen as their target "active, affluent women aged 35 to 55." Between June 2000 and June 2002, their stock went up a dazzling 436 percent.
The purpose of segmentation is to determine groups of people who represent a clear, definable and profitable target for marketers. People in the mature market, particularly baby boomers, have huge amounts of money, which they will spend. Smart marketers will identify niches in this market and, making wise decisions, profit handsomely.
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