Tuesday, August 24, 2010

The Pro's and Cons of Boomers

Mediapost was a weekly blog that is trying to set us straight on Boomers:

The Economy, Today And Tomorrow
Last week, The Wall Street Journal ran a story headlined, "Another Threat to Economy: Boomers Cutting Back." In it, the reporter made the case that Boomers have cut back on spending, and since this has happened when they are entering an age segment (65 and older) where consumers traditionally spend less, the economy is sure to suffer.

This piece, like many on Boomers, is out of order. Literally.

First, it isn't Boomers threatening the economy, it's the other way around -- this lousy economy is threatening Boomers. Low interest rates, diminished stock prices, unemployment, shrunken home values and runaway government spending are ruining the immediate future for the nation's next generation to reach age 65.

And that's the second thing out of order: no Boomer is in the 65 to 74 age segment. Yet. The article featured a chart showing consumer household spending among this age segment now versus 10 years ago. Talk about not relevant. It is comparing today's younger Silent Generation to the older half of the same generation. Nary a Boomer in the picture.

We thought it might be more helpful to readers of this column if we compare today's Boomers at ages 55-64 to the spending the Silent Generation did 10 years ago at the same age. Oops. There's no comparison.

In fact, overall, as a group, Boomers 55 to 64 spent $500 billion more annually on consumer goods and services in 2008 than did the Silent Generation in 1998 (adjusted for inflation, therefore 2008 dollars; the source is the Consumer Expenditure Survey from the Bureau of Labor Statistics). Who is to say Boomers won't spend another half a trillion more annually than the current group of 65 to 74 year olds over the next 10 years? Or at least come close?

In category after category, Boomers 55 to 64 spent more than Silents at the same age. This is in part because Boomers spend more on a per capita basis in many categories. But, overall, it's true because there are simply many millions more Boomers than Silents (demography is surprisingly simple). In this age segment comparison, there are one and a half times more Boomers than Silents.

Take a category like "Eating Out." While both segments spent about the same annually on a per capita basis, in 2008 dollars, overall, Silents spent $35 billion and Boomers spent $52 billion. That's a 50% increase.

"Entertainment" spending jumped from $23 billion by the Silents to $46 billion by Boomers.

Even "Alcohol" jumped from $5 billion to $10 billion. Hiccup.

Of course, some Boomer spending increases reflect changes in costs today versus 10 years ago. Some examples:

CategorySilent SpendingBoomer SpendingChange
Education$6.6 billion$17.2 billion261%
Gas/motor oil$18.3 billion$55.9 billion306%
Health insurance$16.9 billion$38.6 billion230%
Healthcare$19.8 billion$37.3 billion198%

Perhaps the most reassuring news is that, on a per-capita basis, Boomers gave more money to charities, $2,163 to only $1,624 annually by Silents. Overall, Boomers gave close to $43 billion to the $21 billion donated by Silents.

The bottom line is always the bottom line, and it is too bad the Journal article didn't do the math. Sure, there's a "new fru" when it comes to consumer spending. Across the board.

But as Boomers cross the next milestone to age 65 and beyond, their sheer numbers will change the spending patterns for the 65 to 74 age segment. Just like they transformed spending for the 55 to 64 age segment.

Is your business remotely ready to earn any of that spending?

Boomer Project founder/president Matt Thornhill is an authority on marketing to today's Boomer Consumer. He has appeared on NBC, CBS and CNBC, in "BusinessWeek," "Time," "Newsweek" and "The New York Times" and countless others. Matt is also the co-author of the business book "Boomer Consumer." Boomer Project is a marketing research and consulting firm and has done work for Johnson & Johnson, Lincoln Financial, Samsung, Hershey's Foods and Home Instead Senior Care. Reach him here.

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