Theories Of Aging In Consumer

Published Date: 02 Nov 2017

The term "demographics" is defined as the statistical characterization of human population. This word originally derived from the combination of the two Greek words. "Demos" is the translating of people and "graphy" refers to picture. Therefore, the meaning can be explained by picturing of the people by analyzing statistics. The researches include the status of the population (size, structure, distribution) and its numerical change by means of birth, emigration, death, etc. to derive conclusions and predictions about the characteristics of the human population (Bade & Frenkler, 2008).Demographics factors influence a wide variety of aspects by influencing the societies and economies. This issue is concerned by not only the marketers and consumer researches but also the very kind of company in a micro level.

Today, the increase of life expectancy and meanwhile low birth rate demographic trends (Figure 1) are seen and it is also projected that these trends will continue in a way it is currently and expected to get more serious. Therefore it has a significant influence on the consumer behaviors, the market place and finally the companies in the near future. In this part of the documentation, the effects demographics will be examined deeply by stating the importance and threads in macro and micro level and also the new opportunity areas will be mentioned by stating the statistical facts.

Figure 1- The Projection of High Life Expectancy and Low Fertility Rate

(United Nations, 2004)

The slight change seen in demographics related to the trend of aging (increasing life expectancy) and meanwhile the shrinkage of the youth population seen in the world wide but currently the industrial countries leading this trend. Demographic change became a major challenge and tread but this also offers a new business opportunities. The slight demographic change within the industrial countries is given in Figure 2.

Figure 2- Percentage of people up to age 65 compared to Total Population In industrial Countries (UN, 2010)

The first companies started to respond in 1960s to these population structure alterations by considering new strategies, new products and also changes in their own services and their own structure. These responses grew in 1970s and exploded in 1980s (Population Projections for Japan, 2012). It is now clearly understood that changes in the structure of the age distribution have not only social effects but also the effects relevant to the field of economics. The key issues that can create serious problems resulted from this trend will be declining work force, shrinking customer base (changes in the targeted customer) loss of knowledge and also the necessary changes in the working environments according to the increase of the elderly employees. Moreover, the companies has to realize these challenges by detecting the fact that in the future the majority of the spending power will be obtained by the elderly people.

Japan and then Germany are currently leading the demographic transformation compared to all the other industrialized countries. According to the recent census data, the fastest transformation is seen within these countries and the result of its responses and experiences against this transformation will be a valuable insight to other countries. The recent population characteristics of Japan and the mentioned slight change projected up to 2050 is given in the Figure 3-4-5.

Figure 3-4 – Population Pyramid in Japan 2010 and 2030

Figure 5 - Population Pyramid Japan 2050

(Population Projections for Japan, 2012)

The recent census data stated that, it is now in Japan the age of the people who are 65+ approximately covers %25.1 of the total population and in 2050 it is projected that this number will increase up to %38.8 percent (Population Projections for Japan, 2012). As mentioned before the major problems that must be overcome by the companies as a respond to these problems are decline in working force, loose of knowledge and shrinking customer base and also the necessary change in working environments.

Decline in Working Force

During the post war years the population of the working age group which consists the age of 15 to 65 years increased up to 87 million. As the total population of Japan has declined and have a low fertility rate, this number dropped to below 79.98 million in 2012 encountered %63.5 (Figure 6). It is projected that this decline will drop more rapidly and in 2050 the working force will be 46.1 million that encountered %51,2 percent. (Kaneko, A., Ishii, & Sasai, 2008)

Figure 6- Working, Child and Elderly Population Changes

(Kaneko, A., Ishii, & Sasai, 2008)

The companies concerns about how this relatively small workforce will fulfill the consumption needs in the future and also in general how the living standard will stay constant (Little & Triest, 2000). Especially the retirement of the baby boomer generation (born in 1947-1949) can cause serious consequences that comprise a huge percentage of the total working force. Therefore without any precautions, there will be serious economic problems in the different levels of economy. The power of industrial countries that have a fastest shift in demographics can be surpassed by the other nations and the economical balance of these countries can change. The total population and labor force projections are given in Table 1 and 2.

Table 1 (Global Japan 2050 Simulations and Strategies, April 2012)

Table 2 (Global Japan 2050 Simulations and Strategies, April 2012)

The decline in the labor force may lead to economy shrinkage if productivity does not escalate faster than the rate of its decreasing labor force.

Generating the solutions against these demographic trends, human resource management will gain more importance. The following quote can improve the understanding of the importance of the human resource, "with the country’s lack of natural resources, the key to sustaining Japan is ultimately ‚human resource capabilities‛. Such 20th century concepts as choosing between work and child-raising and taking life easy after retirement need to be fundamentally revised and an environment that enables everyone especially young people, women, elderly people, and foreign nationals—to make full effort‛ and ‚work‛ must be created immediately." (Global Japan 2050 Simulations and Strategies, April 2012)

The fundamental revision refers or aimed to promoting the elderly and also women participate proactively the labor force. In addition, there are some different ideas of increasing the usage of the machines as the working force or immigration and emigration as the important sub-aspect of the demographics.

As a result of the projections that seen in Figure 6, while the elderly population is increasing, the younger population is shrinking. Dependency ratio, which is used to indicate the support of the working age group (the age of 15-65) compared by the under (Employment Measure for Older People in Japan, 2008) age of 15 (child population) and elderly age (plus 65). The future projections indicate that the dependency ratio of the old people will rise by %31 percent. In 2005, while 3.3 workers support 1 elderly, in 2020 it is projected that 2 workers will support one elderly and in 2055 this number will raise to 1.3 worker support for 1 elderly. However, the child dependency ratio is expected not to drop significantly due to the shrinkage of the working age group. (Kaneko, A., Ishii, & Sasai, 2008)

In the micro level, it is tend to be a higher rate of elderly employees and a lower rate of younger employees in the companies in order not to face a sudden drop in working force or not to lose high percentage of experts at the same time. This transformation should have made slowly and wisely. Japan promotes young people and baby boomer generation in order to prevent the sudden decline in labor force and their senior experts and also decrease the effects of the aging demographic trend. Therefore, the working regulations (especially concerned with the retirement age) and working environments has to be adjusted according to that shift.

The Retirement Age

The one of the most important consequence of the aging trend is the increase of the elderly employees as the shrinkage of the total younger generation. In order to respond this fact, policies are adjusted according to prevent sudden loss of the working power especially in industrial countries. The laws and the regulations promote not only the people up to 65 but also beyond as long as the people have the capability and enthusiasm. It allows the people continue to work regardless of age. According to the "Employment Measures Law" the age limits in recruiting and employing is prohibited and the force of the retirement is no longer exists in Japan. Moreover, partial retirements and also different company initiatives is supported. (Employment Measure for Older People in Japan, 2008)

The law includes the raising the mandatory retirement age and the obligation to introduce continues employment system up to 65 years old. It can be summaries that measures to stabilize elderly employment, the employees must apply either of the following measures (Amendment, 2006);

Raising the mandatory retirement age

Introduction of a continued employment system

Abolishment of the mandatory retirement system

The aim is to stabilize the working force and for the large scale the power of the companies and countries as much as possible when the huge percentage baby boomer generation can retire at the same time. Baby boomer generation is still working and has a huge contribution not only the labor force but also with their experiences and knowledge.

The Danger of Losing Knowledge

It is also a concern that the demographic change can have a consequence of losing the expertise knowledge within a country that is used to create value added products. There was a high doubt that losing of the valuable know-how when the baby boomer generation retirees. It is advised by the human resource experts that elderly people who are still healthy and motivated should be active to contribute to society as being an adviser or as someone add value with their knowledge. Particularly, the concerns raised mostly in the field of engineering and the businesses contain some complex processes. The importance can be understood by the quote of Audi AG Manager Board Dr. Werner Widuckel," We rely on the experience of our older employees, particularly with regards to complex tasks and critical processes related to quality. A mechanical engineer is only at the height of his working capacity after 20 or 25 years of work experience. In this sector we have been relying for years on employees who are over 50 years old. We need their professional competence, which is grounded in their experience." (Bade & Frenkler, 2008)

Based on the above mentioned law and valuable advises from human resource experts the replacement is now occurring in a slow speed and the risk is held in a minimum level. Besides, companies started to find ways to preserve know-how by implementing different methods that can also decrease the risk of the losing know-how.

The Working Environment has to be adjusted

As the number of elderly employees increase in order not to face problems in working force and also with the increase of the retirement age, continuous working and also the possible abolishment of the retirement age of working, the working environment has to be adjusted properly that younger and older employees can work cooperatively. This is a very important aspect that affects the efficiency of the employees and therefore the companies. The ergonomic designs with the company can decrease the level of physical problems that can be issue old employees. Also, it cannot be possible for them to sit a long time at the same place in front of the computer. Therefore, the job definitions to the elderly should be adjusted by considering these issues. Moreover, it is concerned that younger employees can feel uncomfortable and isolated in order not to do any disrespectful behavior (Carrigan, 1998). This problem can be solved by trainings and creating the project groups in a proper way that declining discomfort.

The Shrinkage in Customer Base

Another consequence of aging trend is the shrinkage of the youth market. Currently, the biggest effort applied in this youth market and this is about the change with the increase of the number of the elderly people in the world. The companies used to fulfill the need of youth segment and dynamism and the predictions about this segment are well known. However, the new target group’s, which is the elderly market, marketing aspects still unknown and also can be changed within the elderly segment or in other words within the cohorts. The market has different types of definitions and target group cohorts. The needs and the expectations show a high heterogeneity within the groups of the age 55-60, 60-65 and 65+ (Lunsford & Burnett, 1992). Therefore a new segmentation characteristic of elderly market is also necessary.

In general, the new target group has unique needs and expectations compared to the youth market. With the appropriate marketing strategies and the studies of the consumer research of this elderly group can turn the effects of the demographic shift into a huge opportunity.

The Silver Market

The problems that are mentioned above caused by the demographic change can be turned into an opportunity with proper marketing strategies. The significant increase within the number of the elderly and the shrinkage of the youth will changed the target group of the companies. However, there is not a homogenous definition of this market; it is usually called with the names like "senior", "grey" or "silver" market. As mentioned above the needs and expectations are different not only compared to the youth but also within this subgroup. The basic methods that work with youth market cannot be directly implemented on this new market. For example basic age segmentation is not a proper way to segment this market. However, cohort segmentation sometimes used within this group and generally it divides commonly the group into three subgroups, because of the high heterogeneity within the group; 55-60, 60-65 and 65+ cohorts. The reason of the cohort segmentation is the cohort has as same aspects and the general expectations and the properties are like the same for instance their way of lifestyles (the cohort which the baby boomer can be replaced). With the more studies and focus on the elderly market, the current definition will change in the future but the potential will remain the same. As their number is in higher magnitude so does their influences.

Elderly market has a huge potential and the potential tend to increase. Not only the number of this group change in a higher magnitude, but also the purchasing power will tend to shift to this group. Elderly has a high purchasing power especially considering their accumulated income. The high purchasing power can be seen in Figure 7

Figure 7 – Purchasing Power of the Elderly – Average Monthly Consumption according to the Age Groups- (Kohlbacher, Gudorf, & Herstatt, 2010)

The values of the purchasing power belonging to the elderly are expected to increase in the foreseen future as the retirement age, continuous working regulations and the abolishment of the age limit within the working level.

The potential also increased by the change in the stereotyped images of elderly being depressed or withdrawal from the life after the retirement. This ideas and theories about the withdrawal of the elderly after retirement are being perished. Currently, the studies showed that elderly people have no intention either withdrawal from life or psychologically depressed (Carrigan, 1998). Especially, when the baby boomer generation will retire, it is expected that there will be a value shift about the definition of the elderly people. In the future, the seniors will be more self confident and more active in life (Bade & Frenkler, 2008). Furthermore, the typical thought of the elderly not to spend much money and save the accumulated income. Possible this thoughts made by the following anecdotes made by previously stating that elderly have less need and financing the post retirement necessary due to long time of not earning money after retirement (Moschis, 1991).With the increase in the life expectancy, continuous working offered by the companies and the value shift, these previous theories are expected to be refuted. Therefore, these estimations and facts increased also the potential of the elderly market.

The high potential possibilities, there are currently lots of companies within this market and numbers will increase as with the potential. The current adult markets like health care, financing, travelling, security etc. are expected to grow more and new areas will be occurred (Trapbagan & Knight, 2003).

Strategies of Marketers to the Elderly Market

In order to get success in this market, first of all marketers have to understand the differences between the common youth market that they used to work with and the new elderly market. The demographic data and shift of the purchasing power from youth to elderly makes this target group a new spotlight. Because of its unique needs, huge difference compared to the youth market and also the heterogeneity aspects within this target group a new marketing strategies have to be applied by the marketers. According to the (Mazur, 1993), a mental shift is necessary to modify perceptions and to defeat the negative reference of the "old age". The cognitive age becomes more important to the physical age as the elderly feel themselves younger. The products tend to fail when targeted as "senior products" because the elderly feel humiliated from being a target group or see themselves younger. Therefore, the possible age segmentation cannot work in the market. The segmentation of this market should be done in a different way. Lifestyle and self image are the ones that mostly preferred. These are more associated with the cognitive age and also how the elderly see themselves. Consumers in this group will buy the products with the brand images appropriate with the path they view themselves. The products that are symbols of age tend to refused by the elderly consumer. In addition, the products that point out their handicaps also don’t appreciated by elderly consumers (Lunsford & Burnett, 1992). Elderly consumer group has unique need and there are also different aspects that differ from the younger consumers. The product and product characteristic therefore has to be adjusted to the elderly consumers.

The Possible Marketing Characteristics for Elderly Consumers

Product Designs

While designing the products the physical decline of the elderly has to be considered. Gerontologists stated that the vision capacity, touch sensibility and muscle strength are commonly worsened with age. First of all the products should consider these facts, if not the products easily rejected by the elderly consumer.

The design and product overviews should less complex and ease of use. The possibility of making them mistakenly wrong use should be decreased.

Self Image

The elderly consumer won’t buy the products that it does not fit their self image. This refers to the products that indicate the age of its consumer or specifically targeted to the "senior" consumer and also show their handicaps will not be accepted by the elderly consumer. The elderly consumers generally feel themselves 15 years younger and also healthier than they are, it is suggested that marketing of the products for the elderly consumer should consider the cognitive age (Lunsford & Burnett, 1992). So, the brand image should fit with its targeted consumer.

Perceived Value

The elderly consumers are willing to see the clear benefit of the prospective products. Marketing strategies has to design to point out the perceived value from the side of the elderly. Elderly consumers tend not to buy the product they already have or do not see the clear benefit of the product. The style of the product comes second compared to the functionality. In other words, buying "needs" are more important for them compared to the buying "new".

Remove the Possible Risks

The elderly consumers are generally risk opposite. Physical, economical and functional risks are considered by the elderly consumers. The physical risks refer to possible physical damage or risk of being hurt. Economic risks refer to important financial investment that perceived by the elderly consumer. Functional risks indicate the risk of not realizing the intended functionality. The perceived risk of three mentioned aspects should be diminished by trails or building close relationship with the targeted consumer and also clear explanations especially made by the people their own age. The elderly trust more on the people close at their own age or higher compared to their own age (Lunsford & Burnett, 1992) .

Intergenerational Design

The definition of the intergenerational design is to design products that can appeal to various generations of consumers. The aim is not have specific design for a specific group of consumers but rather the variety of groups or generations. This design idea is also called as "Universal Design" or "Cross Generational Design". Universal Design Principle has a huge selling potential as it is not only appealing to the younger consumers but also overcomes the challenges that marketers have to think before accessing to the elderly market as the products connoted with age. This design idea is not only help the elderly regain their self-respect but also can be a tool to combine the generations. The properties of Universal Design can be combined as neutral (not targeted old or young), flexible (e.g right or left handed both people can use), simple (easily understood), error tolerant (minimize accidental usage), needed physically low effort and appropriate size and space regardless of users body sizes.

The examples can be user phone which has solutions for amblyopia. The design has a visually and functional design features and also the keypad and easy to use softwares can widely open it’s the customer base without concerning of age. Another example can be game consoles which is a device that combines the generations. Also, office furniture can also be a good example. The desk design can be less complex and the adaptations can be easily done by means of height or slope (Bade & Frenkler, 2008).

Figure 8: Universal Design Example - Cross generational Phone

In these types of products, the age group is not the main focus rather the focus is on its functionality and ease of use. Therefore, it makes them appeal to different kind of generation or even combine the generations in together.

Write in Conclusion: The elderly now or the focus is on the elderly who are wealth, healthy not there will be more sick and poor elderly and can make the market slow down.