RSS feedsIn 1798 a young English demographer by the name of Thomas Robert Malthus published an influential paper in which he warned of an impending catastrophe – the world’s population would soon outstrip the world’s agricultural output.
The mathematician’s arguments about population growth made a lot of sense. It took 150,000 years for the world’s population to hit one billion, but only 123 years for it to reach two billion and then just 12 years to go from five to six billion. Observing the exponential growth of human populations compared to the linear growth of agricultural output, Malthus was convinced that eventually we would run out of food and natural resources.
Fortunately – due to innovations in agriculture and a slowdown in population growth starting in the 1970s – Malthus was proved wrong. Today we are witnessing a reduction in the number of young people that hasn’t been seen since the Black Death arrived at the shores of Italy. According to the US Census Bureau, half of the world’s population now lives in countries with fertility rates below levels that are needed to keep the population from shrinking.
'The developed world is in the process of committing collective national suicide,' warns management guru Peter Drucker. And a quick look at a country like Italy shows why.
The age gap
In the mid 1960s, Italy gave birth to a million babies each year. Today this figure stands at 500,000 making it the first country in the world with more people over the age of 60 than under the age of 20. Italy is not alone.
As you read this, the population of Japan – the world’s second largest economy – is beginning to shrink. Next year, the number of Britons aged over 65 will exceed the number of those aged under 16 for the first time. And by 2030, a whopping 50% of Germany’s population will be over 65.
The rapid decline in the number of young people and the even faster explosion in the proportion of over 50s will send shockwaves throughout the economy in the years to come. Some of these waves are already being felt. In 1979, the basic state pension in Britain was 23% of average male earnings; by 2000 it had fallen to 15%. By 2040, it is expected to drop to just 8%. It’s perhaps no surprise, therefore, that more than 70% of British companies have closed their pension schemes to new entrants, with some, like Rentokil, freezing their schemes altogether.
Demographic shifts
But demographic shifts, tectonic as they may be, aren’t all bad news. While the 16-34 age group is the segment of the population that companies have traditionally marketed to, it’s actually the over 50s who represent the most interesting economic opportunity.
Why? Because the over 50s account for 80% of all private wealth in the UK, have the least financial ties and happen to be the fastest growing segment of the population.
One company that understood the connection between demographics and the bottom line was sports shoe manufacturer New Balance. In 1989 the company decided to 'bet the farm' on one segment of the population – baby boomers.
At the time, the company was the 12th largest sports shoe company in the world. Today it ranks third. Between 1997 and 2002 there was no growth in US sales of sports shoes. During that same period, New Balance enjoyed average annual growth rates of 25%.
Though slow to wake up to the potential of marketing to the over 50s, the UK too has examples of companies who have been smart enough to read the writing on the wall.
In 1951, Sidney de Haan began offering holiday packs for retirees from his hotel in Folkstone. Fifty years later, the Saga Group offers holidays, cruises, radio programs, magazines insurance and financial products to the UK’s over 50s.
Unlike futuristic predictions that may or may not happen, the demographic changes described here have already happened. The people who will form the bulk of your company’s target market in the next 20 years have already been born.
And while most people continue to focus on the pension crises and the implications of a shrinking workforce, the rapid growth of the over 50s represents a unique opportunity for your business to grow with them – that is, if you’re willing to listen to your mother.
Ziv Navoth helps organisations improve their performance. He is the managing director of Verve! (www.verve.nu) and can be reached at mailto:ziv@verve.nu.
