The Economist Report
Nearly all the businesses surveyed expect to see an increase in sales to older consumers over the next 5 years.3 key findings:
- All the respondents see longevity as a long-term issue with structural implications
- Smaller companies seem more reactive and innovative than the larger ones in terms of creating new products and services for older consumers
- Larger businesses are better able to sell niche products and to train their sales teams in how to deal with this segment
Rewriting HR policy
Over the next five years, companies are going to have to manage the effects of rising life expectancy in terms of their human resources policies.
They will see a large number of retiring workers and therefore a significant loss of skills; at the same time, they will experience a decline in average productivity as the median age of workers rises
- 31% of firms expect to have a significantly higher proportion of older workers
- 45% have considered the impact of workforce changes on their business
Faced with a potential drop in productivity, companies will initially try to mitigate losses by better planning how to effectively transfer skills from older workers to younger ones.The respondents expressed worries about:
- The rising cost of pension and healthcare provision (number one concern among American firms)
- Loss of skills following retirement of workers
- And, for European companies most of all, a difference between the average age of the people designing products and the average age of the target market i.e. a lack of understanding about the needs of older consumers
One third of companies are not effective at coming up with specific policies for maintaining - or dealing with the emergence of - an older workforce:
- Only 18% of executives say their company actually has an HR policy for older workers
- Just 11% of executives feel their company was highly effective at targeting HR policies at older workers
- 13% feel that their company is doing things correctly
- Smaller companies are keener to retain their older workers
- 79% of the executives surveyed would be happy to work longer, provided their company was flexible
- Only one third would do it for financial reasons
Older consumers, a burgeoning economic opportunity
The older population of the developed world contains consumers with massive purchasing power. For example, over the past 20 years, consumption by the 50+ cohort in the United Kingdom has risen three times as fast as that of the rest of the population, and its older people hold 80% of the private wealth.
Although future generations of older persons may not be as well off, they will nevertheless present huge potential for many businesses.
Four in ten respondents feel that increased longevity will be a growth driver for the global economy, and 48% of executives see the 65+ age group as being a key part of their company’s consumer base.
For most businesses, longevity represents a major growth opportunity, especially in the healthcare, financial services and technology sectors.
- Some companies will benefit directly from this demographic trend, such as the pharmaceutical and tourism sectors, as well as financial services and the food and beverage industry
- Some companies will need to make strategic decisions and adapt to the changing population by designing innovative products specifically for older consumers (e.g. smaller cars with assisted parking technology) and that help them achieve independent living
A silver opportunity? Rising longevity and its implications for business is a report published by The Economist Intelligence Unit and sponsored by AXA. It looks at the risks and opportunities faced by businesses as they start to grapple with changing demographics, both in terms of their internal workforces as well as the changing nature of consumer demand. To support the study, The Economist Intelligence Unit conducted a global survey of 583 executives during January and February 2011. It covered a wide range of sectors, including financial services, IT and technology, healthcare, pharmaceuticals, and professional services. All company sizes were represented: 56% had annual revenues of less than US$500m, while 35% had revenues of at least US$1bn. All respondents hailed from management functions, with just over half (55%) representing the C-suite or board. To complement the survey findings, the Economist Intelligence Unit also conducted wide-ranging desk research and in-depth interviews with a range of experts and executives.