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Tuesday, July 12, 2011

Are you losing out on the largest potential market for your business?

© 2011 Doug Johnson

This is it.  My first post on my blog.  This is the one where you’re wondering what it’s going to be all about and I’m wondering what to write about that would be interesting and helpful to you.  And the answer on my side is that I’m not really sure.  Even though I write books, do public speaking, and work as a consultant and coach to business (all areas where I continually get input from people about what’s important to them as businesspeople), I still find myself wondering at times what will really reach people.   I’ve been fortunate that the things I do seem to connect well with people.  So, given that that’s been my experience, I’m going to use my instincts in this endeavor to bring you a variety of posts on many different areas that affect businesses and careers in business.  With 37 years experience in the business world I have picked up some things that have consistently proven themselves to impact business.  Those will include some posts that talk about the methods used to do various things in successful businesses, some posts that talk about current events in both the political world and other areas that impact business, and some posts regarding ethics in business and life.  You can’t effectively succeed in business if you don’t consider all of these areas so we’ll move back and forth through them as time goes by.

Are you losing out on the largest potential market for your business?

As I thought about writing this first blog post I wondered what would be a good topic to start it all off.  I kept coming back to a question that haunts me these days as a consultant.   This is a growing problem in virtually all businesses, yet few people can see it.  I’m talking about the abandonment, ignoring, offending, and alienation of the largest, most profitable, and lucrative market for most businesses.  Yet somehow they miss it and are walking away from it.

For decades we’ve been trained in business to cater to the youthful markets.  The belief is that they are the market where the future is, the market where the money is, the market you will grow with.  And in some ways that used to be true, although the idea that young people have the money is really misguided.  People don’t make their best incomes until they are older.  But for decades we’ve been told that the young market is the future. 

I’m a baby boomer and I started my first business while I was still in school.  I catered to people in my age group and realized that it was a huge market.  As the years went by and my successes grew I found that this had been a good strategy.  But today making our priority the youth market isn’t so good for most businesses.  The reason?  The youth market is shrinking.  The young don’t really have the money.  In fact, in today’s economic climate many of the young aren’t even employed any longer.  They’re either scraping by on their own or, in many cases, they’re back home living with their parents because they are unemployed.

And while the economic downturn has impacted the young markets, it isn’t the sole basis for this commentary.  The fact is that the baby boomer generation is made up of the largest number of people of any generation in living history.  Add to that that we baby boomers are now getting older and we’re in the stage of life where people tend to be the most affluent.  This is the largest potential market and its staring you right in the face.

Before I go on, let’s look at the older generation:

  • By 2015, those aged 50 and over will represent 45% of the U. S. population. (AARP)
  • Households headed by someone in the 55-64 age group had a median net worth 15 times larger than for the under 35 age group. (U. S. Census and Federal Reserve)
  • The 50+ age group have $2.4 trillion annual income, which accounts for 42% of all after-tax income.  (U. S. Consumer Expenditure Survey)
  • Adults 50 and older own 65% of the aggregate net worth of all U. S. households. (U. S. Consumer Expenditure Survey)

Now the concept that the older folks have more wealth may seem obvious, and it is. However, even those who see it are often missing some of the most important points about reaching that market.
Here’s a few more interesting tidbits:

  • ThirdAge and JWT Boom reported that 96% of baby boomers participate in word-of-mouth or viral marketing by passing product or service information on to friends.
  • One-third of internet users in the U. S. are adults aged 50+ and represent the internet’s largest constituency. (Jupiter Research)
  • 72% of baby boomers have broadband internet in their homes. (ThirdAge and JWT Boom)
  • The internet is the most important source of information for baby boomers when they make a major purchase. (Zoomerang)

What does all this mean to business?  It means that the biggest potential market for customers is also the wealthiest.  We are missing the mark if we don’t market effectively to them.  We are walking away from huge opportunity by not catering to that market.

A good example of how we can succeed or fail with this market is CBS television.  Here we have a network whose entertainment division has produced shows that cater to the baby boomer market.  Over half of the top 20 broadcast television programs are on CBS, leaving the other three networks to fight for the remaining share of the market.  This means that CBS is a very valuable advertising opportunity to companies wishing to capture their share of the baby boomer market for their products.  CBS has chosen to cater to the largest generation in history and, as a result, has an enviable position from which to market.

What’s also interesting about this is that the CBS news division does not do this.  CBS news has been at the bottom of the ratings for years.  No matter what they do they cannot get out of last place.  And the reason for this very well may be that they don’t cater to the baby boomers with their news division.  Rather, their news division is so entrenched in its ideology that it can’t offer a balanced news program.  The result is rejection by the public.  Now this is not meant to be a commentary on the politics of the news business.  Suffice it to say that by virtually any measure CBS, NBC, and ABC all base their news on their ideology and, as a result, they lose market share because the average American, especially baby boomers, tends to be more conservative.  The result is that CBS offers the most potential to advertisers with its primetime entertainment lineup, but they don’t do that with their news broadcasts.   They have made two separate choices and from a purely business standpoint it is obvious that it has paid off for their entertainment division and costs them in their news division.

So, what can we do to embrace this market of baby boomers that is available to us?  There are a number of very simple things that can be done.  I’ll address those in my next post.