Demographics – the coming of the third age market

We are reminded regularly that ours is an ageing society, and that the changing profile of different cohorts has implications for how we finance retirement and support the cost of old age. But sometimes business fails to join the dots and recognise what this means for product development, marketing and sales strategies for these changing age groups. In a world where population growth has been slowing and is perhaps set to reverse in many countries, the growth opportunities for business are to be found among older consumers.

This was the broad thrust of a talk given recently by Dr John Bateson, a consumer psychologist, academic and former CEO of SHL, the human capital consultancy. He argues that unwitting ageism inside companies can prevent them from spotting market opportunities. If we wake up to the needs and expectations of the over 50s, the prospects for many businesses could be transformed.

Bateson began by discussing the extent of the demographic change we have been living through. Life expectancy has risen on average three months a year, every year, since 1840. By way of comparison, Bateson’s father was born in 1918, when life expectancy was only 53. A baby born today has an average life expectancy of 80. “Today we live longer and those years are healthier,” Bateson said.

This all points to a global shift in consumer markets, he added. Low birth rates mean that there will soon be more people over 65 than under 15. There will be more grandparents than grandchildren. This represents a threat and an opportunity for business. But, in Bateson’s view, the youth market is not the place to be.

The growth of what has been called the “third age” is central to this. (The first age is from birth up to the start of working life, and the second age covers the full-time career. The third age is that growing period of time after retirement but before dependent old age, which is the fourth and final age.)

“When my father retired he stopped spending, when I retire I won’t stop spending,” Bateson said.

This growth of the third age is happening all over Europe and is indeed a global phenomenon. China’s population is static, in spite of attempts to relax the “one child” policy. Japan’s population is falling. Here, the drop in numbers is the equivalent of five full Dreamliner jets leaving Tokyo airport every day, never to return, Bateson said.

As recently as 1997, 32% of 57 year olds in the UK experienced life-changing ill health. Today that rate of ill health is only reached at the age of 70. We are getting more healthy years of life, Bateson said. And this applies to mental capacity also: an 80 year old today has the capacity of a 70 year old a generation ago. The American gerontologist and psychologist K. Warner Schaie has led the field in these questions with his Seattle Longitudinal Survey, founded in 1956.

The growth in this third age is significant: while there were only 125m people over 65 on the planet in 1950, and 424m by the year 2000, Bateson said there would be as many as 2bn over-65 year olds by 2075.

The third age market will be the biggest engine of consumer spending growth in the world, Bateson said. It will grow in size by 33%, and there will be 25% growth in consumption per head. In western Europe, the third age market will account for 60% of all growth in consumer spending until 2030.

Senses working overtime

What do businesses need to understand about these third age consumers? They may be living longer, but their faculties are not necessarily all that they once were. Take eyesight, for example. A 70 year old needs twice as much light to see clearly as a 30 year old does. (This is explained by changes in the eye muscles and the lens.) 90% of us need to wear glasses after the age of 50.

So why, Bateson asked, do we have to play “shower Russian roulette” trying to read tiny lettering on shampoo bottles in hotel bathrooms?! Why don’t restaurants consider the levels of lighting and noise that might make the customer experience – especially the third age customer experience – more pleasant?

Older consumers make purchasing choices differently, Bateson said. A few examples are:

  • Many more decisions are made on autopilot
  • We use our purchasing expertise to save energy
  • Fewer alternatives are considered for each decision
  • Much less information is gathered for each decision
  • More loyalty to existing suppliers

People feel younger and are spending more, even as they age, Bateson said. A key challenge for marketers is to pitch product offerings skillfully, in order to avoid an unwelcome response, e.g.: “This holiday is meant for old people, and I’m not old…”

The good news is that customer satisfaction appears to go up with age. “If you want to make sure of that customer satisfaction bonus, get older customers,” Bateson said.


The only growth markets are the third and fourth ages, Bateson argued. For the first time in human history, the world is becoming middle aged. 49% of people on the planet live in countries whose birthrates are too low to maintain the population. We are living longer and healthier, feeling younger and consuming longer.

In the past, spending per year went down after retirement. Now spending is maintained to the age of 75 and beyond.

It might be necessary for businesses to create two parallel operating models, Bateson said. Second and third age customers are different.

But unwitting ageism may cause businesses to fail to understand customer needs. Attention has to be paid to this possibility. Consider the work of MIT’s Age Lab, which built an ageing suit called A.G.N.E.S. for researchers to wear, to allow them to experience what it might feel like to be older. Remember that a call centre has to work for older customers as well as younger ones. Don’t design product lines for younger customers and then expect older ones to like them.

The “grey pound” is real and plentiful. The task now is to win a bigger share of this growing market. For a full video of the event, see below.