Should we forget about ‘the older consumer’? An expert roundtable on market segmentation -...
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Should we forget about ‘the older consumer’? An expert roundtable
on market segmentation
22nd October 2013
This event is kindly supported by PFRC
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Welcome
David Metz
Visiting ProfessorCentre for Transport Studies, University College London
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David Sinclair
Assistant Director of Policy and CommunicationsILC-UK
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Laurence Miklichansky-Maddocks
Director of Brand and Business Insights for Europe Brown-Forman Beverages
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David Hayes
Research Associate PFRC
Spending by older people
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Exploring patterns of expenditure:Segmenting the older UK consumer using the Living Costs and Food Survey
David Hayes and Sharon Collard
Brown-Forman 22 October 2013
6www.pfrc.bris.ac.uk/esrc
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Our Approach
• Using the Living Costs and Food (LCF) Survey, we:1. Describe average household expenditure by age
(using descriptive analysis); 2. Segment older households based on their patterns
of expenditure (using cluster analysis);3. Explore cluster membership (using descriptive and
CHAID analysis).
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• Alcohol & tobacco• Clothing & footwear• Communication• Education• Food & non-alc. drinks• Health• Household goods &
services
• Housing, fuel & power• Recreation & culture• Restaurants & hotels• Transport • Miscellaneous goods &
services
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Standard LCF expenditure categories
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Data Considerations
• Good sample of household heads aged 50+• To cover transition into and beyond retirement• Total sample size of 2,769• Good distribution of age groups (even 80+ ~ 12%)
• Equivalised expenditure• To take account of household size
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Absolute and equivalised expenditure by age
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50 but under 55 yrs
55 but under 60 yrs
60 but under 65 yrs
65 but under 70 yrs
70 but under 75 yrs
75 but under 80 yrs
80 and above0
100
200
300
400
500
600
510
189
286
160
AbsoluteEquivalised
Poun
ds p
er w
eek
(£)
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Proportion of total expenditure by age
↑ Food & non-alc. drink increases: 12% to 19%↑ Housing, fuel & power doubles: 12% to 24%↔ Communication constant: 3%↓ Clothing & footwear halves: 6% to 3%↓ Transport decreases: 18% to 7%↓ Recreation drops: 16% to 11%
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The segmentation (clustering) process
• Exploring how types of expenditure co-vary• Identifies dominant patterns• Classifies people into segments based on these
• Clustered on the 12 expenditure categories
• ...the optimal solution contained six clusters
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Drivers of cluster membership
• Highly statistically significant variations in expenditure for all 12 categories
• Three categories were particularly strong• Alcohol and tobacco• Clothing and footwear• Housing, fuel and power
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The clusters
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The average equivalised expenditure across the sample is £217.
Percentage in cluster (%) Mean weekly expenditure
‘Conservative consumers’ 46 138
‘Foodies’ 19 228
‘Burdened by bills’ 11 231
‘Smokers’ 9 245
‘Recreation and clothing’ 4 392
‘Socialites’ 12 405
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Conservative Consumers
• Spent £138 on average• Transport (£18) much lower than average (£32)• Only 47% connected to the internet• More likely to be the oldest old (22% cf. 15%)• 38% in the lowest income quartile; 60% retired• 56% gave benefits as main source of income
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Spend far below average on non-essentials (such
as recreation and hotels)
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Foodies
• Spent £228 on average• Close to average expenditure in most categories • A half (54%) live in two-adult households• Very few households are renting (12%, cf.25%)• Only 18% in lowest income quartile• Larger houses (58% cf. 50% with 6+ rooms)
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Very high expenditure on food (£58 compared to the average of £34)
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Burdened by Bills
• Spent £231 on average• All other expenditure is relatively low • Low transport costs (lowest petrol expenditure)• 70% in rented accommodation (cf. 24%)
• Including 45% from a social landlord• More single households
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Very high proportion of expenditure on housing costs (£4 in every £10,
twice the average)
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Smokers
• Spent £245 on average• Very high spend on alcohol and tobacco (£36 per
week/15% of total expenditure, cf. 3%)• One of the ‘younger’ clusters (62% under 65) • Almost a third still in full-time employment• Home-ownership is relatively low (42% cf. 54%)
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Spent £28 a week on tobacco products
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Recreation and Clothing
• One of the two high-spending clusters (£392)• High spend on recreation (£65) & transport (£53)• Only 21 per cent of this cluster are 70 and above• Two-thirds in larger houses (6+ rooms)• 20% say benefits main income (cf. 10% socialites)• Half of the cluster in the highest income quartile
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At £65 each week, these fashionistas spend more on clothing than all the other groups combined!
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The Socialites
• One of the two high-spending clusters (£405)• Spent £96 on transport costs (24% cf.15%) • Three quarters under 65; 41% working full time • Income – 57% earnings; 33% investments• More than half in highest income quartile• 90% of households connected to the internet
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Enjoy the finer things in life, spending £131 per
week on eating out, holidays and recreation
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Important socio-demographic characteristics
• Tenure: 97% of Socialites were homeowners• Compared with 29% of Burdened by Bills
• Age: 40% of Smokers aged under 60• Compared with just 26% of Conservative Consumers
• Income: 7% of R&C in lowest income quartile• Compared with 39% of Burdened by Bills
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What does this research tell us?
• Equivalised expenditure decreases with age...• ...but other factors important• No such thing as the ‘older consumer?’• Depends on preferences, resources, mobility• However - Smokers are young (stop/morbidity)• Housing costs key in wellbeing (+/- constraints)
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But, we only know so much...
• Conservative Consumers are a diverse group• And need unpacking further to understand why they
spend comparatively little• Hostels, boarding houses, and institutions such
as rest/care and nursing homes are excluded• The true effect of ageing vs. generational effects
remains unclear – further analysis neededwww.pfrc.bris.ac.uk/esrc 23
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Exploring patterns of expenditure:Segmenting the older UK consumer using the Living Costs and Food Survey
David Hayes and Sharon Collard
Brown-Forman 22 October 2013
24www.pfrc.bris.ac.uk/esrc
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Dick Stroud
Managing Director20plus30
Response
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Debate and Q&A
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Should we forget about ‘the older consumer’? An expert roundtable
on market segmentation
22nd October 2013
This event is kindly supported by PFRC