Boomers Caught in Squeeze Play


Even with America's No. 1 pastime, media, consumers are reevaluating their spending. Last summer, as gas prices peaked, Mediaedge:cia asked consumers in smaller, rural counties what their priorities were. Food came in at the top, followed by gas to get to work, cell phones and broadband. Interestingly, TV was not among those top choices.

"We've reached a plateau about whether people are really getting their money's worth," underscores Lee Doyle, North American CEO, Mediaedge:cia, who says the average U.S. household spends $270 a month on communication technology services. "This is going to accelerate what is already starting to happen: People are going to discover things like Hulu [a free, online streaming video, TV and movie provider] that much faster because they're strapped. It's not just techies, it's the Wal-Mart consumer. Whether it's Netflix or DVDs from the library or the wealth of video online, that's scary for marketers. It just accelerates what we know about consumers as being more and more in control of their media."

There is, of course, the irony that as consumers do the right thing for themselves by saving more, they hurt the economy's chances of revival by spending less, the "paradox of thrift" as put forth by John Maynard Keynes. To be sure, younger U.S. consumers haven't suffered the financial reversals of their elders. Their spending may be temporarily reined in during the current credit crunch, but they have a love of brands and their acquisitive tastes show little signs of giving up instant gratification and a "luxuries-as-necessities" lifestyle.

But back in the larger world, there are macro challenges, beyond boomers' fears about funding retirement, which could further thwart a return to healthy spending.

Robert J. Samuelson, author of the new book, The Great Inflation and Its Aftermath: The Past and Future of Affluence, says the coming era may usher in a new consumer mind-set he describes as "affluent deprivation." People will feel poorer because at the same time their income growth slows, they'll be paying more towards higher taxes, energy costs and healthcare. "When people think of their standard of living, they think of discretionary spending, which has always been an expression of their freedom," says Samuelson, a Newsweek writer. "While their income may not go down, their discretionary spending could remain stagnant or decline."

The global financial crisis has, of course, slowed growth in previously hot, emerging economies like China. Less obvious may be the population drop in large Western European markets. Bain & Co.'s Almquist notes that there is a declining populace in countries like Spain, Portugal, Italy and Germany. "Marketers face not only the possible change toward more conservative boomer behavior, pre-retirement, they're also going to have fewer customers there in absolute numbers. Marketers are going to have to be relentlessly focused on where value is and on their core customers. It's not going to be like the 1950s where you can throw anything out there and see growth," he says.