Using Targeted Marketing to Attract Retirees
Advertising and marketing are sometimes interchangeable. Marketing a laundry detergent, for example, largely involves advertising its desirable qualities (e.g., scent, cost) so that when someone needs laundry detergent they will choose a particular brand. Virtually everyone purchases laundry detergent, so there is no need to target the advertising to a particular audience.
Marketing an active adult community is quite different. In the first place the potential market is much smaller than it is for laundry detergent. Everyone is not retired or getting ready to retire. Further, of those who are, most (80% or more) are not interested
in moving away from where they currently live, let alone into an active adult community in another state. Finally, depending on their interests and finances, they may not be interested in moving into the community where the development is located.
Thus the first task of marketing an active adult development is to identify those people interested in what the development and its community has to offer. Once someone shows an interest in a community or development the next step is to sell them a home. This second (sales) step is not distinct from advertising when talking about laundry detergent; there advertising is the sales pitch. The reason sales is a distinct step in marketing an active adult community is that moving is a much more important, expensive, and life altering decision. If advertising gets you to buy a laundry detergent you find you don’t like, all you are out is $5 or $10, however, if you choose the wrong retirement destination you may be out a lot of money and have a much more difficult time restoring your previous life.
Because not everyone is interested in purchasing a home in a specific active adult development or in a particular community, it only makes sense to target its advertising to those who are most likely to be interested in purchasing a home there. Today there are just over 300 million people in the U.S., most of who have no current interest in relocating to an active adult development. However, there are about 65 million people over the age of 55. If just people age 55 and older were targeted in advertising an active adult development or retirement destination, it would reduce the advertising cost by almost 80%.
Not all 55+ year olds are interested in relocating to a distant active adult development. Recall that 80% or more of retirees do not relocate on retirement. Thus identifying those people who may soon be retiring who are open to relocating when they retire could reduce advertising costs by another 80% to a target market of only 13 million people or 4% of the U.S. population.
Finally, all of those 13 million people are probably not interested in a given community either because it does not have the amenities they want or because they do not feel comfortable with its socioeconomic characteristics (e.g., general income level, price of houses). If it were possible to identify just those 55+ year olds who have some interest in relocating to a community or development with a particular set of amenity strengths, it might further reduce the target market to only 1.3 million people. Now think of the difference in costs of having advertising that needs to reach 300 million people, or 65 million, or even 13 million from the costs of a targeted marketing campaign that needs to reach only 1.3 million people.
Clearly, for a retirement destination or an active adult development, targeted marketing makes a lot of sense. The costs of the market research needed for targeted marketing is dwarfed by the cost savings of a targeted marketing effort. This begs the obvious question, “Why don’t all communities and active adult developments target market themselves?”
The answer is (here comes the targeted market advertisement) traditional survey and focus group methods of market research produce psychographic profiles of potential buyers, but don’t give information about potential buyers that can identify where they currently live. On the other hand, because TW+A’s economic models are based on observed behavior at the zip code level, we can identify and differentiate where people live that are most likely to relocate to a given community or active adult development. – Gene Warren
Community Partnerships Lead to Community Rewards
Some (in)famous politician once said, “it takes a village.” While that may not be entirely true, having multiple entities working towards the common goal of retiree attraction as an economic development strategy makes the task a lot easier. There are many reasons, or perhaps excuses, why different groups may not want to work together. Government departments frequently feud amongst themselves over budgetary issues, or are content to build their own vertical empires within their department. Citizens do not want the nature of their community to change and business owners may not welcome the new businesses that are created by relocating retiree households.
What’s in it for me? Taking the selfish approach I will outline and describe why civic groups, government agencies, private business and other entities should at least cooperate when attracting retirees to your town.
Chambers of Commerce and Economic Development organizations often work together for the good of the community. For these groups the rewards of a successful retiree attraction program are general community development including new chamber members, a stronger chamber, and economic robustness as retiree households bring jobs and money to their new communities. Economic developers need to leave their ego at the door. Attracting retirees does not get your name in the local press immediately. Their notoriety grows when new businesses are opened and expanded due to the increased demand for goods and services from new active adult residents.
Educators including school districts, advisory boards and colleges benefit immensely from an in flux of new retirees. Retiree households contribute to property taxes that frequently consist of the lion’s share of school funding. Not only are their houses usually more highly valued than the community average, but they are not typically using school services. Universities and colleges can also cash in on possible new endowments that alumni may give, not to mention possible adjunct faculty teaching opportunities.
I am not sure who first coined the term ‘CAVE’ People, but my best guess is that it originated from an article in the Orlando Sentinel by Bo Poertner in 1990. I first heard the term at two different conferences in two weeks. CAVE people is an acronym Citizens Against Virtually Everything. Why? Largely it is because of the fear of change. In general everyone benefits from an increased supply of goods and services, the opportunity to minimize community brain drain, increased property values, and other benefits of retirees. CAVE people feel that an increase in the retiree population will change the community’s nature. The notion is entirely false, because retirees self select where they want to retiree. By relocating, retirees are affirming their affinity to the nature of their new community and do not want it changed either.
Home builders, land developers and real estate agents almost universally understand that retirees come with gold in their hands. Relocating retirees, especially Baby Boomers, spend more money on homes and land than an average resident. That easily translates into monetary benefits for home builders, developers and sales agents.
Business owners of every variety stand to benefit from an increase in new retirees. Hospitals increase their efficiency by adding more beds and services. Merchants and service providers increase their sales opportunities as retiree households spend more than $42,000 per year. Utility companies benefit by adding new hook ups and subscriptions to their user bases.
Tourism organizations and Convention and Visitor Bureaus are greatly rewarded by retiree relocation programs. Every retiree that relocates was once a tourist or visitor to the community. TW+A has estimated that every relocated retiree household creates a demand for 200 room nights spent in hotels that generates more than $960 of bed taxes and pumps more than $16,000 into the economy.
Many organizations simply could not operate without volunteers. New retirees want to give back to the community. Charities and faith based organizations are primary benefactors for retiree volunteerism. However, there is also a push toward knowledge and leadership mentoring that is sweeping many civic groups. These retired leaders not only provide economic benefits to the local governments, but also to entrepreneurs and young people of the community to learn and grow.
The government at large has perhaps the most to gain from cooperation amongst various entities. Local governing agencies benefit from increased tax rolls (property and sales), new job opportunities, and economic prosperity. Unfortunately many political leaders cannot envision their community’s future beyond the next election. The real payoff from retiree relocation programs begins around 3 to 5 years after its adoption, a time period longer than their term in office.
All of these entities have a lot to gain from retiree attraction. The solution to cooperation amongst them is education. Organize and hold town hall meetings and forums with all of the appropriate players. Greater participation at the meetings equates to a greater chance of success and a deeper understanding of why the community should participate together in such a program. Thomas, Warren + Associates can help provide the third party information and non-biased view points your community needs to get the right parties involved.
Retirement Postponed?
For those interested in marketing to retirees, one of the shortcomings of the U.S. Census is that it never asks the question, “Are you retired?” The closest it come is to ask people, “Are you in the workforce?” Presumably those who answer negatively are either bums or retired.
Data from the U.S. Census’ 2005 American Community Survey shows that for the first time in decades the percent of people age 55+ who state they are in the workforce increased significantly from 2000 to 2005. The percent of people age 55-59 who claim to be in the workforce increased for 67.0% in 2000 to 69.9% in 2005 while the percents for 60-64 year olds increased from 46.6% to 50.8% and the percents for people age 65+ increase from 13.3% to 14.7%. These differences are all statistically significant (not equal in statistical terms).
The consistently larger percent of people who claim to be in the workforce in 2005 is an indication that people in each age cohort are retiring later (at an older age) than they did in 2000. This is a reversal of the long-term trend of people retiring at ever younger ages, and may portend what will happen as the Baby Boomers begin to retire.