AARP | THOUGHT LEADERSHIP OVERVIEW

1

Mapping theLongevity Economy

Jody HoltzmanSVP Thought Leadership, AARP@jholtzman

#LongevityEcon#boomersummit

Prepared for the 2012 What’s Next Boomer Business Summit

March 28th, 2012

AARP | THOUGHT LEADERSHIP

Context

Why AARP is interested in the Longevity Economy

Because achievement of AARP’s Vision, Mission and social change goals is dependent, in part, on the greatly expanded effort and success of the business community to meet the needs and wants of people 50+

3

Our Goal Begin a dialogue that helps establish a

common language and understanding about the Longevity Economy, so as to stimulate innovation in the market that contributes to our mission and benefits the 50+

4

Orientation is Key

In Washington, addressing the needs of 100 million people is called an unaffordable cost

For Entrepreneurs, addressing the needs of 100 million people is called an opportunity

5

Why?

Because:Demographic Wave +

Over Half of all Consumer Spending = Big Markets and Big Investment Opportunities

6

So What is the Definition of the Longevity Economy?

• …. We’ll get to that…

7

AARP | THOUGHT LEADERSHIP

The Longevity Wave

An additional 35+ million people over 50, in just twenty years

Source: US Census

19401950

19601970

19801990

20002010

20202030

0

20

40

60

80

100

120

140

US population over 50

A large number ofpeople livinglonger

Nearly 20% of the US Population will be over 65 by 2030

2010 2020 2030 2040 20500.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

59.9%57.4%

54.5% 54.2% 54.1%

13.0%16.1%

19.3% 20.0% 20.2%

1.9% 1.9% 2.3% 3.5% 4.3%

Projected US Population by Age 20 - 64 Years65+ Years85+ Years

Source: US Census Bureau

8.7 Million people 85+ in 2030

72 Million people 65+ in 2030

This growth will largely be driven by the aging of the Baby Boomers

10,000 people will turn 65 every day for the next 18 years!!

AARP | THOUGHT LEADERSHIP

The 50+ and Longevity

The Challenges of Longevity Financial insecurity: 30+% of Social Security recipients are totally

dependent on SS check. 65% mostly dependent on SS check Doubling of the cost of health care by 2020 – Driven by health care

inflation combined with growing older population (CBO) Rise in number of Americans with chronic diseases

The cost of caring for chronic illness in the United States -- $1.5 trillion yearly, fully three-fourths of annual healthcare spending (Inst of Medicine)

Nine chronic health conditions "dominate: arthritis, cancer, chronic pain, dementia, depression, type 2 diabetes, post-traumatic disability, schizophrenia, and the loss of hearing and vision

Growing number of people with Alzheimer’s Impending financial insecurity of the Baby Boomers with average

retirement savings of $50K Unpaid value of caregiving = over $400 billion and rising (PPI)

13

The Upside of Longevity – Economic Growth, Productivity Growth, and Prosperity

New industries (eg aging in place technology, brain fitness) New markets (eg Wii in nursing homes) Productivity growth (BMW) Entrepreneurship/small business growth (2X that of 20-somethings) Market maximization (Design for All, eg iPad, BMW) Greater economic value from retaining

older workers and new businesses Slower draw-down and extending the life

of the Social Security Trust Fund Greater opportunity for mentoring young

workers and institutional knowledge transfer Strengthening economic security of older

people Minimize coming labor shortage

15

Leveraging olderworkers and entrepreneurs

How Boomers See It

It’s about Living Not Aging

This is the Opportunity Generation. They see and seek it everywhere

This generation has the desire to grow, learn, and discover. They have a positive view about these extra years of life

For a great future, they see the need to be open-minded, learn new things, and embrace change

They see life as a “Progression” and “Continuation” – not Reinvention

It’s about planning for What’s Next

Don’t categorize. Don’t label. In other words, don’t box them in

AARP | THOUGHT LEADERSHIP

The 50+ as Consumers

Baby Boomers (45-64) spent $2.5 Trillion in 2010

1. 45 – 54 Years $1,456BN 25.0%

2. 35 – 44 Years $1,217BN 20.9%

3. 55 – 64 Years $1,089BN 18.7%

4. 25 – 34 Years $938BN 16.1%

5. 65 + Years $903BN 15.5%

6. Under 25 Years $221BN 3.8%

Share

2X the consumption of under 25-34 segment

Source: BLS 2010 Consumer Expenditure Survey

Age RangeRank Consumer Spending

Total consumer spending and share of total by age group

43.7%

59.2%

Boomers+ account for almost 60% of all spending

Under 25 Years

25 - 34 Years

35 - 44 Years

45 - 54 Years

55 - 64 Years

65 -74 Years

Over 75 Years

$-

$20,000.00

$40,000.00

$60,000.00

$80,000.00 Average Yearly Income and Consumer Spend (2010)

Average Income Af-ter Taxes

Average Con-sumer Expendi-tures

$ Pe

r Con

sum

er U

nit

Average consumer spend peaks at 45-54, but aging baby boomers are likely to continue spending past 65

Source: BLS 2010 Consumer Expenditure Survey

Income and Consumer expenditures are growing fastest among 65+ demographic

Income 5-yr CAGR -0.3% 1.9% 1.3% 1.3% 1.8% 2.0% 2.5%

Exp. 5-yr CAGR -0.2% 0.7% 0.3% 0.7% 0.5% 1.4% 3.1%

Baby Boomers

The dominance of traditional companies serving these product markets makes them ripe for innovation – now, for the 50+

Source: BLS 2010 Consumer Expenditure Survey

Housing, Housekeeping, Furnishing

Transporation

Food

Personal Insurance and Pensions

Healthcare

Entertainement

Apparel

Personal Care

0% 20% 40% 60% 80% 100%

Percent of Total Category SpendUnder 25 Years

25 - 34 Years

35 - 44 Years

45 - 54 Years

55 - 64 Years

65+ Years

Healthcare spending increases significantly after 65

Baby Boomers (45-64 Years):

41.4%

43.6%

42.3%

50.4%

43.0%

44.5%

44.5%

42.4%

Baby Boomers spend the most across all product categories

AARP | THOUGHT LEADERSHIP

Innovation & Strategy in the Longevity Economy

Innovation is occurring across verticals and company types

Industry Established Companies Start-ups Institutional/

Non-Profits

Healthcare Care Innovations

(JV of Intel & GE Health), Philips

,GloCaps, Independa, Virtual Health, Extend Health

Mayo Clinic HALE Center/Kaiser Permanente

Housing KB Homes

Entertainment CBS RLTV,

Transportation BMW,Google Autonomous Car Silver Ride, Tesla, MIT Age Lab

CPG / Food Live Well Collaborative,General Mills

Revolution Foods Live Well Collaborative(Univ of Cincinatti)

Financial Services Prudential, Ameriprise,Schwab, Fidelity Prosper, Kiva MIT Age Lab

Travel Road Scholar,Viking River Cruises

Air BnB, Tripedia, Tripping

Insurance The Hartford,Genworth

See Change Health

Significant Activity

Growing Focus Some Focus / Scattered Examples

KEY:

Limited Focus

Companies Are Using Two Over-Arching Strategies to Address

the Longevity Economy

Target the 50+ market explicitly, with products and services specifically designed for a segment or segments in that market

Maximize market opportunity by expanding into the 50+ market

23

5 Additional Strategies

Universally designed products & services with universal messaging

Age-targeted design with age-targeted messaging

Age-targeted design with universal messaging

Universal design with age-targeted messaging

Existing products modified for older consumers

24

Applying Alternative Strategies

Approach Example Impact Applicability

Universally designed products & services with universal messaging

Or

Finding the Longevity Economy by accident

• Nintendo Wii was designed to appeal to a wide range of consumers rather than those with console gaming experience

• Apple’s iPad targeted GenX and GenY

• Facebook was designed for college students

• Legalzoom has just 1/3 of sales to Boomers

• Wizard 101, a top 200 web site designed for 7-12 year olds

• Zulily was designed for young mothers

• Sales to 65+ consumers & nursing homes were significantly higher than expected due to universal accessibility

• Over half of purchases by Boomers and older

• Fastest growth among women 55+

• Over 50% of business incorporations by Boomers

• Discovered growing intergenerational play by parents and grandparents

• Learned that largest buyer segment are grandmothers

• Entertainment• Consumer Electronics• Housewares• Consumer Goods & e-

commerce sites• Social Networking• Travel

Applying Alternative Strategies continued…

Approach Example Impact Applicability

Age-targeted design with age-targeted messaging

• Cover Girl Advanced Radiance was designed to meet needs of older women

• Glocaps designed as wireless medication management system for seniors

• Drove incremental sales for the Cover Girl brand without damaging success with younger consumers

• Value proposition was recognized by caregivers and pharmacists

• Healthcare• Housing & Caregiving• Niche Consumer Goods

Age-targeted design with universal messaging

• OXO Good Grips were designed for people with arthritic hands

• BMW cars are designed for Boomer driver ergonomics

• CBS targeted older viewers and was attacked as the “old fogie” network

• Performed well with all consumers and become a standard design

• Better driving experience for young drivers and maintained brand equity with GenX

• Ended up with the most watched TV show (NCIS) with cross-generational appeal (#1 in every demographic segment), and standout financial results

• CPG• Transportation• Consumer electronics• Entertainment• Healthcare• Housing & Caregiving

Applying Alternative Strategies continued…

Approach Example Impact Applicability

Universal design with age-targeted messaging

• General Mills increased marketing spend for cereals to older consumers

• Our Time online dating service for Boomers

• Ameriprise launched with Boomer-focused positioning and evolved to “what’s next”

• Drove sales with older consumers who already had strong existing connection to the brand

• New entrant has faster growth than incumbents eHarmony and Match.com

• Successfully grew its Boomer client base

• Financial Services• CPG Brands• Online platforms and e-

commerce

Existing products modified for older consumers

• Ferrari modified interior design of cars to improve accessibility for 50+ consumers without focusing marketing

• Harley-Davidson designed the Trike for older Harley riders

• Improved customer satisfaction with core consumer base without alienating other age cohorts

• Retained older riders and created a path to continued revenue from loyal customer segment

• Consumer Goods• Transportation• Financial Services• Housing• CPG• Every Web site, online

platform, and e-commerce site

• Travel

Although Healthcare is the largest area of innovation, unmet needs, and therefore areas for growth and

investment, exist in all industries

Industry Growth Areas and Potential Investment Themes

Healthcare

• Cures for age-related illness and chronic diseases, especially 65+• Products improving physical and mental vitality among consumers 50+

— E.g., fitness and nutrition, new pharmaceuticals, brain health, vision and hearing• Long-term care and connected living• Non-FDA-approved consumer needs (eg, Aging in Place technology and

services)

Housing• Innovations that facilitate ‘Aging in Place’ • Homebuilding based on ‘Better Living Design’ principles• Reimagined retirement communities that facilitate both independent living

and social connections

Transportation• Innovations that improve ease of use and accessibility and optimize the

driving-experience for 50+ consumers• Transportation alternatives for individuals with limited mobility and for

those who are no longer able to drive

CPG / Food• Innovations creating the appearance of physical vitality

— E.g., Clothing, anti-aging personal care products, etc.• Nutritionally advantaged foods for physical and mental vitality• Ease-of-use and accessibility improvements for existing products

Areas of Expected Growth (continued)

Industry Growth Areas and Potential Investment Themes

Entertainment

• Universally designed consumer electronics that appeal across age groups • Online platforms and social networks that appeal across age groups• New programming for boomers and the 50+, both broadcast and online• Products that allow individuals to create new experiences rather than

acquire new possessions – E.g., live entertainment, adult classes, outdoor excursions

Travel• Non-traditional travel packages for 50+ consumers that recognize Baby

Boomer preference for independent travel and more luxurious amenities • New online competitors to Expedia/Kayak that serve the 50+ who account

for 80% of leisure travel – multigenerational opportunities included

Financial Services

• Flexible financial planning for individuals who either want to or have to keep working after the traditional retirement age

• Financial planning for individuals who plan to make big life changes (e.g., starting a business) after traditional retirement age

• Alternative savings vehicles

Insurance• Greater focus on products that allow aging parents to help ameliorate the

emotional and financial burden of old age care— E.g., long-term care insurance

Areas of Expected Growth (continued)

Industry Growth Areas and Potential Investment Themes

Work &Entrepreneurship

• Alternatives to traditional work arrangements, eg, Mechanical Turk• Products, services, platforms that reduce barriers to 50+

entrepreneurship

So What is the Longevity Economy?

Working definition - The Longevity Economy encompasses: Every dollar spent by consumers, companies, and governments, on

products, services and activities that enhance the quality of life as people age

The employment, personal income, corporate revenue and profit, personal and corporate paid taxes, and other macro-economic multiplier benefits associated with the value-chain and supply-chain of development, launch, sale/delivery of products and services benefiting the 50+

The productivity increases that result from production and service delivery changes that integrate the physical capabilities and behaviors of workers 50+

The value creation by new 50+ entrepreneurs The value creation enabled by new and modified products based on

design for all principles The tangible and intangible benefits of older skilled workers

31

What else? A Work in Progress…

• Help us define what should be included in the Longevity Economy

– What about ‘happiness’ expenditures (e.g. financing education for grandchildren?)

– What should be excluded (e.g. xyz)

32

Contribute to the definition…

• What do we have right? What do we have wrong? Weigh in:

– Twitter: #LongevityEcon

– Wikipedia: Longevity Economy (coming soon to a screen near you)

33