Analysis of Customers in the US Retirement Market - Case Study Example

Analysis of Customers in US Retirement Market Name: Lecturer: Course: Date: Executive Summary Aveo retirement group seeks expansion to the U.S. retirement villages market. With operations across Australia, the company remains the leading retirement group in the entire country. With up to 76 villages in its portfolio, it maintains a leading position as the country’s largest operator of retirement villages. Analysis of the U.S. retirement markets shows that the industry will continue to experience growth since the country’s population continues to age. The retirement market in the United States has experienced tremendous growth over the past 20 years. This has been triggered by the Baby Boomer generation. Their population is projected to exceed 20 percent in 2050, showing that one in five individuals will be above the age of 65 years by 2050. This means that the retirement market in the United States offers Aveo a lucrative market for growth potentials. Further, analysis of geographic distribution of the elderly in United States shows that Florida and California should be the target markets for Aveo in the United States. Additionally, in using Hofstede’s model, it is clear that the United States society is generally individualistic and hence tends to take the elderly people to long-term nursing facilities. This also means that the United States offers a lucrative market for Aveo since most elderly people are referred to institutionalised homes. In addition, the increase in the elderly seeking to live in institutional settings, high divorce rates and increase in dependence on caregivers imply that Aveo will have a profitable market. Table of Contents Executive Summary 2 Table of Contents 3 Introduction 4 United States Country Profile 4 US Retirement market 4 Relevant historical developments 5 Shifts in Demography of Target Customer 6 Demographic Composition 7 Social-cultural Aspects – Living Arrangements 7 Consumer Behaviour – US Elderly 8 Income Levels 9 Aveo Live Well retirement villages, Australia Introduction Aveo retirement group seeks to expand to the U.S. market. The company remains the premier retirement group in the whole of Australia. With up to 76 villages in its portfolio, it maintains a leading position as the country’s largest operator of retirement villages. Aveo has some 10,000 units across Australia (Aveo 2013). For over 20 years, the company has handled retirement villages, 90 percent of which are situated within 30-kilometre radius from the Australia’s major regional centres. Australia has provided lucrative business for the company, with 80 percent of the residents above 75 years of age (Aveo 2013). In the financial year 2013, the company managed 622 retirement unit sales, representing some 10 percent of inventory. The company is poised to make headway into the United States retirement industry. This report analyses customers’ aspect in the United States to understand the retirement market in the country. Special emphasis is however given to analysis of the customers, based on theoretical perspectives (Aveo 2013). United States Country Profile US Retirement market The industry is estimated to continue experiencing growth since the U.S. population continues to age. The industry offers personal care and residential services for the elderly as well as other people who are incapable of taking full care of themselves, or those looking to reside in community facility. The retirement market in the United States has experienced tremendous growth over the past 20 years, triggered by the Baby Boomer generation that amassed some $24 trillion financial assets by 2008. Most leading financial services companies in the United States have invested substantial amounts of capital on developing businesses for elderly consumer goods and services. Overall, improvements in the US housing market are expected to support growth because home equity is used in paying of costs linked to entry into the US retirement community. In addition, industry players are expected to adjust their services and resources to attract more educated and knowledgeable residents through the use of more technology to adapt the new markets. Relevant historical developments In regards to issues concerning retirement homes and the elderly, historical development of the United States can be well understand through the temporal orientation dimension of Kluckhohn and Strodtbeck’s (1961) Values Orientation theory. The dimension emphasises analysis of the past present and future in solving societal problems (Nardon & Steers n.d). In this respect, the United States currently has the third largest population across the globe, accounting for an estimated 4.5 percent of the global population. According to the 2010 Census, the country’s population was estimated at 308.7 million people, showing the country’s population has more than doubled from 152.3 million in 1950 (AgingStats.gov 2012). Current statistics shows that in addition to more than just doubling, the features of the present generation population are relatively different from what it was in the 1950s. Indeed, according to Population Reference Bureau, the US population is getting older, larger and increasingly diverse due to interplay of decreased births, increased birth rate and increase in net migrations (Sherstha & Heisler 2012). Shifts in Demography of Target Customer The Baby Boomer generation, or those who were born between 1946 and 1964, began turning 65 in 2011. Their number is expected to rise rapidly from 2010 to 2030. The growth rate is expected to stagnate from 2013 when the last of the Baby Boomer generation makes entry into the older population. Then on, the percentage of those aged 65 will be relatively stable. According to the US Census Bureau, the population of those aged 85 years and above could increase from 5.5 million to around 19 million by 2050 (Pearsonhighered.com n.d.). The population of those aged 65 and above has increased in proportion with current statistics showing that the older population is represented by some 12.1 percent of the total population, as of 2009 compared to 8.1 percent in 1950 (Table 1). It is projected to exceed 20 percent in 2050, showing that one in five individuals will be above the age of 65 years by 2050 (AgingStats.gov 2012). Figure 1: Representation of US Population: 1950 to 2050 Demographic Composition The U.S. Census report indicates that California and Florida have the largest proportion of individuals aged 65 years and older, with some 17.3 percent of the age group living in the state. Alabama and Arizona have 13.8 percent each, while South Carolina and New Mexico follow closely at 13.7 percent and 13.2 percent respectively. The fraction of the elderly persons ranges depending on state, with some experiencing greater growth than others. As of 2011, the leading states included California with 4.4 million, followed by Florida with 3.4 million and Texas and New York with 2.7 million each. Others include North Caroline, Michigan, Pennsylvania, Illinois and Ohio with over 1 million each (Pearsonhighered.com n.d.). According to the US Census Bureau Projections, Florida and California are placed among the top four states for retirement residency from 2010 to 2030. Studies indicate that most Americans are living longer due to better medical care and nutrition. Estimates for life expectancy at birth are estimated to reach 79.5 (with 81.9 percent women and 77.1 percent men) by 2020. Most elderly who have reached retirement age have migrated to Florida and Southern belt area because of favourable climate conditions (AgingStats.gov 2012). Social-cultural Aspects – Living Arrangements In describing the living arrangements of the elderly, some 57 percent of those who are non-institutionalised people live with their spouses while 28 percent live alone, as of 2012. Some 3.6 percent, or 1.5 million, of those aged 65 years and above lived in institutional settings such as nursing homes, as of 2011. There is however a high increase of 3 percent for those seeking to live in institutional settings since 2009 (Toossi 2012). According to the Ecosystem Model, family, individual, sociocultural and social structural factors affect the development of the elderly (Peña-Swart 2012). One key factor in regards to this is caregiving, where elderly individuals need to be taken care of in terms of home care, health aides, feeding, hygiene and transportation. Due to large existence of nuclear families in the United States, most elderly resort to retirement homes that provide nursing home care and assisted living (Mayda 2012). In this regards, using Hofstede’s model of national cultural diversity in understanding institutionalised care and familial care of the elderly, five dimensions are identified, namely Masculinity versus femininity (MAS), Long-tem versus short-term orientation (LTO), Uncertainty avoidance (UAI), Power distance (PDI) and Individualism versus collectivism (IDV) (Basci 2013). Of the five, the perspective of individualism versus collectivism is concerned with the level of interdependence that a society maintains of its members. While individualism places emphasis on independence, collectivism on the other hand placed emphasis on interdependence (Peña-Swart 2012). In the United States, the society is generally individualistic and hence tends to take the elderly people to long-term nursing facilities. This shows that the United States offers a lucrative market for Aveo, as most elderly are referred to institutionalised homes. Consumer Behaviour – US Elderly Based on adult development theories, developed by Erikson (1982), it is clear that since each human psychosocial stage has a radical change in perspective. Such changes have significant impact on consumption behaviours (Peña-Swart 2012). The consumer behaviour of the elderly United States is analysed using dimensions of mode of activity proposed Kluckhohn and Strodtbeck’s (1961) Values Orientation theory. The dimension emphasises on understanding the primary mode of activity of a group in the society (Nardon & Steers n.d). The United States has the largest number of mature consumer globally. In which case, the subject of ageing will continue to receive attention in the country in regards to long-term care of the elderly and retirement policies. Studies have shown that the growth in mature segment has the potential of effecting businesses significantly in the United States -- specifically by providing huge opportunities for international and domestic marketers 9 ATKearney 2013). Income Levels The retirement market in the United States has experienced tremendous growth over the past 20 years, triggered by the Baby Boomer generation that amassed some $24 trillion financial assets by 2008. Most leading financial services companies in the United States have invested substantial amounts of capital on developing businesses for elderly consumer goods and services. According to 2011 statistics, the median income of the elderly was $15,362 for females and $27,707 for males. Among the 25.1 million households headed by the elderly person, some 19 percent were renters while 81 percent were owners. Some 50 percent of elderly households spent nearly 25 percent of their income on housing costs (Toossi 2012). Most elderly people in the United States depend on family caregivers for support and assistance. In the United States, shifts in trends have seen the elderly segment shift from being the wealthiest from the poorest die to a mix of investments, personal savings, increased values of their homes and pension programmes. Studies indicate that 80 percent of US homeowners are seniors, while some 75 percent have paid their mortgages. Those aged 55 years and older control three-fourth of viable financial assets as well as half of the entire discretionary spending power in the United States (Toossi 2012). Conclusion This report concludes that the retirement market in the United States offers Aveo a lucrative market for growth given the project increase in numbers of the elderly from the Baby Boomer generation between 2014 and 2050. Analysis of geographic distribution of the elderly in United States shows that Florida and California should be the target markets for Aveo in the United States. Additionally, in using Hofstede’s model, it is clear that the United States society is generally individualistic and hence tends to take the elderly people to long-term nursing facilities. This also shows that the United States offers a lucrative market for Aveo as most elderly are referred to institutionalised homes. In addition, the increase in the elderly seeking to live in institutional settings, high divorce rates and increase in dependence on caregivers imply that Aveo will have a profitable market. 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