Make Room for Granddaddy

American Demographics, April 1, 2002

Byline: PAMELA PAUL

A typical Baby Boomer approaches each new life stage - parenting, empty-nesting or retirement - with zeal, interest and the intention to spend money. Allan Zullo of Asheville, N.C., was no exception. In 1996, when the then 47-year-old Zullo learned he was a grandfather-to-be, he immediately ran to the bookstore to get more information on his impending new role. What he found was "strictly geared to that gray-haired granny," not the energetic, young, still-working-full-time man he regarded himself to be. So Zullo and his wife Kathryn, then age 46, decided to write their own how-to book. The idea: to show just how different this new generation of grandparents is. "We're redefining the image of grandparents from the cookie-baking type to active grandparents who are in-line skating with their grandchildren," Zullo explains. "Today's grandparents are vibrant, alive, wear spandex and do yoga. We're very proactive in wanting to be part of our grandchildren's lives."

Say goodbye to the image of gray-haired grandparents in rocking chairs. As Baby Boomers enter this new life stage, they are adding their own twist to the idea of grandparenting. This new generation of grandparents is more youthful, more involved and has more money with which to dote on their grandkids. Today, a record 70 million Americans - about one-third of all adults - are grandparents, and the number is expected to rise to 80 million by 2010, according to Washington, D.C.-based AARP. The average age of a first-time grandparent today is 47 - the average life expectancy just a century ago. With today's life expectancy of 76, this generation of elders may have as much as 30 years of grandparenting ahead of them.

What's more, they constitute a new market for businesses to tap: With grandparents spending an average of $500 a year on their grandchildren, up from $320 in 1992, grandparents constitute an annual $35 billion market. As Boomers - the 78 million Americans between the ages of 38 and 56 - enter their prime grandparenting years, this market is bound to grow even larger.

Of course, grandparents have always spent money on their grandchildren. But how this particular generation of grandparents indulges its grandkids is likely to change, marketing experts say. There will be a new emphasis on services with an educational or instructional value, and long-term financial planning for a grandchild's education and early adulthood. Already, more than half of grandparents (52 percent) help pay for their grandchildren's education, according to a 2002 AARP nationwide survey of 800 grandparents over the age of 50. Forty-five percent help pay for living expenses and 25 percent contribute to their grandchild's dental or medical costs. Vern Bengtson, a professor of gerontology and sociology at the University of Southern California, found that among his 150 students, 1 in 5 said their grandparents were paying all or part of their tuition.

Yet despite grandparents' formidable spending power, many experts say the grandparent market remains largely underserved. "This is a profoundly untapped market," says Ken Dychtwald, president and CEO of San Francisco-based consultancy Age Wave and author of Age Power: How the 21st Century Will Be Ruled by the New Old (Penguin/Tarcher, 2000). One reason why, according to Dychtwald, is that outdated images of grandparents cause many marketing messages to misfire. For example, although grandparents, and older people in general, are often perceived as frugal, Dychtwald says this idea actually stems from the preceding wave of grandparents, who grew up during the Depression and World War II. In contrast, this new generation of grandparents - Boomers - are not only among the wealthiest and most privileged segment of society, but they also tend to be proud of their largesse.

Last year, to better understand and predict this group's consumer behavior, SRI Consulting, a Menlo Park, Calif.-based marketing services firm, started to segment the grandparent population. SRI coined three behavior categories to describe most grandparents. The first, "traditionalists," tend to be cautious, moralistic and patriotic, and account for the largest group of today's grandparents (54 percent), but is on the wane. As consumers, traditionalists are home-oriented, and prefer tried-and-true brands. The second group, "makers," (15 percent) is much more active than the first group, and is more likely to be independent and anti-authority. The third group, "achievers," (9 percent) is more status-oriented. They value interpersonal relationships and their buying behavior often relies on peer influence.

As Boomers start entering grandparenthood in droves, SRI sees a fourth group on the rise - "thinkers." Currently 16 percent of the grandparent population, they are more intellectually curious, active and globally oriented, and will start to replace the other three groups as Baby Boomers begin to dominate the grandparent population. This new group is driven by principles and doing what's right. They like to acquire information and are thoughtful in their purchasing behavior. They research products before buying them.