Fall 2005 Generation Y

Generation Y: Population explosion and pop-culture phenom. This diverse, smart, and well-financed bunch is triple the size of Gen X, and the biggest influence on the American social front since their Baby Boom parents. Born between 1979 and 1994 (or 1982 and 1998, depending on whose research you prefer), they’re now age 10-26—the oldest ones in real-world adulthood, the youngest are in grammar school, with the largest group still three years away from their teens.

At some 70 million strong (about three times the size of Gen X) and only somewhat smaller than the 78-million Baby Boom, Gen Y differs from them in almost every way. They have different attitudes towards school, politics and the people they’re close to, and are more marketing-savvy. Like their boomer parents three and four decades ago, these kids crave freedom and fun, but they have a more pragmatic outlook on life. They’re goal-oriented, super-busy and, as a result, often stressed. They try to balance the increased demands of home, school, jobs and social lives. And according to various studies, most of them believe they’ll “always be successful.”

Being Y

As early as 1997, Melinda Beck writing in The Wall Street Journal, describes the societal changes that shaped Gen Y’s attitudes and outlook on life. “Generation Y was born into a world so different from the one their parents entered that they could be on different planets,” she says. Gen Y lives fast-paced lives, surrounded by technology. High-tech innovations that their parents as kids found only in science-fiction are everyday reality, and have been for some time. “This generation views computers as basic equipment like pencil and paper,” says Larry Mondry, CEO of CompUSA, as quoted by Beck. Things their parents saw as gizmos straight out of The Jetsons, such as instant video communication and controlling household functions via computer, are commonplace now, he says. So is the ubiquitous iPod, thanks to them.

This generation is also more racially diverse: One in three isn’t Caucasian. Family structure is different, too. One in four grows up in a single-parent household, a relative rarity when boomers were children. Almost 60 percent have mothers who work outside the home, compared with 18 percent in 1960. While school-age boomers spent afternoons playing with pals, Gen Y’s schedules are jam-packed with sports, music lessons and a host of other organized after-school doings. “Like MTV… life resembles a chaotic multi-scene video stuck on fast-forward” for Gen Yers, says Neuborne. Given that, it’s not surprising that sleep deprivation, once known only to adults, is a widespread problem for Gen Y kids.

Money talks

“Generation Y is the most powerful consumer group in the world,” writes Peter Sheahan (petersheahan.com). But although some generalities apply, defining Gen Y as one unified consumer group isn’t easy. The Gen Y consumer demographic ranges from kids who rely 100 percent on parents for spending money, to high school and college kids with part-time jobs, to young adults on their own. Nonetheless, as Peter Zollo notes in his book, Getting Wiser to Teens: More Insights into Marketing to Teenagers (New Strategist Publications), the group’s discretionary income makes them incredibly attractive as consumers. Or as Neuborne says, they rival the Baby Boom in size and “buying clout.” Marketers and retailers “haven’t been dealt an opportunity like this since the baby boom hit.”

Teens in particular are free to spend their money any way they want, says Zoll—they’re not burdened with mortgage or rent, utility bills, groceries and the like. In 2003, he says, “teens spent $115 billion of their own money, and an additional $60 billion of their parents’ cash, giving the 33 million American teens spending power greater than the gross domestic product of countries such as Finland, Portugal and Greece.”

For younger Gen Yers, 87 percent of income for children under 13 is adult-supplied, according to Harris Interactive. Their spending money comes largely from parents and relatives in the form of allowance, special-occasion gifts, and money earned for doing household chores. This changes as they enter high school: the Harris Interactive survey shows that only 37 percent of teens and 7 percent of young adults said they get spending money from parents. Instead, the majority of high-schoolers get part-time jobs to pay for the extras they want and their parents can’t or won’t pay for.

Gen Y—accused, rightly or wrongly, of a marked cynicism and a “me”-centered attitude—has a distinctly practical world view, according to marketing experts. Raised in homes (whether dual-income or single-parent) with a working mom, these kids have been given considerable financial responsibility. They also exert enormous influence on family purchases. Surveys show that they’re deeply involved in what gets bought, from weekly groceries to the next family car.

One in nine high school students has a credit card co-signed by a parent. And many will take on extensive debt to finance college. Most expect to have careers, and are already thinking about home ownership, according to a Northwestern Mutual Life Insurance survey of college freshmen. ”This is a very pragmatic group. At 18 years old, they have five-year plans. They’re already looking at how they’ll be balancing their work/family commitments,” says Deanna Tillisch, who directed the survey.

Older Gen Yers, those in their 20s and many with college diplomas in hand, face new challenges. As with the previous generation, “turning 21 signals the end of youth and the beginning of adult responsibilities, which can be a scary prospect,” writes Peter Francese in American Demographics. “It is also the age at which many people… begin looking for their first ‘real’ job.” But unlike the previous generation’s experience, the first job is likely not to bring financial stability and enough spending money for all the things these young people want. According to Census Bureau surveys, the mean wage of 21-year-old men is $17,000 for high school graduates and $26,000 for college graduates. For women, it’s $13,000 and $24,000 a year, respectively. Living expenses, especially in big cities (where most young adults live), consume their income very quickly. Many are also paying off student loans. With low income, high expenses and debt carried forward, what makes Gen Y such an attractive consumer group?

Answer: A culture of consumerism, an “I want it now” sense of entitlement, and credit cards. With the cultural emphasis on consumption during their growing-up years, they learned early how credit cards work, and used their own parent-subsidized cards from an early age (some as early as pre-teen) to buy the extras they want but can’t afford or pay for. And that doesn’t change in the face of a skimpy paycheck. “Most young adults find out very quickly how easy it is to spend more than they make,” says Francese.

According to the Bureau of Labor Statistics’ Consumer Expenditure Surveys, the average household in the 25-and-under category spends 116 percent of its after-tax income. In these young households, spending 16 percent more than they make translates to about $267 a month on average. “If these young adults suddenly started living within their means (perish the thought),” says Francese, “consumer spending would shrink by at least $30 billion a year… ” But that’s not going to happen: that’s not who they are.


imageFrom the early 1940s on, a societal shift away from both farms and city centers, a changing view of American teens (in fact, the word “teenager’ was coined in 1941) and heavy youth-oriented advertising for the first time led to a change in lifestyle. And one of the now iconic results: teens and phones. For the rest of the century, a top parental annoyance was the kids’ constant use of the family’s phone. But one “tiny” technological advance in the late ’90s set the stage for a significant societal shift: the cheap chip.

Huge advances in the microchip led to the affordable, ever-smaller cell phone. Now everyone in the family can have a phone and a phone number of their own, including the kids. And millions do. They also have their own computers, and their own screen names. Put it all together, and you have Gen Wired.

These kids have never lived in a world without home computers, and the Internet is a given in their lives. According to Teenage Research Unlimited (TRU), a market research firm dedicated to understanding teens, more than 80 percent have Internet access, whether at home, school, work, a friend’s home or the library. “While boomers were mastering Microsoft Windows 98, their kids were tapping away at computers in nursery school,” says Neuborne.

Not surprisingly, then, younger Gen Yers are more tech-savvy than any other group. In fact, they’ve never been conscious of a world without computers and the Internet. According to Northwestern University’s Kellogg School of Management, two-thirds of children under age 11 first used a computer before age 5. “One thing is certain about those born after 1980: they’re the most media savvy, technologically adept generation ever to walk the earth,” says Jim Meskauskas, chief strategic officer of the consulting firm Underscore Marketing (New York City). More than 40 percent of 13- to 24-year-olds use the Internet for entertainment, he says: “Movie reviews, music reviews and computer games dominated the time most Gen Yers spent online.”

A study by The Fortino Group predicts that today’s 10- to 17-year-olds will spend one-third of their lives, or 23 years, online. Young people exchange screen names along with phone numbers, and e-mail and instant messaging are second nature, if not indispensable. “Technically proficient multi-taskers, today’s teens may be found simultaneously instant-messaging friends, listening to music, surfing the Net and doing homework,” according to a recent TRU report.

Selling to Gen Y

Can specialty retailers relate to and attract this hooked-up, plugged-in demographic? Certainly. While Gen Yers get lots of information online, they still shop the old-fashioned way: they take their cash and credit cards to the mall.

As did Gen X tweens and teens, Gen Y, especially the younger ones, love to hang out at malls. For those in the suburbs, the mall is still a favorite place to “see and be seen,” and spend the day shopping with friends. A TRU study found that teens visit the mall five times a month on average. When Cotton Incorporated’s Lifestyle Monitor asked 16- to 19-year-old females how they felt about clothes shopping, 56 percent said they love/like to shop. This age group was also at the top in number of times they shop per month (2.75) and the average time they spend in stores (103.9 minutes).

Shopping is definitely on top of their favorite activities list. Patti Adcroft, former editor-in-chief of Seventeen, says that for young consumers, shopping at the mall is a special event they look forward to. Quoted in Lifestyle Monitor, she says “it’s about social interaction” for them. “You can get a new T-shirt, hang out with your friends, and see that cute guy you’ve got a huge crush on.” According to Adcroft, 93 percent of all American teens visit the mall at least once a month, and spend $33 billion a year on fashion and beauty alone. Add to that cell phone accessories and other electronic gadgets, music, sports-themed merchandise, games, and more.

Despite that much if not all of their income goes to overhead, older Gen Yers are buying, too. And they’re buying pretty much the same things as their younger Y siblings—plus household and home dec items, occasional wedding gifts and, increasingly, baby things.

So how does a retailer attract this lucrative market? How do you get them to spend their money with you? First, realize that this group comprises several segments: by age (school age, teens, young adults), gender, and various cultural backgrounds. Then see how your existing product lines fit in, or add to your product mix accordingly. Of course, that’s just one step: targeting a demographic isn’t just about product. Here are other important considerations for selling to Gen Y:

Let Gen Y sell Gen Y. Hire Gen Y sales staffers. They can relate to the interests and needs of Gen Y customers better than anyone. They’re likely to go to the same websites and watch the same TV shows as your Gen Y customers, so they’ll be speaking the same language. That’s not only good for communication—it’s good for street cred. And that goes a long way not only to making the sale, but to making repeat sales: your Gen Y shoppers come back because of “this great girl at the XYZ cart” who recommended the purse (or headband or whatever) that everyone at school just loved.

Be honest, upbeat, even a little fun. According to market research, Gen Yers respond to humor, irony and the unvarnished truth. Don’t try to coax them into buying something—it won’t work. The product should speak for itself and they’ll decide if it’s cool enough to deserve their attention. That doesn’t mean there shouldn’t be any demonstration or sales chat—just don’t push the product on them.

Be where they are. If possible, your mall location should be near the food court or a lounge area where Gen Y shoppers hang out. That idea is worthwhile enough for The Glendale Galleria mall in LA to open The Zone, a 15,000-s/f space that combines a teens-only lounge area surrounded by stores targeting this group with Gen Y-oriented merchandise.

Pay attention to trends. Watch celebrity trends and Gen X fashion—yes, Gen X. Teens, especially girls, always want to know what the next-older ones are wearing, and follow their lead. Girlshop.com, a fashion site that caters to women in their 20s and 30s, has a huge teen following. Laura Eisman, CEO, says younger girls have become an increasingly significant customer base. Eisman, quoted in Cotton Incorporated, says she’s received a lot of press because both Britney Spears and Christina Aguilera have worn clothing from designers featured on the site. “We’ve had teenagers calling the office and being just crazy to get an item that’s been featured somewhere,” she says.

Bring them in with special events. This group likes workshops and how-to demonstrations—remember, Gen Yers have practical minds: they like knowing how something will work for them. So think of ways to invite them in for a hands-on presentation about your product.

Keep in touch via e-mail. First, have an ongoing emailing list at your location, and ask every visitor to add their name and email address to it. Then send periodic emails to the people on your list. Tell them about promotions, special offers, new product announcements, discounts, events, tie-ins—anything. Write it so they’ll read it: short and breezy, and with a time limit (“This deal’s only good through Sunday!”). If you need help writing “in their language,” hire a high school or college student to help. In any case, keep in mind that these kids grew up in an ad-saturated world—the average 19-year-old has been exposed to about 300,000 advertising messages in his or her lifetime, according to TRU—and can see through gimmicky, overstated or patronizing messages.

Log on. Visit Gen Yers’ favorite websites regularly (see the “Gen Y Online” sidebar). Those sites are the main source of fashion, news and what’s-hot-right-now information for the Gen Y consumer. They’re a great source of info on peaking and emerging trends.

Have your own website. With the amount of time Gen Yers spend online, you need to be there, too. Even if you don’t want to sell online, you want your business and information about your products available online. News travels fast via the Net, and if you have a great product, they might tell each other about it in the next IM session. Show them the way to your site: put your Web address and cart/store location on your bags, tags, business cards—everything. And the cooler the design, the better. PS: Invite visitors to sign up for your e-mail news.

The smart money

Young, influential mega-group with money, Gen Y doesn’t like to be “sold”—but they love to buy. Smart retailers are finding out that getting to the top of their shopping list is as straightforward as they are: Understand what makes them tick, learn to connect, know what they want “right now,” and stock it. Then keep it going: These new kids are just getting started.