BrainTrust Query: The Post-Crisis Gen Y Consumer
By Doug Stephens, President, Retail Prophet
Through a special arrangement,
presented here for discussion is a summary of a current article from the Retail
Prophet Consulting blog.
Kit Yarrow, co-author of Gen BuY: How Tweens, Teens
and Twenty-Somethings are Revolutionizing Retail, says
Gen-Y has clearly become less impulsive and are more interested
in cheap thrills and sales promotions than they were pre-recession. But they
haven’t cut back their spending as much as older generations.
"It makes sense
when you consider that Gen Y had less and so lost less
during the recession," said Ms. Yarrow, a professor of psychology and
marketing at Golden Gate University. "They’re also highly optimistic
about their earning potential and consequently less cautious when it comes
to spending. This generation was trained by their parents to have high expectations.
Lastly, Gen Y "wants" feel a lot like "needs," especially
when it comes to technology."
She likewise said that while Gen Y has become
more knowledgeable about personal finance issues and money management as a
result of the recession, she doesn’t expect to see any noticeable frugality
lasting in the long term.
"Gen Y has not been psychologically damaged by the recession in the same
way that Depression Babies were," said Prof. Yarrow. "Not even close.
I’ve heard more Gen Y’s scoff at the futility of saving than I
have those who have stopped spending (though neither extreme is the norm)."
Still,
she said retailers will need to make adjustments to appeal to Gen-Y customers
in the decades ahead. One key is to get them involved and to acknowledge and
reward that involvement. Communication also needs to be more visual, symbolic
and intuitive.
"Honestly, transparency, humor and humanness go a long way too," said
Prof. Yarrow. "There also needs to be more activity, product turnover
and sensory involvement than what satisfied previous generations. Lastly, it
makes sense to rethink absolutely everything with a nod toward what’s
technically possible today."
In messaging, she said Gen-Y consumers
always gets their say, but are not always heard.
"What Gen Y craves is to be seen and heard. Status is no longer
about money, it’s about influence," said Prof. Yarrow. "Therefore
the messages that resonate with Gen Y are those that champion the customer.
Listen, respond, notice and reward — that’s where it’s at."
Discussion Questions: Do you agree that the recession ultimately will have
little impact on the Gen-Y consumer’s purchasing behavior? What do retailers
need to understand about this generation to successfully win their attention
and loyalty as they move into their prime consumption years?
Surely the Baby Boomer generation responded more dramatically to the Great Recession than its children, and for good reason: Boomers saw their retirement savings and home values shrink dramatically and they are understandably gun shy about opening up their wallets today. But the Gen Y response to the recession is harder to interpret: Many of them are homeowners, too, and just beginning to save and invest for the future through company 401k plans. Their discretionary spending has also likely taken a hit, but this group may be more attuned to “bargain-hunting” anyway.
A huge number of Gen Y shoppers don’t make a spending move without doing their online homework first, sharing insights via social networking sites, or looking for website coupons and deals. There may be more frugality in this age group than their parents want to admit.
Based on my research of the Mature Millennials, I agree with the author’s conclusions. In particular, I studied the food retail attitudes and behaviors of older Gen Y’s (22 to 33 years of age). This group is in the process of career development, getting married and forming families. In many cases they are finding out that happy hour and dinner can be two separate events. They are very optimistic, feel a sense of entitlement, and are heavy users of social networks and online food shopping.
Research shows that this generation does not have the same attitudes/behaviors and will not spend on the same categories as their parents did. It may be the case that Mature Millennials will eventually behave like their parents and older consumers. However, at this stage of their life cycle their attitudes, lifestyles, and behaviors are sufficiently unique to suggest the development of specific marketing strategies and tactics by food retailers that will capture a greater share of their total food needs.
Food marketers who assume that the Mature Millennials will start to behave like current older Americans, just because they age, do so at their peril.
While Gen-Y consumers seem to have not been hit as hard as the older generations, they still have had to learn to cut back and spend their discretionary income more judiciously. This generation is more technology savvy and have learned to use it as an asset helping them find the better bargains on line.
The older generations have learned from their parents who experienced the great depression, possibly too late; but they learned how to cope with the adversity. The Gen-Y’ers are adroitly finding other ways to combat the difficult times.
It goes to show that any comparison of the last few years’ economy to the Great Depression is dramatically overstated. But unless Gen Y gets the message that working hard and saving creates better outcomes than working less and spending, we’ll all be in trouble for a long time to come.
The recession ultimately will have little impact on the Gen-Y consumer’s purchasing behavior because it’s human nature to spend money when you have money to spend.
I saw Kit speak at the recent IIR Shopper Insights conference and here are a few points she made about Gen Y that I found particularly interesting:
Parents are more influenced by their Gen Y kids than the other way around–Gen Y advises their parents on what to wear, influences what they drive, and are able to repair home tech products. Gen Y is defined by technology, and that we are now a youth-centric society. 83% of them SLEEP with their cell phones and the average college student has 438 social network friends. They are overloaded with options yet crave genuine connections. 60% of college students see themselves as leaders. They view more than they read.
In short, they are a complex generation who expect a lot and think a lot of themselves. While they may not be seriously damaged by the Great Recession, they have LOTS of options so marketers had better do a great job of communicating with them or they won’t even get considered.
Of course GenY consumers are going to spend more, they are in the ‘accumulation’ phase, but many I work with daily have a watchful eye toward building long-term assets. Virtually all of the boomer parents I know have shared their lessons learned with GenY kids, many of whom are back in the nest, at least temporarily.
They seek and will pay for technology that saves time, enables productivity and enhances connections to people and places and stuff they like. And they can find a deal faster than most others I know.
Personally, I think we have a lot to learn from them. Their filters and choices are more reflective of the future than ever before. If GenY starts to show signs of unruly excessive consumerism, combined with a dip in savings and a rise in shaky credit scenarios, I will be very surprised indeed.
It is nonsense on the face of it to have this discussion as though “Gen Y” is a useful filter without better descriptors. Doing pop psychology on a 20 year cohort as “them” is nonsense.
As with any large social/economic event (including the Great Depression) there is a scale or continuum. Leading edge Gen Y (mentioned as Mature Gen Y) who had graduated, reached the workforce, and perhaps formed their family have a very different set of experiences from a 15 year old whose dad lost his job, the family home got foreclosed, and any chance of going to a private college just disappeared.
We all have seen any number of studies that show that graduates who enter the workforce during a sharp recession like this one will, on average, have permanently lowered earning power for their entire lifetime. How can this NOT affect spending behavior?
Similarly, someone in their mid to late 20s who bought a house three years ago and is now six-figures upside down–this is not something that you shrug off and go to the virtual mall without it having had an impact.
Sure, they will have kept cell phones, computers and other electronics at a higher level of need. Trade offs will happen and the taste and preferences of this young generation will have enormous impacts. But it is way too soon to tell this story and nonsense to act as though an entire generation is coherent.
We have to recognize in this case that we are truly facing two different unknowns. The first unknown is an unprecedented drop in the economy, primarily reflected in mortgages and job availability. The second unknown is the growth of this unique generation that is more accustomed to the leveraging of technology and the building of virtual support communities, than we have ever seen before.
In the current stage of the bulk of this generation, they are not facing the economic pressures that subsequent generations are facing to provide for their families in the short-term and over the long-term. As a result, they have a higher percentage of their income available for flexible spending, and have no hesitancy in doing so. To the extent that this generation has been able to keep their jobs, their spending has not changed appreciably.
It is unclear whether or not this generation will “change their ways,” as they mature and find the same pressures as their parents. No matter what, they will continue to interact with retailers and with each other in an unprecedented, highly interactive networked way.
As correctly mentioned in the comments above, Gen Y is in the life cycle stage where they are either building their careers or thinking of starting a family. They have not invested enough to lose much and they also have a long employable life in front of them, which makes them optimistic.
Also as mentioned in the article, this generation is trained to have high expectations and technological advances have made them impatient. They have a very short attention and memory span, hence if a retailer is unable to engage with them, it will be soon forgotten. They love to research and get the best deal which might not necessarily be for the best price, making them value hunters.
As correctly said, status is not about money but about influence. Opinions of others matter a lot. Hence to differentiate, uniqueness is expected.
For retailers it means real-time, personalization, collaboration, and enabling this through every touch point.