PL Buyer: The ABCs of Reaching Gen X and Gen Y with Private Label
Through a special arrangement, what follows is a summary of
a current article from Private Label Buyer, presented here for discussion.
Generation
Y, or “Millenials” as they also are called, today represent
the largest U.S. population segment — more than 76 million strong. Add
the 51 million members of Generation X into the mix and you have a large and
powerful new customer segment to home in on for private label sales.
“They are looking to try products that are new and different and branding
isn’t as critical to them as it was to their parents,” said Richard
George, professor of food marketing at Saint Joseph’s University, Philadelphia,
Pa. “I think this should have the private label folks saying hallelujah.”
For
Gen X, time is a precious commodity, so retailers should reduce deadline pressure
by offering meal planning and deals, and little indulgences like lattes to
make shopping less onerous, according to a study, Mining the U.S. Generation
Gaps, from The Nielsen Co. Childcare activity centers or computer kiosks
keep kids engaged while parents shop. In-store cooking or craft classes offer
family fun and a reason to increase trip count.
To reach Gen Y, consider upgrading
piped-in music to current hits, the same study says. Coffee stations with
battery chargers and in-store Wi-Fi let them kick back and review internet
or mobile coupons and shopping lists. Convert their need for immediate gratification
into impulse buy sales with enticing end caps and front-of-store bins.
Brand
loyalty overall tends to be lower for these younger generations. In a recent
survey of 865 Gen X and Gen Y consumers by AMP Agency, just three percent of
respondents said they’re loyal to a particular brand. The
survey included baby products, consumer electronics, food and beverage, health
and beauty and fashion categories.
Trading-down behaviors related to the choice
of retailer, product or brand will lose some traction in the recovery, but
private label brands (especially in fast moving consumer goods categories)
will remain a significant factor due to their high-quality at lower prices.
“While Gen X-ers are smaller in number, they are a huge opportunity in
today’s economy,” said Tom Bernthal, CEO of Kelton Research. “Gen
X-ers remember the consumption culture of yesterday and long for it back. They
are the ones that have latent desires to spend. Gen Y-ers, for the most part,
are just now coming into the financial situation where they have disposable
income. They don’t have strong memories of how people spent in the pre-recession
days.”
Discussion Questions
Discussion Questions: Do Gen X and Gen Y represent a unique opportunity for retailers to grow market share of private labels? How should the PL marketing approach change to reach these younger generations versus Baby Boomers?
Private labels need “brand management” just as much as national brands. In fact, a lot of the evolution toward “exclusive brands” rather than private labels is an effort to move away from one-size-fits-all marketing. Any brand should try to reach a targeted audience, whether through demographic or lifestyle segmentation. Even a full-line retailer trying to draw a broad customer segment needs an array of brands with targeted appeal within its overall assortment.
Whenever I see a comment that young people are not as brand loyal, my BS detector activates. I then shut down to most of what remains in the article. If you watch and speak with young people regarding fashion brands, Apple products, Red Bull, etc. you will see how silly that assertion is.
There is always an opportunity to grow share by targeting a specific demographic niche, but in the case of Gen Yers one shouldn’t confuse a lack of specific brand loyalty with a lack of loyalty to brands in general.
I’m not sure I’m clever enough to understand the generational shuffling the study seems to assume. If you have Gen X and Gen Y as separate groups with distinct buying patterns, what sense does it make to speak about their collective strength?
One could just as easily add Boomers–who presumably need to charge their phones and check their email–to the mix and then you’d have that most staggering of all niches–the mass market!
So, if the question is, “Is there an opportunity to grow ‘private label’ (I hate those words) share in America among all adult demographic cohorts?”–I guess the answer is “yes,” provided that retailer-controlled brands continue to evolve their value proposition to the consumer.
If the question is, “Will Gen Y kill brand market share because of some unique cohort attribute?”–I think the answer is “no.”
I have three Gen Y adults living their crazy lives with me. I learn a lot from them by observing and discussing the brands they buy and why, as well as when and why they choose private label products. The article we’re commenting on says “branding isn’t as critical to them as it was to their parents” and I tend to agree with that in many cases. Especially in packaged foods.
But Gen Y’s are as brand snobby as they come in other categories. From cars to technology to beer, luggage, shoes and clothing, they justify pricey brands just like I justify those quality national food brands. I will still pay more for Campbell’s Tomato Soup and Pepperidge Farm whole grain bread. Have tried the alternatives, and I’m just not satisfied.
When my Gen Y kids shop for food, they reach for Archer Farms, Meijer brands, Kroger brands and local brands. They didn’t grow up during the revolution of mass-produced packaged goods, and they don’t have any latent emotional connectedness to how those brands nourished our nation as it grew to prosperity, even though they grew up on some of them.
They’d just as soon explore new flavors and go to the farmer’s market, truth be known. It’s going to be a tough road ahead for many great national food brands, I’m afraid.
A good book to read on this topic is Gen BuY (Kit Yarrow and Jayne O’Donnell) – www.genbuy.net
I am not sure that age is the defining variable here. I would like to see a study that evaluates target segments in terms of technology use or attitudes toward technology. There is a group of people across these age groups that uses technology as a lifeline. There is a group of people who uses technology for business and a group who uses technology for entertainment and a group who uses technology for interaction. Before making a generalization that brand loyalty does or does not exist across a particular or one or tow or three age groups it would be worthwhile to examine brand loyalty for groups of products across alternative ways of segmenting the market.
I refute the statement that the Millennials are the largest segment of the population. The baby boomers are the largest and have the most buying power by far.
One more comment…the recent increase in private label share was fueled by the economic meltdown. I wonder who felt the need for tradeoffs more, was it the kids, or the parents who had to make ends meet. Because Nielsen/IRI purchase panel data are household data, I’m not sure there is a definitive source for this, but the answers might surprise….
Boomers became consumers in a time where if you put enough TV advertising in front of them (and it didn’t take very much) you could sell your product to them. Gen X and Gen Y are different in the sense that television is neither the best or most economical way to get their attention.
However, there are a few points in the article that I have to question. I agree that most of the research done suggests that Gen Y are less loyal to particular brands, we have to be careful not to confuse that with a lack of brand consciousness–they are extremely knowledgeable and connected to what’s cool.
Secondly, as it applies to Gen X. Yes, they may represent an opportunity for retailers but the reality is that they are not only a much smaller generation but they’ve also been severely challenged for mobility and income growth in the workplace over the last 10-20 years and worked in the shadow of Baby Boomers.
I echo Anne Howe’s observations. As I observe the buying habits of both my son’s and daughter’s families it very much reflects the non-brand mentality. And let me add, in neither case do they “trade down” to save money. Money is not an issue. But, their cabinets a full of private label grocery and OTC products. They have no compelling understanding on why they should buy brands. Their fashion purchases are almost anti-brand. I love what they are teaching my grandchildren about brand labeling on clothing. No horsies on their shirts.
On the technology side, however, they go heavy for performance and features. Yes, Apple computers, iPhones, Wii, Netflix, etc.
What should private label marketers do? Beyond offering good products, they should do nothing. Private label is the default position. The reason for branded advertising is to justify the increased price of the branded product. Broadcast branded advertising is headed for limbo. This generation, more than any other previous has the ability to control its own messages and with all the messages they get, advertising is not often going to be chosen.
From my informal polls, I strongly believe that brand affiliation in FMCG continues across the Boomer generation and older, while Millennials are less discerning in this category.
I believe this research is intended to support strategy in grocery, pharmacy and some category of retail, but I would remind marketers that Millennials are as ardent in their support of boutique brands as any generation alive.
Apple, Red Bull, Starbucks each generates strong brand affinity and I would hesitate to extrapolate the private label thesis to categories beyond grocery and pharmacy.
A poster said a survey found that only 3 percent of Gen X and Gen Y are brand loyal. So, of course these groups represent a unique opportunity for retailers to grow market share of private label. Now it is up to private label suppliers and retailers to make these products attractive enough beyond a lower price. That is where brand marketing comes in. Enough ex-CPG execs now work for private label companies and retailers. The skill set is there. Seize the day!