Generation Y
Today's teens--the biggest bulge since the boomers--may force marketers to toss their
old tricks
From Business Week Online (1999)
http://www.businessweek.com/1999/99_07/b3616001.htm
At malls across America, a new generation is voting with its feet.
At Towson Town Center, a mall outside of Baltimore, Laura Schaefer, a clerk
at the Wavedancer surf-and-skateboard shop, is handling post-Christmas
returns. Coming back: clothes that fit snugly and shoes unsuitable for
skateboarding. Schaefer, 19, understands. ''They say 'My mom and dad got me
these','' she says.
At the Steve Madden store in Roosevelt Mall on Long Island, N.Y., parents,
clad in loafers and Nikes (NKE), are sitting quietly amid the pulsating music
while their teenage daughters slip their feet into massive Steve Madden
platform shoes. Many of the baby boomer-age parents accompanying these
teens look confused. And why not? Things are different in this crowd.
Asked what brands are cool, these teens rattle off a list their parents blank on.
Mudd. Paris Blues. In Vitro. Cement. What's over? Now, the names are
familiar: Levi's. Converse. Nike. ''They just went out of style,'' shrugs Lori
Silverman, 13, of Oyster Bay, N.Y.
Ouch. Some of the biggest brands on the market are meeting with a shrug of
indifference from Lori and her cohorts. A host of labels that have prospered by
predicting--and shaping--popular tastes since the baby boomers were young
simply aren't kindling the same excitement with today's kids. Already, the list
includes some major names: PepsiCo Inc. (PEP) has struggled to build loyalty
among teens. Nike Inc.'s sneaker sales are tumbling as the brand sinks in teen
popularity polls. Levi Strauss & Co., no longer the hippest jeanmaker on the
shelf, is battling market share erosion. Meanwhile, newcomers in
entertainment, sports equipment, and fashion have become hot names.
What's the problem? These kids aren't baby boomers. They're part of a
generation that rivals the baby boom in size--and will soon rival it in buying
clout. These are the sons and daughters of boomers.
Born during a baby bulge that demographers locate between 1979 and 1994,
they are as young as five and as old as 20, with the largest slice still a decade
away from adolescence. And at 60 million strong, more than three times the
size of Generation X, they're the biggest thing to hit the American scene since
the 72 million baby boomers. Still too young to have forged a name for
themselves, they go by a host of taglines: Generation Y, Echo Boomers, or
Millennium Generation.
Marketers haven't been dealt an opportunity like this since the baby boom hit.
Yet for a lot of entrenched brands, Gen Y poses mammoth risks. Boomer
brands flopped in their attempts to reach Generation X, but with a mere 17
million in its ranks, that miss was tolerable. The boomer brands won't get off so
lightly with Gen Y. This is the first generation to come along that's big enough
to hurt a boomer brand simply by giving it the cold shoulder--and big enough to
launch rival brands with enough heft to threaten the status quo. As the leading
edge of this huge new group elbows its way into the marketplace, its members
are making it clear that companies hoping to win their hearts and wallets will
have to learn to think like they do--and not like the boomers who preceded
them.
Indeed, though the echo boom rivals its parent's generation in size, in almost
every other way, it is very different. This generation is more racially diverse:
One in three is not Caucasian. One in four lives in a single-parent household.
Three in four have working mothers. While boomers are still mastering
Microsoft Windows 98, their kids are tapping away at computers in nursery
school.
With the oldest Gen Yers barely out of high school, it's no surprise that the
brands that have felt their disdain so far have been concentrated in fashion,
entertainment, and toys. But there's a lot more going on here than fickle teens
jumping on the latest trend. While some of Gen Y's choices have been driven
by faddishness and rebellion, marketing experts say those explanations are too
simplistic. ''Most marketers perceive them as kids. When you do that, you fail
to take in what they are telling you about the consumers they're becoming,''
says J. Walker Smith, a managing partner at Yankelovich Partners Inc. who
specializes in generational marketing. ''This is not about teenage marketing. It's
about the coming of age of a generation.''
Smith and others believe that behind the shift in Gen Y labels lies a shift in
values on the part of Gen Y consumers. Having grown up in an even more
media-saturated, brand-conscious world than their parents, they respond to ads
differently, and they prefer to encounter those ads in different places. The
marketers that capture Gen Y's attention do so by bringing their messages to the
places these kids congregate, whether it's the Internet, a snowboarding
tournament, or cable TV. The ads may be funny or disarmingly direct. What
they don't do is suggest that the advertiser knows Gen Y better than these savvy
consumers know themselves.
Soon a lot of other companies are going to have learn the nuances of Gen Y
marketing. In just a few years, today's teens will be out of college and shopping
for their first cars, their first homes, and their first mutual funds. The distinctive
buying habits they display today will likely follow them as they enter the high-
spending years of young adulthood. Companies unable to click with Gen Y will
lose out on a vast new market--and could find the doors thrown open to new
competitors. ''Think of them as this quiet little group about to change
everything,'' says Edward Winter of The U30 Group, a Knoxville (Tenn.)
consulting firm.
Nike has found out the hard way that Gen Y is different. Although still hugely
popular among teens, the brand has lost its grip on the market in recent years,
according to Teenage Research Unlimited, a Northbrook (Ill.) market
researcher. Nike's slick national ad campaigns, with their emphasis on image
and celebrity, helped build the brand among boomers, but they have backfired
with Gen Y. ''It doesn't matter to me that Michael Jordan has endorsed Nikes,''
says Ben Dukes, 13, of LaGrange Park, Ill.
Missteps such as Nike's disastrous attempt to sponsor Olympic snowboarders
two years ago and allegations of inhumane overseas labor practices added to
Gen Y's scorn. As Nike is discovering, success with this generation requires a
new kind of advertising as well as a new kind of product. The huge image-
building campaigns that led to boomer crazes in everything from designer
vodka to sport-utility vehicles are less effective with Gen Y. ''The old-style
advertising that works very well with boomers, ads that push a slogan and an
image and a feeling, the younger consumer is not going to go for,'' says James
R. Palczynski, retail analyst for Ladenburg Thalmann & Co. and author of
YouthQuake, a study of youth consumer trends.
Instead, Gen Yers respond to humor, irony, and the (apparently) unvarnished
truth. Sprite has scored with ads that parody celebrity endorsers and carry the
tagline ''Image is nothing. Obey your thirst.'' J.C. Penney & Co.'s (JCP) hugely
successful Arizona Jeans brand has a new campaign showing teens mocking
ads that attempt to speak their language. The tagline? ''Just show me the jeans.''
NET EFFECT. Which isn't to say echo boomers aren't brand-conscious.
Bombarded by ad messages since birth, how could they not be? But marketing
experts say they form a less homogeneous market than their parents did. One
factor is their racial and ethnic diversity. Another is the fracturing of media,
with network TV having given way to a spectrum of cable channels and
magazine goliaths such as Sports Illustrated and Seventeen now joined by
dozens of niche competitors. Most important, though, is the rise of the Internet,
which has sped up the fashion life cycle by letting kids everywhere find out
about even the most obscure trends as they emerge. It is the Gen Y medium of
choice, just as network TV was for boomers. ''Television drives homogeneity,''
says Mary Slayton, global director for consumer insights for Nike. ''The
Internet drives diversity.''
Nowhere is that Net-driven diversity more clear than in the music business. On
the Web, fans of even the smallest groups can meet one another and exchange
information, reviews, even sound clips. Vicki Starr, a partner in Girlie Action, a
New York-based music promoter, last year booked No Doubt, a band with a
teen following, into a small Manhattan venue. She says that on opening night
the house was packed with teenage girls dressed just like the lead singer. ''How
do they know this? How do they keep up with what she's wearing? It's not from
network television,'' says Starr. ''It's online.''
The Internet's power to reach young consumers has not been lost on marketers.
These days, a well-designed Web site is crucial for any company hoping to
reach under-18 consumers. ''I find out about things I want to buy from my
friends or from information on the Internet,'' says Michael Eliason, 17, of
Cherry Hill, N.J. Even popular teen TV shows, such as Warner Bros. (TWX)
Television Network's Buffy the Vampire Slayer and Dawson's Creek, have
their own Web sites.
Other companies are keeping in touch by E-mail. American Airlines Inc.
recently launched a college version of its popular NetSaver program, which
offers discounted fares to subscribers by E-mail. ''They all have E-mail
addresses,'' says John R. Samuel, director of interactive marketing for
American. ''If a company can't communicate via E-mail,'' he says, ''the attitude
is 'What's wrong with you?'''
This torrent of high-speed information has made Gen Y fashions more varied
and faster-changing. Young consumers have shown that they'll switch their
loyalty in an instant to marketers that can get ahead of the style curve. No brand
has done a better job of that than Tommy Hilfiger (TOM). When Hilfiger's
distinctive logo-laden shirts and jackets starting showing up on urban rappers in
the early '90s, the company started sending researchers into music clubs to see
how this influential group wore the styles. It bolstered its traditional mass-
media ads with unusual promotions, from giving free clothing to stars on VH1
and MTV to a recent deal with Miramax Film Corp., in which teen film actors
will appear in Hilfiger ads. Knowing its customers' passion for computer
games, it sponsored a Nintendo competition and installed Nintendo terminals in
its stores. Gen Y consumers have rewarded that attentiveness by making
Hilfiger jeans their No. 1 brand in a recent American Express Co. (AXP)
survey.
Compare that record with Levi's, one of the world's most recognized brands and
an icon of boomer youth. It got a harsh wake-up call in 1997, when its market
share slid, and research revealed that the brand was losing popularity among
teens. With its core boomer customers hitting middle age, both Levi's
advertising and its decades-old five-pocket jeans were growing stale. ''We all
got older, and as a consequence, we lost touch with teenagers,'' says David
Spangler, director of market research for the Levi's brand. Now, Levi's is
fighting back with new ads, new styles, a revamped Web site, and ongoing teen
panels to keep tabs on emerging trends. "We never put much muscle into this
sort of thing before, but now, we are dead serious about it," says Spangler.
"This is a generation that must be reckoned with. They are going to overtake
the country."
Marketers who don't bother to learn the interests and obsessions of Gen Y are
apt to run up against a brick wall of distrust and cynicism. Years of intense
marketing efforts aimed directly their way have taught this group to assume the
worst about companies trying to coax them into buying something. Ads meant
to look youthful and fun may come off as merely opportunistic to a Gen Y
consumer. That's what happened to PepsiCo in its attempts to earn Gen Y
loyalty with its Generation Next campaign, says William Strauss, co-author of
the 1991 book Generations: The History of America's Future. The TV ads, in
which kids showed off branded trinkets, from jackets to gym bags, fell flat.
''They were annoying,'' says Philip Powell, 14, of Houston. ''It was just one long
'Please, please, buy me.'''
Ironically, Pepsi already has one of the biggest teen soda hits with Mountain
Dew, but the drink's success has little to do with advertising. Instead, kids
found out about Dew from their most trusted endorsers--each other. ''[Kids]
believe--true or not--that they're the ones who figured out and spread the word
that the drink has tons of caffeine,'' says Marian Salzman, head of the brand
futures group at Young & Rubicam Inc. ''The caffeine thing was not in any of
Mountain Dew's television ads. This drink is hot by word of mouth.''
Along with cynicism, Gen Y is marked by a distinctly practical world view, say
marketing experts. Raised in dual-income and single-parent families, they've
already been given considerable financial responsibility. Surveys show they are
deeply involved in family purchases, be they groceries or a new 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 1998 survey of college
freshman for Northwestern Mutual Life Insurance Co. ''This is a very pragmatic
group. At 18 years old, they have five-year plans. They are already looking at
how they will be balancing their work/family commitments,'' says Deanna
Tillisch, who directed the survey.
GRASSROOTS. That means marketers who want to reach worldly wise Gen
Yers need to craft products and pitches that are more realistic. To rejuvenate its
Gen X hit House of Style, for example, MTV switched the emphasis on the
weekly fashion show from celebrity lifestyles to practical information, with
segments on decorating your bedroom and buying a prom dress. ''We adapted
the show to be more of what they wanted to see,'' said Todd Cunningham,
director of brand research for MTV.
To break through Gen Y's distrust, marketers are also trying to make their
campaigns more subtle and more local. A growing number, including Universal
Studios, Coca-Cola (KO), and McDonald's (MCD), use ''street teams.'' Made up
of young people, the teams hang out in clubs, parks, and malls talking to teens
about everything from fashion to finance, trying to pinpoint trends as they
emerge. Other marketers are trying to build grassroots support for their brands.
Following the lead of underground rock bands, mass marketers have taken to
''wild postings,'' that is, tacking up ad posters on street corners and construction
sites. Others sponsor community events or hand out coupons and T-shirts at
concerts and ball games. Golden Books Publishing Co. distributed sample
chapters from a new teen book series at movie theaters. The idea is to let kids
stumble onto the brand in unexpected places.
Last year, when Lee Apparel introduced Pipes, a line of oversize,
multipocketed pants aimed at 10- to 14-year-old boys, it spent its marketing
dollars on the Internet, outdoor posters, and skateboard magazines. ''As a brand,
you need to go where they are, not just pick a fashion statement, put it on TV,
and wait for them to come to you,'' says Terry Lay, president of the Lee brand.
Even Coke, a master of slick advertising, looks for more personal ways to reach
Gen Y. Last summer, it courted teens with discount cards good for movies and
fast food. To build credibility, it mailed them directly to high school sports
stars and other leaders first before handing out more at stores.
Of course, plenty of marketers continue to reach for this group with national
TV campaigns. The ones that work are funny, unpretentious, and often
confusing to older consumers. Consider Volkswagen of America Inc. Although
VW doesn't market directly to teens, both its Golf and Passat models show up
on surveys as Gen Y faves. Part of the credit goes to the carmaker's quirky TV
commercials, which are about as far from the traditional image-building ads
Detroit churns out as possible. ''We're a little edgier, a little more risk-tolerant,
and not so mainstream,'' says VW marketing director Liz Vanzura. While other
marketers fled the airwaves when Ellen DeGeneres came out of the closet on
her show last spring, VW used the groundbreaking episode to introduce a new
commercial showing two guys in a car who pick up a discarded chair. The ad,
funny and oblique, became a favorite among young adults and teens.
With the oldest Gen Yers turning 20 this year, a lot of other companies will
soon find themselves grappling with this new generation. Toyota Motor Corp.
(TOYOY), noting that 4 million new drivers will come of age each year until
2010, unveiled the Echo at this year's Detroit auto show. With low emissions
and a price well below the Corolla, the new subcompact is aimed squarely at
boomers' kids who are buying their first cars. General Motors Corp. (GM) is
putting together a task force to figure out how to appeal to Gen Y. The auto
maker brings teens and children as young as sixth-graders into car clinics,
where researchers probe their opinions of current models and prototypes of
future cars. Michael C. DiGiovanni, GM's head of market research and
forecasting, says Gen Y kids have an entirely different aesthetic from their
parents. Their sense of how a product should look and feel has been shaped by
the hours they spend at the keyboard. ''One of the trends that will manifest itself
is computers,'' says DiGiovanni. ''The design of products will be influenced by
the way a computer screen looks.''
Meanwhile, computers and other high-tech products are starting to look less
industrial and more sleek in an effort to attract younger buyers. By using bright
colors and cool designs, Motorola Inc. (MOT) helped transform the pager from
a lowly tool for on-call workers to a must-have gizmo for teens. Apple
Computer Inc. (AAPL) appeals directly to the same group with products such
as its rounded, space-age-looking iMac computer. ''For this generation, the
computer is like a hot rod,'' says Allen Olivo, Apple's senior director for
worldwide marketing, who says kids are constantly comparing features and
styling with their friends' systems.
Apple's stylish iMac may or may not become the computer of choice for this
new generation. But Apple and other marketers that attempt to chart the Gen Y
psyche now could have an advantage as this generation moves into adulthood.
After all, some of the biggest brands on the market today got their start by
bonding with boomers early and following them from youth into middle age.
Will the labels that grew up with baby boomers reinvent themselves for
Generation Y? Or will the big brands of the new millennium bear names most
of us have not yet heard of?