The case for focusing on marketing to Millennials now.
Jane Bailey is VP, Planning & Perspectives at TPN, a nationally recognized retail and shopper marketing agency, whose clients include PepsiCo, 7-Eleven, The Hershey Company, Bank of America, MWV and Clorox. A member of the Omnicom Group, TPN has a proven history of producing programs that drive and sustain transactions for global consumer brands. In this two-part guest column, Bailey discusses the importance of recognizing the emerging power that Millennials have on our economy.
Thinking long-term—or even mid-term—in the current economic situation is hard, especially when so many people and businesses are simply trying to get through this recession as best as they can. There’s pressure to focus on immediate needs—how to make this quarter’s numbers and what needs to be accomplished in order to stay in business for the next six months. But taking a longer view is particularly important in the current circumstances for a couple of reasons.
There is not going to be a fast recovery.
- Consumer spending is the key driver of economic growth in the U.S. But challenges in housing and employment are continuing, thus will damp down consumer spending for some time.
- At present, there are so many homes for sale, that at current rates, it will take almost 9 months to clear them. Add to this the “shadow inventory” of one to three million distressed properties likely to enter the housing market and the number of “negative equity” homes (in which owners owe more than their home is worth), and the housing market is not likely to bounce back for one or more years.
- Employment also remains weak. In July 2010, unemployment exceeded 9% for the fifteenth month in a row. Increases in jobs in the private sector have been small. Many experts are now saying that with the slow rate of job creation, it will take more than five years for employments rates to get back to the 4-6% range they were at from 2004-2007.
The recovery, when it comes, will not be driven by the Baby Boomers, the generation that has driven the economic growth of this country for three decades.
- There are a lot of Boomers and, throughout their adulthood, they have loved to spend. But the recession hit the Boomers hard. They were seriously hurt by the collapse of housing prices and the declines in the stock market.
- Never a generation known for saving or planning ahead, most Boomers are facing their approaching retirements without the resources needed to maintain the lifestyles they have come to expect. While Boomers are likely to work longer to try to recoup some of their losses, they will finally have to cut back their spending and live within their means.
This leaves the Gen Xers to drive the recovery.
While Gen Xers are at a stage in their lives when spending is high (supporting families and homes), there simply aren’t enough of them to replace the spending gap left by the Boomers. There are 11% fewer Gen Xers than there are Boomers, so that even if they spend at the same level that Boomers had, that leaves consumer spending 11% lower. So, as Ben Bernanke and the Federal Reserve Board are learning, there are no quick ways out of this recession, and we need to look beyond the traditional levers and beyond the traditional targets to build the model for growth over the next 5-10-15 years.
This is where the Millennials come into focus.
Call them Gen Y, Gen Next, or Millennials, the people born since 1985, who are entering into adulthood in this millennium, represent the largest generation this country as ever seen. It is estimated that between 1985 and 2010, there will be more than 100 million babies born in the U.S. Roughly 4 million of them are turning 21 every year. Many manufacturers, retailers, and marketers want to dismiss Millennials—arguing that they are young, with limited money to spend, not much of an impact on the economy yet. But that perspective ignores what is already happening at the leading edge of this generation. In 2009, the Pew Research Center looked at the leading edge of this group as they entered adulthood (18-28 years old, born between 1981 and 2001).
- There are 45.8 million of them who are already young adults.
- They are highly educated with 49% of the men and 60% of the women with at least some college education.
- Sixty-two percent of them are employed.
- The average household income for them is $58,620.
- Twenty-five percent of them are married.
- They own more than 5 million homes (according to the Census Bureau).
By any measure, Millennials are not a group that manufacturers, retailers, and marketers can ignore for the time being. Instead, the Millennials are a generation that is significant already and whose impact will grow over the coming years. If the economy continues to sputter for the next few years, it will be the Millennials as well as Gen Xers who will drive the recovery. As they grow up and enter adulthood, Millennials are poised to do what their parents, the Boomers, did—drive demand and consumer spending for the next two to three decades. And like the Boomers, Millennials will redefine the marketplace—what we buy and how we buy. Will your company be ready to reach this influential group?
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