Marketing to Millennials in a Recession

At first it was 'a financial crisis' but now everyone calls it a 'recession'. With only 19.7% of new college grads who apply for jobs getting them and 65% moving into Mom's basement, the reality of the 'new frugality' has finally settled in with Millennials. However, new research from JWT (see chart) shows, the recession hasn't yet affected spending across the board. For adults 18-29, some things are indispensible (Internet), others less critical (dining out), and some are completely forgettable (magazines).

Marketing to Millennials now is not fundamentally different from any other time, because Gen Y has always considered itself cash strapped. (I am always amused to hear my students complain about how poor they are). Now, as they graduate and get jobs, Millennials continue to see themselves as careful shoppers, even as they outspend other generations on everything from cell phones to wine. They wouldn't think of making a major purchase without careful and exhaustive research, online and via word of mouth. One of my favorite Gen Y blog posts declared that if you are not Gen Y, you probably overpaid.

With money dearer now, and the tools for discovering preferences of friends becoming ever more accessible and powerful, I expect they will become even more careful in the future.

Of course, it's not just Millennials who are affected. According to new IRI research, the recession has created what they call the "Downturn Generation", a "new generation of Americans adopting practices similar to Depression-era shoppers, implemented both to weather the recession and to keep a close eye on spending long after the recession ends." The strategies characteristic of this 'new generation' sound a lot like practices Millennials have been implementing for years. Here's a sample:

"Consumers are becoming more resourceful and strategic when planning their purchases for meals, wardrobe, home and automobile maintenance and personal care. New approaches identified include consumers turning to the plethora of information available on the Internet to help prepare for purchases, clip online coupons and research reviews, commentary and opinions on products and services before making a purchasing decision. In fact, more than 44 percent of shoppers are using online resources to find coupons today, and 55 percent of them plan to continue this practice into the future."

How do we market to a generation of tight wads who are programmed to avoid impulse shopping? Very carefully.

According to the JWT study, "77 percent of young adults, people18-29, feel nervous and anxious about the impact of the recession."

Extra reassurance is needed for each decision, and that reassurance will be trusted most if it comes from a friend or neutral party. The key is to make sure they find the right information, not necessarily make your brand per se the go to source for the information. In other words, it’s very important to allow them to market to each other. Information is a form of social currency. Give Millennials information they value and they will share it with their friends. According to the article mentioned above, authored by Northwestern Medill Journalism student, Inyoung Hwang, here's how it could work in video games:

Morris Levy, senior at the University of New Hampshire, said even if a new product like a video game sparked his interest, he would hold off on purchasing it until he understood it better. “I’d look into it more – look at reviews online, ratings from different companies and news sources,” he said. Gary Rudman, the president of GTR Consulting, a market research firm, said video game companies will sometimes provide free clips of games to websites like IGN Entertainment. It’s a simple but successful word-of-mouth strategy that allows young people to feel like they’re finding things on their own and then talk to friends about it. “It doesn’t feel like a marketer is forcing something down your throat,” he said. “You’ve gone to a place to find it, you’ve discovered it, and you share it with the world.” Very successful brands understand there’s nothing better than having something “bubble up from the bottom,” according to Rudman.

Music and movie marketers have used this approach to reach Gen Y for years. If it is that effective for entertainment, imagine how powerful it could be for restaurants, wine, automobiles, financial services, higher education, and more.

Buckle's Up! Fashion Retailers Who Get Millennials

As I predicted last month, Millennials are not cutting back when it comes to their favorite fashion retailers.

Yesterday the WSJ reported teen retailer, Hot Topic, which also operates stores offering fashion forward merchandise for plus sizes under the name Torrid, posted a 19% rise in fiscal Q4 profits and 38% rise in gross margin, buoyed by sales of gear connected to the popular teenage-vampire movie, Twilight. Aeropostale, H&M and Zara also appear to be fairly recession resistant, which is impressive at a time when other apparel retailers (e.g., Abercrombie, Ann Taylor LOFT) are struggling.

One fashion retailer that seems to really 'get' Millennials is Buckle. According to WSJ, Buckle's net also jumped 19% in the fourth quarter. A visit to the Buckle web site says a lot about how they do it. The home page features a Millennial-friendly message about a Spring break event. It's free to enter and you can enter everyday. Brands are front and center, and they seem to have the brands my kids want most -- Lucky, Hurley, Puma, Billabong, Fossil and literally dozens more. Major boomer brands like Levi's and Calvin Klein are no where in sight.

The shopping experience is easy, with new arrivals and sale merchandise featured plainly on the home page. There are multiple ways to shop. You can shop by size (even by inseam), brand, item type, price, even by outfit. There's a 'style shop' that features separate 'trend watches' for men and women.

The visuals look like real Millennials, not models. Prices appear comparable to what you would pay on the individual brand sites, but the ability to assemble outfits, and ship all at once is a big plus. Military and international shipping are also featured.

The whole site makes shopping fun and gives you confidence you can create the looks you want. This is a site that really seems to have done its homework on Millennials, a lot of functionality and fun without unnecessary gimmicks or commercialization.

Millennials Face the Financial Crisis II

No, I am not going to talk about Skittles' Twitter debacle as it is still underway (stay tuned). Instead I want to revisit a topic I first addressed January 27, how the financial crisis is affecting Millennials. I speculated that this may be the defining event of their generation, and made five predictions:

1. Many will return to school.

2. Many will seek alternative jobs in the not-for profit sector.

3. Many will try to supplement their income with side jobs.

4. Many will redirect their careers.

5. Many will move back home.

6. Some will sign up for military service.

While I stand by these predictions, they don't address the more subtle impact the crisis is having on Millennials' values and outlook. An article in the LA Times yesterday, "The Millennial Generation Test" speculates a prolonged recession may start to contradict Gen Y's basic assumptions about how the world works. Perhaps not everyone does get a trophy? -- or even a fulfilling job. Will the Millennials become even more resilient? Or embittered? There are voices on both sides of the argument.

UC Irvine researcher Ellen Greenberger is the lead author of a recent study that found that a third of college students thought they deserved a B just for attending lectures, and that 40% said they deserved a B just for completing the required reading. She worries that this generation will be deeply embittered. "The insults of this recession might be seen as a personal affront to their high expectations," she said.

Morley Winograd, coauthor of "Millennial Makeover: MySpace, YouTube and the Future of American Politics," has no such concerns. "This is not an embittered and cynical generation," he said. "Although they did tend to be protected as children, they were also taught to compete and to perform. This will only make them more determined.

I don't presume to know the answer, but there is mounting evidence the financial crisis has Millennials' full attention. It is affecting their lives and narrowing their choices. Parents who have devoted their lives to protecting their kids from the hard knocks of life are now confronted with hard choices on everything from allowances and family vacations to college educations. Students see their programs squeezed by fewer resources. New graduates face the reality that many more qualified unemployed workers would be happy to claim entry level jobs once reserved for them.

This week YPulse posted the question, "How Has The Recession Affected You?" to its youth advisory board. The video above is a great window into the pain of the financial crisis as it is experienced by twenty-somethings. They also shared this from Nina, a high school freshman in Washington state:

"I go to a public school in a wealthy community where money has never been a problem until now. For the 2009-2010 school year, they may have to drop up to 17 teachers throughout the district. And even though many of my friends are not going right out and saying it, I know that it has been affecting them, too. Over the past couple of months my lunch table has converted from hot lunches to bag lunches. Also, as a group, we have opted for low-cost activities, such as wagon racing, watching old movies at home, and perfecting that classic teenage-skill of loitering. Last year when my girlfriends and I went to the mall, we bought junk like lip gloss, cheap earrings, an ugly hat that we'd never actually wear. Now when we go, we just look, or go to Nordstrom and try on wedding dresses."

Now that's frugal! They aren't the only ones, Scarborough Research shows teens are cutting back in many ways:

15% of teens dropped out of a sport or recreational activity

13% missed doctors’ appointments

11% stopped or cut back on taking vitamins

33% changed eating habits. The most frequent change cited is a reduction in eating out, particularly at quick service restaurants

20% have cut back on eating organic food

Millennials Face the Financial Crisis

(video from DigProjects)

The financial crisis of 2008 to ??? may turn out to be the defining event of their generation. Todd Woodward, a savvy Millennial Marketer, believes the crisis may be the event that distinguishes Millennials from the generation immediately following behind them. No doubt the childhood experiences of today's middle schoolers and younger children will be quite different; the Millennials were the children of plenty and the next generation will likely be the children of scarcity.

So how will Millennials cope with the financial crisis? Last week I suggested that they are unlikely to make immediate or drastic changes in their spending habits (or savings) because they already consider themselves cash-strapped. Here are a few more predictions:

1. Many will return to school. According to GMAC's 2008 Application Trends report, "economic changes and GMAT test-taking patterns suggest that the highest level of growth in (graduate school) application volume may occur next year (2009), after which a slowdown is likely to begin."

2. Many will seek alternative jobs in the not-for profit sector. With career advancement iffy, many will decide to focus on other 'rewards' for working. Making a difference is a key Millennial value. Many will reason that there will never be a better time to try. GMAC's annual Corporate Recruiter survey (11/09) says "Overall, salaries for 2009 MBA graduate hires will likely remain at the 2008 level. Yet, the majority of nonprofit and government organizations as well as energy and utilities firms plan to increase average annual base salaries for new MBAs in 2009.)"

3. Many will try to supplement their income with side jobs.. Instead of spending less, Millennials will become creative about generating income from what 26-year old Arneta in the video above calls 'a side hustle'. Arneta styles hair, her boyfriend makes videos. She believes many Millennials will become more entrepreneurial, and so do I. As she points out, a side hustle not only generates income, but also provides experience.

4. Many will redirect their careers. An article in today's Wall Street Journal ("Summer on the Street, Before the Fall") describes the lives of three summer 2007 interns at Morgan Stanley in New York. Today only one is working full-time at Morgan Stanley after graduating in May. The others? One delayed his graduation from Rutgers to take more business and accounting courses. The other had a subsequent internships at Lehman Brothers in the media-relations department and now has a wedding and fashion photography business. I expect to see students in the MBA program at Notre Dame who might before have been fixed on finance careers start taking a harder look at marketing and management.

5. Many will move back home. Helicopter parents will continue to provide a social safety net for Millennials in need. And Millennials will not feel uncomfortable about moving back in with Mom if it comes to that.

6. Some will sign up for military service. Time magazine reports (2.2.09) that the US military surpassed its 2008 recruiting goal. A total of 184,841 new recruits were added to active duty service with the National Guard recruiting the most and overshooting its goal by the most. Second in line was the Army Reserve.