The X and Y Equations

Generations X and Y are collectively the most economically powerful group in history. Their strength lies in numbers: Gen Y (13- to 25-year-olds) is now the largest segment of the population at 32 percent, and spends more than $300 billion annually. Gen X (26- to 34-year-olds) accounts for another 18 percent of the population. Together, these two groups are a major force driving the economy and the retail industry.

To take a closer look at the influence these groups have on retail, VM+SD asked two experts on generational marketing to share their thoughts on the influences of Gens X and Y. Cynthia Cohen is president of Strategic Mindshare, a Miami-based strategic management consulting firm, and David Bersoff is a director in the Monitor Group at Yankelovich Partners (Norwalk, Conn.).

Cynthia Cohen: Gen Y is the arbiter of what's cool. They can and do make brands into mega-successes, such as Abercrombie & Fitch, Tommy Hilfiger, Adidas and Target. They can also break or inhibit a brand's comeback strategy, as evidenced by Levi's, which is considered “uncool.” Strong-willed and opinionated, they speak their minds with confidence. They may not buy all the products in the household, but they comment on what brands are best. They are also very vocal and have learned how to communicate their opinions to everyone around them quickly.

Gen Y influences/spends more than $300 billion in consumer products annually. They have more disposable income than any other generation has had at this age. They receive it not just through allowance, but through store gift cards, online gift certificates, “Rocket Cash,” Doughnet and other new currencies. The most powerful segment of this group is the Tweens (8-14), which we have dubbed “Speeders.” They are bold, confident, articulate and were raised in the modern “young millionaire” economy.

David Bersoff: The young are always a major influence on retail and marketing, because social change tends to originate among the young. The young tend to be the least content with and the least invested in the way things are, so they tend to be on the leading edge of the demand for change and innovation. This was true of the Boomers in their day and probably of the Matures in their youth.

Whereas the influence of the young is a constant, the nature of the changes they demand varies from generation to generation. Gen Y is spearheading the demand for the personalization (mass customization) of products and services. Because innovations tend to start among the young, marketers not wanting to get left behind must make it their business to know and understand what today's kids want, whether today is 2000, 1950 or 2025. The power of the young lies in their roles as cultural bellwethers.

Cohen: Bill Gates, Oprah Winfrey, Tiger Woods, Michael Jordan, Brittany Spears, Backstreet Boys, etc.

Cohen: In terms of technology and shopping habits, they are innovators. In terms of fashion, they are imitators of the celebrities they watch on TV and the music stars they listen to.

Bersoff: Young people always worry about belonging, and often that means conforming to the styles and norms of a group they want to be accepted into. That is a constant. But as a group, Gen Y is as innovative as any we have seen.

Cohen: Mirroring the Boomers, they love to shop. They shop with friends; shopping is mostly a social experience. Males are closing the gender gap slowly in terms of recreational shopping. This group has favorite stores, but is not necessarily loyal. A favorite store can fall out of favor overnight.

Bersoff: Gen Y likes to shop, more so than other generations. Of course, that is probably because they mostly shop for fun things like books, CDs and clothes, and not for things like floor wax, diapers and Q-Tips. Shopping is also a social experience for the young, again because more of their shopping is recreational and not chore-based. This implies that stores also need to be places to play, have fun and socialize if they're going to attract Gen Y. This will change as Gen Y ages and starts the process of family formation, as the Xer's have.

The young make less money than older consumers, but they also have fewer expenses and more discretionary income. This makes them interesting shoppers. They can not afford to be spendthrifts, but they do have the luxury of being able to splurge if they choose. Therefore, in some contexts they appear to be price-sensitive and in others they seem to be relatively less concerned about price. The key to predicting when Gen Y will manifest which price orientation lies in understanding whether the trend is style-based or brand-based. For example, when cargo pants were hot, it was the style of pants and not the brand that was important. Thus it was important for retailers to keep prices on those items competitive. In contrast, when Air Jordans first got hot, it was all about the brand, and kids were willing to pay high price for the “right” sneaker.