The Post-Crisis Gen Y Consumer

July 27th, 2010

By Doug Stephens

Most marketers are all too familiar with what has become an overly simplistic consumer segment profile of Generation Y.  They are often broadly described as a large segment of 9-29 year old, tech savvy, voracious spenders with high ideals and expectations of the retail brands they shop.

But how much of what we think we know about Gen Y is born out of pre-recession realities that no longer exist?  In the cold light of a post-recession day, does the post-crisis Gen Y consumer bear any similarity to the one that’s become stereotyped in North American marketing circles?  Moreoever, what do retailers need to understand about this generation to successfully win their attention and loyalty as they move into their prime consumption years?

To help answer these questions, I spoke with Kit Yarrow PhD, professor of psychology and marketing at Golden Gate University and co-author of the acclaimed book, Gen BuY: How Tweens, Teens and Twenty-Somethings are Revolutionizing Retail. Kit is widely recognized as a leading authority on consumer psychology and Generation Y.

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Retail Prophet:  Throughout the the last decade we heard a lot about Gen Y’s spending patterns; specifically that they were spending at a rate up to 500 percent greater than their parents in adjusted dollars. What impact has the recession had on Gen Y spending patterns?

Kit Yarrow: They’ve cut back – but not as much as older generations.  It makes sense when you consider that Gen Y had less and so lost less during the recession. They’re also highly optimistic about their earning potential and consequently less cautious when it comes to spending. This generation was trained by their parents to have high expectations. Lastly, Gen Y “wants” feel a lot like “needs,” especially when it comes to technology. In contrast to older generations, they’re spending less because they have less to spend, not because they have a new attitude about spending.

However, although they haven’t adopted the frugal mindset of older generations, they have learned new ways of shopping. They’re definitely less impulsive and more interested in cheap thrills and sales promotions than they were pre-recession.

Retail Prophet:  The silent generation’s consumer behavior was to some extent a product of the Great Depression. Consequently they became known as a generation of savers. What long-term effects do you see this recession having on Gen Y’s consumer tendencies?

Kit Yarrow: Gen Y is more knowledgeable about personal finance issues and money management as a result of the recession.  I think parents are doing a better job of preparing their kids for financial independence.  Gen Y has not been psychologically damaged by the recession in the same way that Depression Babies were. Not even close. I’ve heard more Gen Y’s scoff at the futility of saving than I have those who have stopped spending (though neither extreme is the norm).

Retail Prophet:  From your research, what would you say are the most significant changes or adjustments retail businesses need to make in order to appeal to Generation Y customers and secure their loyalty in the decade ahead?

Kit Yarrow: It’s essential to get Gen Y involved. They’re willing to advise and champion retailers. Why not take them up on it? The key is to acknowledge and reward their involvement – a little courtship is required. Secondly, I think communication has to be more visual, symbolic and intuitive. Honestly, transparency, humor and humanness go a long way too. There also needs to be more activity, product turnover and sensory involvement than what satisfied previous generations. Lastly, it makes sense to rethink absolutely everything with a nod toward what’s technically possible today.

Retail Prophet:  Certain marketing messages resonate with specific generations. For time-compressed Baby Boomers for example, “convenience” became a key driver. Are there any particular messages you think resonate particularly well with the Gen Y consumer?

Kit Yarrow:  This is the generation that always gets their say, but isn’t always heard. There are multiple ways to get your point out there – and the result is lots of talking, not so much listening. What Gen Y craves is to be seen and heard. Status is no longer about money, it’s about influence. Therefore the messages that resonate with Gen Y are those that champion the customer. Listen, respond, notice and reward – that’s where it’s at.

Retail Prophet:  We’ve all heard the statistics about the disproportionate channel growth of e-commerce compared to bricks and mortar retail. Are there any indications from your research about Gen Y’s attitude towards shopping online versus visiting a physical store location? Will bricks and mortar retail suffer under a Gen Y consumer?

Kit Yarrow: There really has to be a complete integration now. Gen Y’s shop in stores with Internet information and apps that allow them to compare and share at their fingertips. Gen Y views online and physical location retail as equally valuable and somewhat seamless. After all, virtual is more tangible to Gen Y than to older generations.

They prize online capabilities like crowdsourcing, customization and most importantly their ability to learn and share with others. At the same time, according to my survey, Gen Y also enjoys shopping in stores more than any other generation. The smart retailers today are really looking for ways to enhance both experiences and their retail brand by bringing more online capabilities into the store and putting more of the store experience online.

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Kit Yarrow, Ph.D. is a professor of psychology and marketing at Golden Gate University and their 2009 Outstanding Scholar. Her book, Gen BuY: How Tweens, Teens and Twenty-Somethings are Revolutionizing Retail (Wiley, 2009), was described by Publisher’s Weekly as “a must-read for all who hope to keep their companies relevant and viable.”

Kit has given talks on Gen Y, the psychology of consumers and insight-driven marketing to organizations such as Stanford, The Commonwealth Club, Cisco and Vogue.  And she’s consulted to businesses including General Electric, Del Monte, AAA and Nokia.

Posted in Technology | 2 Comments »

Generosity

July 13th, 2010

By Doug Stephens

Generosity: noun~ Willingness to give or share; unselfishness

All successful relationships are underpinned by generosity.

The willingness to give or share without expectation of repayment is central to healthy, human interaction.  It doesn’t matter what you give.  It can be your time, your praise or simply your attention but without generosity, relationships tend to vanish in a cloud of selfishness and resentment.

This is equally, if not more true with business relationships.  Long-term success in retail comes down to fundamental beliefs with respect to the whole concept of generosity.  Specifically, you either believe that generosity is almost always rewarded or almost always abused.

You can easily spot businesses that believe the latter.  They’re the ones that have you deposit a quarter to use their shopping cart.  The ones that refuse refunds without a receipt. Those who link any charity work they do to a sales goal or promotion.  They cut the holiday employee turkey to save a few dollars. And you probably can’t use their restrooms either.  All because their belief system suggests that generosity is something that is abused and taken advantage of.  As the English poet Alexander Pope wrote “…all looks yellow to the jaundiced eye.”

Rare businesses, however, take the contrary view.  These businesses believe that the simple act of giving – whether to customers, employees or the communities they operate in is simply the right thing to do –it’s just good karma.  They provide their employees with great places to work, their patrons with great places to shop and their communities with businesses that give back.  They regard customers as people – not mere transactions.  Employees are part of the team – not simply headcount.   They give based on the belief that people are basically good and that their generosity will indeed be repaid – if not today then tomorrow and if not tomorrow then someday.

The unfortunate thing is that generosity is no guarantee of success.  Indeed, some of the most successful businesses in the world are also the greediest.    The consolation, however,  is that only those businesses who give generously will leave a positive impression on the world.  And perhaps that’s the truest definition of success.

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Posted in Branding, Marketing | Comments »

An Inconvenient Truth About Bad Customer Service

June 29th, 2010

By Doug Stephens

The effects of bad customer service may take years to prove fatal but the eventual outcome is almost always corporate extinction.  Despite this, surprisingly few companies turn these negative situations around and actually improve their customer service position.  And as counter-intuitive as it seems, many businesses act like they don’t even care.

It’s a lot like global warming

Whether you believe the science or not, most would agree that the world’s climate is changing.  With this change we are seeing potentially devastating and irreversible impact on the planet’s ability to sustain itself and its inhabitants, for that matter.  Unchecked, the problem will almost certainly eradicate life on earth.

So why have we done so little to reverse the trend?  I mean the survival of the planet is a pretty big deal!

According to Dan Ariely, a professor of psychology at Duke University and author of the bestselling book, Predictably Irrational, there are three primary reasons for our apparent apathy when it comes to huge problems like global warming.  Firstly, the problem seems simply too large for any one of us to comprehend solving.  Secondly, it’s a problem that threatens future rather than immediate devastation.  Lastly, we have trouble visualizing how the little things we do as individuals (like using more energy efficient light bulbs or recycling), can contribute to solving the seemingly insurmountable problem.  The end result is that we don’t become emotionally invested in the solution.  We check out.

This same theory holds true  to systemically bad customer service.  Despite leadership droning on about the need for improved customer service, front-line staff often see the problem as too large, too complex and beyond their individual capacity to correct.

The Prius Effect

Perhaps no other automobile has become as synonymous with the environmental movement as the Toyota Prius.  It seems safe to assume therefore that people who own a Prius are more environmentally conscious than those of us who don’t.  However, there’s no credible evidence of any correlation between driving a Prius and having an elevated environmental consciousness.  Apart from owning a hybrid vehicle, Prius owners are much like the rest of us.  They don’t exercise any more day-to-day concern for the planet than we do.  In fact, one study concluded that a mere 27% of Prius owners made the choice based on a strict concern for the environment – most drive one to save money.  Nonetheless, we perceive Prius owners to be more eco-friendly.  In other words we infer from their choice of vehicle that they actually care more about the environment than they actually do.

So, what if we took this idea of inference a step further?  What if you could create a similar effect when it comes to delivering customer service in your business?  What if you could define specific actions, that if performed, would infer to customers that your employees appreciate them, even if they don’t?   Think about it.  Could you program specific events into the customer experience that make even the least engaged staff member seem to actually care about the customer?

Stop Talking About “Customer Service”

The first step I would advocate is to stop using the term “customer service”.  It’s problematic for a few reasons.  Firstly, it implies servitude and who wants to be thought of as a servant?  Secondly, it’s nebulous, making it difficult for staff to know if they’ve really provided it or not and also making it difficult to measure.  Lastly, it’s too subjective.  Great service to one person may be mediocre to another.

Instead, let’s call customer service something different – I’ve always liked the term the path to purchase.  And let’s agree that along the path to purchase certain defined, measurable and positive events should take place.   These events might range from holding a hotel door open for guests to shaking a customer’s hand– it doesn’t really matter as long as they’re defined, measurable and widely accepted as being positive behaviors.

So now, instead of pleading with staff to “improve customer service” – which is undefined, impossible to measure and open to interpretation, you can be instructing them to perform the specific tasks you’ve engineered into the path to purchase.

As a hotel guest, I don’t really care how customer-centric the bellhop is.  If they smile and hold the door open for me, I’ll infer from their behavior that they care.  As a shopper I don’t know if the salesperson appreciates my business or not but if they come out from behind the counter to give me my purchase while shaking my hand, I’ll infer from their actions that they do value me.

Behavior Drives Emotion

But how do we solve the problem of apathy?  How can we get our staff emotionally invested in delivering a better customer experience?

It’s commonly accepted that what we do affects how we feel.  Change the behavior and you’ll change the emotion.  It follows then that if you get staff consistently doing things along the path to purchase that clearly indicate caring for your customers, eventually those same staff will care about customers.   There may also be staff who choose not to come along for the ride but trust me, with a clearly defined set of actions on the path to purchase, they’ll stand out like a Hummer in a sea of hybrids!

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Posted in Store Experience | 3 Comments »

Dollars and Sentiments. The Real R.O.I. on Social Marketing

June 8th, 2010

By Doug Stephens

Alice in Wonderland speaking to the Cheshire Cat….

“Would you tell me, please, which way I ought to go from here?” “That depends a good deal on where you want to get to” said the Cat. “I don’t much care where—“  said Alice. “Then it doesn’t matter which way you go” said the Cat. “–so long as I get SOMEWHERE,” Alice added as an explanation. “Oh, you’re sure to do that”  said the Cat,  “if you only walk long enough.

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Like Alice, marketers often find themselves needing to “get somewhere” but may not be precisely sure where that somewhere is.  This has become particularly true of social marketing efforts.  With the fervor around social media, marketers are feeling pressured to begin incorporating it into their program but aren’t quite sure how.  In some cases they’re not even completely sure why social marketing matters so much – they just feel they ought to be doing it.  So, like Alice, they often set out in a direction, only to find that after considerable time and effort, it got them nowhere.

In talking with marketers I’ve come across three common pitfalls that, from the beginning, can lead them astray.

Pitfall #1: Believing that ALL social marketing means creating social media

While social marketing may involve social media, there’s a fundamental misconception that all social marketing involves the development of content – blogs, videos, Facebook apps etc. This is not always true.  Media or content development is only one aspect of social marketing.  Depending on your company’s objectives, you may never want or need to create your own content.  The key lies in defining what results you want from the program.  What do you want to happen as a result of your social marketing?

I like to think of social marketing as a spectrum of engagement ranging from passive to active.  The objectives you target will directly affect the activities you undertake and your engagement level.

Pitfall #2: Setting Program Objectives That Aren’t Measurable

I was speaking recently with the head of marketing for a major regional shopping centre.  We were talking about her desire to begin to incorporate social marketing into her plans.  When I asked what her objective was, she said “to generate foot traffic for the mall.”  This sounded like a reasonable objective but the problem is that the mall has no empirical means of credibly measuring foot traffic.

The objectives you set should meet three key criteria; they should support the overarching strategy and positioning of your business.  They should be credibly measurable. And lastly, they should be meaningful to the people in your company that control the financial and/or human resources you’ll need to continue or expand your social marketing effort.  After all, there’s no glory in meeting an objective, if it doesn’t at least win you the resources you need to continue your program.

This doesn’t preclude you from establishing any objective you want; it only puts the onus on you to make sure it matters and measure it.

Pitfall #3: Confusing Social Activity with Return on Investment

One of the most uncomfortable points in a marketing meeting is when the CFO turns to the CMO and asks what the R.O.I to date is on the company’s social marketing program.  The only thing less comfortable is when the CMO cites the R.O.I as having gotten their 1000th Facebook fan.  This is usually met by a blank look from the CFO, who is quietly making a mental note not to invest another nickel in the social marketing program.

While it’s true that some enlightened companies have simply come to regard social marketing as a tool that is as essential as their phone system, they are definitely the minority.  The rest of the world works for companies that regard social marketing as the new kid on the block that needs to earn every nickel it consumes.

Part of what gives social marketing a bad rap is that too many marketers simply measure and report the company’s social marketing activity – that is blog posts, YouTube videos, Tweets etc.  They also tend to confuse return on investment with non-financial consumer responses like blog subscriptions, YouTube views, Re-tweets etc.  The result can often be a nebulous set of metrics that neither support nor negate the merits of their program.  What they fail to measure is the amount of sales, profit or cost-savings that the social marketing program is (or isn’t) generating – the real return on investment.

Part of the problem is that we’ve been told that financial R.O.I on social marketing can’t be measured – that it needs to be valued against softer metrics – which is simply not true.  I won’t go into detail about it in this post but will instead point you to a great Slideshare presentation here from Olivier Blanchard from Brandworks who shares an excellent methodology on for measuring financial R.O.I on your social marketing spend.

We’re beyond the “shiny tool” phase with social marketing and the onus is back on marketers to show the return on their work in this area.  Like most things, with social marketing you tend to finish how you started.  So, be sure to start with the right objectives, the right means of measurement and a clear path to the (real) R.O.I. your program is delivering.

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Posted in Marketing, Technology, Trends | Comments »

Privacy is Dead… and It Could Be Great

May 11th, 2010

By Doug Stephens

Recently Facebook announced its intentions to develop what it calls the Open Graph, a means of connecting data about an individual based on their choices, tastes and preferences by profiling  their social networking and web activity. The idea is to link all of this data and then bring it to a central point; that central point being Facebook, of course. In doing this, Facebook would be capable of graphing an intricate, accurate and ever-evolving picture of the individual consumer.

The strategy involves a few things. First, they are allowing partner sites to interface with Facebook. When a user comments on an article (on CNN.com for example), it would be shared with their social circle on Facebook and in the process, the fact that the user visited CNN.com would be noted and added to their graph. Second, they’re going to share the “like” button programming code so that any business can place the button on their site to create a social-link back to Facebook. In the process, Facebook gathers more data about that user’s preferences outside of Facebook itself. Lastly, they’re going to break from the current protocol of not storing or caching user data for more than 24 hours. They didn’t give any details about how long they intend to store this information.

 The open graph is the Holy Grail of marketing

The point in doing all this, according to Facebook’s founder and CEO Mark Zuckerberg is to “create a Web that’s smarter, more social, more personalized, and more semantically aware.” In other words, to bring all our disparate likes and dislikes together to form a unique profile of who we are and in doing so, allow the web to deliver data that’s more tailored to our needs as consumers. The subtext however is obvious. By holding the keys to the open graph, Facebook literally becomes the centre of the marketing universe and the preeminent channel for any brand that wants their message to reach consumers with unprecedented timeliness and relevance – the issues that have always been the greatest challenge for marketers.

Reaction to this announcement ranged from enthusiasm to anger. While some viewed it as a positive step toward a more connected and meaningful internet experience, others saw it as yet another step in the eradication of privacy as we know it.

In fairness to the naysayers, anyone who’s been phished on Twitter or Facebook can attest to the fact that the web can be an ugly place when you share the right information with the wrong people. What’s particularly disconcerting is the speed and scale of the damage that can be done when your information gets compromised. There’s no question that we need to be vigilant in our pursuit of improved safeguards to this sort of activity.

Privacy is outdated

Having said all that, I believe that the idea of privacy is completely outdated. To be honest, it’s a nostalgic notion that we’ll describe to our grandchildren who will no doubt wonder why it mattered so much to us. They may even speculate as to what we did that was so weird or shameful that we didn’t want other people to know about it.  

And what privacy do we really have anyway? We live in a world where your picture can be taken hundreds of times in the course of a normal day. Our cell phones are like homing beacons, tracking our whereabouts at all times. Our credit card is a trail of digital breadcrumbs a hundred miles long. And it’s now routine to Google someone before you meet, hire or do business with them. Our lives are anything but private. Good lord, talk show hosts and golfers can’t even keep a good old fashioned affair under wraps. So why should we care about handing over more of our personal information to institutions and companies? It’s not about privacy.

It’s really about trading information for value

Traditionally when we give companies information, we don’t get any real value in return and if we do get anything, it’s usually just generic offers, junk and noise. Life doesn’t become easier or less complex – just the contrary. It becomes filled with more information that we don’t need.

However, imagine if we could move to a state where the marketing messages we receive are almost completely relevant and timely. If virtually every piece of direct marketing you received made perfect sense with respect to your tastes and preferences and needs at that moment. If the advertising you were sent matched your life-stage and interests perfectly. If even new products that you’d never heard of made sense with respect to your unique needs and wants as an individual.

Would you be willing to trade a little privacy to get to this point? I know I would.

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Posted in Technology, The Future, social media | 3 Comments »

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