The New Retail Consumer
June 11, 2010 | By Margo DeAngelo
While positive economic predictions have switched from talk of recession to that of recovery, the effects of the past two years have made an indelible impact on today’s retail consumer.
The reality of the recession caused people to take a hard look at the consumption and purchasing choices they were making, according to Manila Austin, Ph.D., director of research, Communispace Corporation. Austin is the co-author with Graceann Bennett, managing partner and director of strategic planning, Ogilvy & Mather Chicago, of the report “Eyes Wide Open, Wallet Half Shut: The Emerging Post-recession Consumer Consciousness,” which surveyed 1,200 representative U.S. consumers. The result is a “more holistic” approach by consumers to balance what they need with what they want. “People are still willing to invest money and time into things they deem are worthy of it,” Austin says, “but they have a clearer sense of what’s worth it and what’s not.”
According to a PricewaterhouseCoopers LLP and Retail Forward, a Kantar Retail Company, report, “The New Consumer Behavior Paradigm: Permanent or Fleeting?,” companies need to recognize that “there will not be a wholesale return to a prerecession shopping mode.” The new “more mindful shopper” will seek coupons, comparison shop and research loyalty and rewards programs and exercise “rational trading down” while reintroducing “wants” into the equation. One-fifth of those surveyed said they would continue to forgo buying items that seem “too expensive.” To justify reintroducing spending on “personal desires,” consumers place a premium on products that offer timeliness, usefulness and versatility.
David Capece, chief executive officer (CEO) of Sparxoo, a digital media agency based in Tampa, Florida, points out that consumers are increasingly savvy about their purchase choices. “Luxury actually became a bad word over the past year or two, but it’s slowly coming back. The willingness to spend has rebounded, but it’s all about being selective. If there’s something somebody must have, they’ll figure out how to get it on more affordable terms.” Consumers, he says, are “taking more control of their money and having power when it comes to using it for the things they want. They’re figuring out how to get what they want and negotiate on their terms.”
Not getting everything at once and making mindful indulgences is part of the new consumer calculus, Austin says, where people “weigh their choices against a holistic picture of what’s worth it and what’s not and how their finances play into that.” The things survey respondents chose, she says, were important to their sense of self and who they are and expressing themselves. “The vast majority of people also said they would rather have fewer higher-quality things than more lower-quality ones. They want to feel like they are buying quality even if they are more price-conscious about it. They still want that experience. People talked about moving from striving for, aspiring to and needing tangible things like a bigger home or a sexier job to more intangible things like experiences. People would rather invest in things that are more long-lasting, like a memory of a great experience, rather than another object.”
Capece points out, “When consumers do decide they want to pay for something, they want the royal treatment. They want to feel pampered. And so they appreciate when someone goes above and beyond. A lot of companies are going the extra mile to ensure customer satisfaction. Consumers are trying to stick with more limited budgets but they are dividing them up so they can allocate certain dollars for higher-end purposes. You just have to really go out and demonstrate why is it worthwhile for them to part with a significant portion of their budget for this product.”
Christina Hloros, senior manager of consulting services at The Futures Company, a trend and futures marketing consultancy, points out that the result of this new consumer prioritizing is a cross-category competition for the money allocated for higher-end purchases. “It’s not just Tiffany versus Blue Nile, it might be Tiffany versus Samsung versus Crystal Cruises or a shopping trip to Target. It’s really important for marketers to talk about value, not just in relation to other brands in their category, but in relation to all of the other things someone might be using their money on.”
Austen agrees: “The competitive set for brands has widened and when they think about who they’re competing with, it’s not just people in their categories, it’s actually other kinds of products that are totally outside of their category.”
Approaching the Consumer
In light of the consumer’s more complicated decision-making process, says Austin, more than ever before, brands need to communicate who they are in a way that’s authentic, real and accessible so people can find their way to them. And, Capece adds, “for the consumer to make the leap to a higher price point, you have to give them a reason and make it worth it.” But, he cautions, “Consumers know when you are marketing to them and they’re going to use their own judgment in deciding whether or not to listen to the marketing message. What they prefer is to find out about things through word of mouth or through their own searching and hunting. That’s why customer satisfaction is now more important than ever, because a satisfied customer will tell a friend.”
“Providing transparent information that enables people to make their own decisions about the brand is going to be really helpful,” says Austin, “because it supports that can-do-it mindset people have developed and their sense of self-reliance. What brands shouldn’t do is get in the way of that, either by talking down to people, playing on their fears or obsessively talking about the recession.”
Where are the Jobs?
We hear it again and again — consumer confidence and spending are strongly influenced by job security. Here are some states with employment climates that give middle-class shoppers the impetus to buy.
Agriculture and Energy Dominate
North Dakota is perhaps the brightest spot in terms of U.S. employment. It has reliably defied the nationwide job loss trend that began in 2008. Abundant positions in energy and agriculture, as well as an aggressive economic development plan by Governor John Hoeven, have given the state an enviable advantage, according to a recent report in Forbes.
A close second are farming neighbors South Dakota and Nebraska. South Dakota was recently named by the U.S. Chamber of Commerce as the best state for “corporate tax and enterprise friendliness,” as the state does not tax individual or corporate income. Though Nebraska’s unemployment rate did rise slightly in March 2010 compared with February, Catherine Lang, the state commissioner of labor, attributed the increase to people reentering the labor force. Not surprisingly, these three states also had the lowest mortgage delinquency rates in the first quarter of 2010, according to credit and information management firm TransUnion.
Durable and nondurable goods manufacturers in Kansas, Oklahoma and Iowa are slowly adding jobs as the economy recovers, according to a survey by the Creighton Economic Forecasting Group. Louisiana has the strongest employment picture in the South and its unemployment rate fell from 7.3 percent in February 2010 to 6.9 percent in March 2010, but fishing industry losses due to damage from the BP oil spill loom on the horizon.
AP’s Economic Stress Index named Vermont, with the best unemployment figures in the Northeast, among the “least stressed” states. In its 2009 to 2010 fiscal year, Vermont pumped $5.6 million into its state park system, approximately seven times its average annual budget, creating jobs in an attempt to spur tourism.
Federal Jobs Help
Though it is not indicated in the maps opposite, which show year-over-year figures, Maryland experienced the largest month-over-month percentage increase in employment during March 2010, followed by the District of Columbia. Maryland’s top industries are information technology, telecommunications, aerospace, defense and agriculture. Gallup’s April Job Creation Index revealed significantly more hiring by the federal government than in the public sector, which likely boosts these geographic areas, as well. Nationwide, the Middle Atlantic region absorbs the largest chunk of federal positions, at 29.5 percent. In addition, from February to March, Virginia added 24,500 jobs, Pennsylvania’s jobs jumped by 22,600 and Indiana’s jobs climbed by 16,600.
Are Target, Walmart, Kmart, Costco and BJ’s set to continue gaining market share? As big-box retailers thrive in selling diamonds and jewelry, they aren’t saying who is doing the buying. In the postrecession era of bargain hunting, it seems that almost anyone’s car can be observed in a Costco parking lot, from a jalopy to a BMW.
Nicholas White, retail consultant and president of custom jewelry retailer White & Co., views the big-box jewelry shopper as the female self-purchaser who is fashion-oriented. Harry Friedman, founder and chief executive officer (CEO) of retail consulting and training firm The Friedman Group, feels similarly. “I haven’t done studies, but if we did, I think you would find that it is the women themselves who are buying it,” Friedman says.
Discounting Not New
White believes that discounter growth will persist. “It’s a trend we’ve seen for the past ten years. I think that is going to continue.”
Friedman notes, “The jewelry business has always been completely diverse. The only constant is that women love jewelry. Look at the impact that the HSN [Home Shopping Network] had. Television shopping took millions of dollars out of the jewelry market. I’m not surprised that big-box stores are very successful.”
Walmart and its rivals primarily hurt the weakest companies, according to Friedman. Jewelry retailing has been permanently altered, White reasons. “During the downturn, 80 percent of retailers were down 10 percent or more. Now, 80 percent of the people are not up 10 percent or more. It’s not coming back in the same way that it left.”
Price Point Loyalty
In Spring 2010, The Colloquy Retail Loyalty Index, based on the results of a December 2009 survey of 3,500 consumers, reported that low prices had replaced customer service as the top driver of customer loyalty among all retailers. According to its authors, the index showed Walmart “upending the status quo among its national retail peers.”
In March 2010, AlixPartners released its 2010 Consumer Sentiment Index, showing a “shift to thrift” among 7,700 consumers interviewed in the fourth quarter of 2009. Matthew Katz, managing director of the global business advisory firm and leader of the company’s retail practice, stated that consumers will switch to retailers offering “real, no-frills, back-to-basics, honest-to-goodness value.” AlixPartners predicted that a lower level of consumer spending will last beyond the recession.
Experience Matters, Too
However, a smaller, but more recent, study conducted in April 2010 cited shopping experience, service, merchandise selection and quality as factors that helped 400 women determine where they would shop, as opposed to price alone. Retail Eye Partners’ “Target Vs. Walmart Consumer Report” showed Target edging out Walmart, as Target’s “cheap chic” aesthetic appeared to be gaining ground. Still, trading up to Target is hardly a return to the family jeweler.
No one knows for certain what the future holds in the battle for jewelry shoppers’ wallets. But Friedman recognizes, “If you’re going to buy a 1-carat round brilliant and you don’t know anything about diamonds, $2,000 at Costco looks like a fair shake. It’s likely your best friend doesn’t have a loupe.”
Despite the doom and gloom of the economic downturn, recent tracking surveys of the affluent shopper — households of $100,000 and up, the top 20 percent of the population — point to a rebound…of sorts.
According to Bob Shullman, president of media research company Ipsos Mendelsohn, their 2009 Mendelsohn Affluent Survey showed affluent households spent $1.2 trillion in discretionary expenditures. “Their optimism for the economy 12 months out is neutral, not negative, not positive; they’re still trying to figure out where it’s going. But when you get into what they’re going to buy in the next 12 months, a lot of the items that affluents were buying pre-Lehman are coming close to the levels they were back then. But all it takes is one bad thing to kill it.” In fact, says Shullman, “Everything we’re tracking shows that at least with the people who are into higher-value jewelry, the reported probability of their buying it is going up again.”
“The affluent market has been hurt in paper wealth,” continues Shullman, “and by losing that, they’re clearly concerned about holding on to cash...but I think the people at the top of the economic pyramid are feeling better — although maybe not as good as before Lehman tipped, but I would suspect that will have a fairly long-lasting effect.”
“What’s happened is that consumers are now living within their means,” observes Milton Pedraza, founder of The Luxury Institute in New York City. “They’re no longer using their homes as an ATM; people who are aspirational are no longer using credit cards the way they used to. While some of that demand — the aspirational segment — has gone away, there’s been a comeback in the affluent and wealthy. There’s cautious optimism. It’s still going to be slow, tepid growth and yes, while compared to last year, it’s very strong, but compared to the peak, it’s still well below.”
The Recovery Mindset
There is a new mindset, points out Greg Furman, founder and chairman of The Luxury Marketing Council. “This customer is saying, ‘I want to share the fruits of my labors with my family in a quiet way through great experiences with no need to flaunt and tout to anybody.”
Back before the recession, says Pam Danziger, founder of the marketing consulting firm Unity Marketing, “these consumers felt powerful because of the amount of money they had to spend. But today, their power comes from how smart they are as shoppers. They know how to work the system; they know where to find alternatives. They’ll go to internet websites like Blue Nile and jewelry vendors online where they know they can get a good value. They’re willing to do the hard work to find the best prices.”
There’s a generational shift coming, states Danziger, “that’s going to have profound influences on all the marketers from now until the year 2018, 2019. Because the older affluents, the Baby Boomer generation, are moving toward retirement, the pursuit of buying more stuff is becoming less and less important.…
Younger affluents are much more materialistic but it takes age to reach affluence. And the Gen Xers, because there are fewer of them, nowhere near make up for the loss of Baby Boomers’ spending. And the Millennials, or Gen Y, are a big enough number, but it will be 2018, 2019 before they start to reach 35 or 40 years of age and their peak of income. And then the jury is still out on whether these Millennial young affluents are going to be spending their money on luxury goods.”
Boomers are still buying material goods, continues Danziger. “If they’re inclined to spend, they tend to go for the best of the best. A Boomer is less likely to turn to the internet and much more likely to turn to a local jewelry store. The Gen Xers and the Millennials will go to the jewelry store and look at the diamonds and learn all they can and then go home and buy it from Blue Nile. It may be that retailers need to have younger salespeople in the store who can deliver the kind of shopping experience that these younger consumers want, which is ‘give me the information I need and get me out of the store fast and give me a good price.’ We did focus groups in November 2009 about the internet and social shopping. And this is the first time I heard men talking about discount shopping and bragging about finding discounts in the same way women have always done. And that to me was really groundbreaking. Men tend to brag about spending more, but that wasn’t what we heard. They were bragging about discounts. Their average age was about 35 to 45.”
For the younger affluents, Pedraza believes you need “to not only have heritage but also a cool factor.” Furman points out that many Millennial affluents are “already preprogrammed by their parents to understand the best of the best. So they’re starting earlier, with higher levels of expectation, and a much higher degree of appreciation of what is the best of the best.”
“The smartest competitor is going to win,” concludes Danziger, “and you have to learn about all the tools your consumer is using and where their priorities are and adjust accordingly. The consumer market is changing faster now than ever before. You need to be out there learning. The old thinking is just not going to work.”
While all consumers have felt the pinch to the pocketbook from the economic meltdown, how each generation is responding to the recovery is vastly different. For retailers and marketers looking to win back or even expand sales, taking into account the shopping preferences of the three major players in today’s marketplace — Baby Boomers, Gen X and Gen Y, also known as the Millennials — is crucial.
Neil Howe, historian and economist, author of many books on American generations, and president of LifeCourse Associates, a consultancy that provides generational insights, points out: “Looking at life generationally allows you to make nonlinear projections about the future. If you know that there’s a generation of teens very different from the people now in their twenties, then you know that ten years from now, the people in their twenties are going to react totally unlike people now in their twenties, because they’re going to age into it. And the way they behave may not at all be a linear extension of what you’re seeing now.”
“The difference in style and outlook of the generations is going to be a lot more fundamental than the marginal change in the numbers,” continues Howe. “And while we often look at the numbers of these generations by how many were born in each year, you need to keep in mind that figure is conditioned by immigration. The real pitfalls are constantly thinking about marketing and branding in terms of age brackets. That’s not to say that phases of life and age don’t matter. They do. But if you watch age brackets over time, you’re looking at different people. If you look at generations, you’re looking at the same people over time.”
Even when taking income into consideration, generational marketing still makes sense. Advises Unity Marketing’s Pam Danziger: “Conventional wisdom in the luxury market is that all affluents are the same, but it’s much more diverse today. And it’s much more of a challenge to speak to the 60-something Baby Boomer versus a 40-something Gen Xer versus a 25-year-old Millennial. You need to learn how to communicate with each of the different generations and each of the different people at different life stages.”
The fact is, points out Britt Beemer, chairman of America’s Research Group, a consumer behavior marketing firm, the retail consumer today covers a large breadth, and retailers have to deal with different generational groups in their store. Phil Goodman, chief executive officer (CEO) and president of Genergraphics, Inc., a generational market research consultancy, agrees, pointing out that a jewelry store’s customers ranging from 18 to 49 actually represent three generations “and they all have different lifestyles. So why would the same ad appeal to them? It doesn’t. You can’t keep using demographics with age groups. You need to use age only as it relates to a generation. You have to be able to reach each generation separately and present your message differently to each. And the major reason for that is at least 90 percent of a person’s thought processes comes from their peer group during adolescence, when the biggest physical and mental change happens, and it is carried forward through the years.” But, he adds, what you don’t want to do is make the references to their generational mindset too obvious and insult their intelligence. You need to make it seem that you’re addressing it to them “and not just the generational group. You have to do it in a way that’s exciting and a call to action, whatever the type of media.”
“Each generation has a lens through which they view the world,” sums up Cam Marston, president of Generational Insights, a marketing and research consultancy on demographics and buying trends. “Once you begin to understand these viewpoints, you can talk to them in a way that tends to be more persuasive.” Spreading the word through social media, Marston points out, can be an effective way to get your product’s message out — if it’s done correctly. “In the past, it was said a happy customer tells six people; a dissatisfied customer tells 11. Today, a dissatisfied customer can tell 3,000 with one Facebook post and a happy customer can do the same.”
“You need to let people know that what they’re being offered is of tremendous value and special,” says Kenneth W. Gronbach, international demographer, futurist and author of The Age Curve, How to Profit from the Coming Demographic Storm. He points out that the coming change in demographics to which marketers will have to adjust is not just the growth of the huge Gen Y, but the needs of the Latino market, which “assimilates faster than other generations,” and the African-American market, “half of whom, when they were polled by Pew Research Center in 2010, said they thought the economy would improve for them.” —PS
In size and purchasing strength, the Boomers, born between 1946 and 1964, represent the largest chunk of the consumer landscape. And recession or recovery, they’re still spending! Any way you look at the demographics, Baby Boomers are an economic force to be reckoned with.
- There are 78 million Boomers in America; their annual purchasing capability is $2 trillion and that hasn’t gone down much despite the economic dips. — Eileen Marcus, senior partner and practice chair FH Boom, Fleishman-Hillard.
- Baby Boomers are about 25 percent of the total population and that’s essentially what their market share is. They’re the largest of the generational segments. Gen X is about 19 percent and Gen Y, about 15 percent. Over-65s are about 14 percent. — John Migliaccio, Ph.D., director of research, MetLife Mature Market Institute.
- According to the U.S. Census Bureau, over the next ten years, the growth of 18-to-49-year-olds is going to be 3 percent; the 50-plus segment is going to grow 22 percent. — Matt Thornhill, president of The Boomer Project, a marketing, research and consulting firm.
- One-third of the Boomers have significant financial assets, which might have been diminished but still, they are wealthy people. — Brent Green, Brent Green and Associates, marketing, communication firm based in Denver, Colorado, author of forthcoming book, Generation Reinvention.
What it all adds up to, says Thornhill, is marketers cannot afford to ignore the 50-plus consumer who is going to want different things than a 35-year-old.
Boomer consumers are alive and well and buying. Yes, like every other consumer, they had their shopping optimism dim in the glare of the economic downturn. Some, says Thornhill, have traded in their perennial optimism about the future for a more pragmatic and practical approach to spending. But, points out Migliaccio, Boomers’ buying power started out at higher levels — particularly the middle Boomers, in their fifties, who are in their highest earning years — “and they have higher levels of assets, more discretionary income.”
In the Boomer mindset, says Green, “luxuries aren’t luxuries if they serve a specific purpose that can be justified.” And while Boomers may be more frugal and more deliberate in defining these needs, “when those needs emerge, they will find a way to buy products. There are many events going forward in their lives that can justify luxury diamond jewelry purchases — weddings, birth of grandchildren. Forty percent of the Boomers are single, so there’s the purchase of jewelry for significant others, and gift-giving on key holidays like Valentine’s Day and Christmas/Chanukah.”
Shift in Priorities
People in their fifties, Thornhill points out, are less interested in “stuff” and more in experiences. It’s a shifting of priority from the youthful quest to have the “biggest, brightest, shiniest item to keep up with the Joneses” to buying in terms of legacy.
Instead of “possession values,” says Green, what’s important are “being values — being in the moment, having a treasure that stands for something larger than the act of walking into Zales and buying a diamond ring. Their purchasing motivations revolve around enrichment of their lives, self-actualizing purchases. They’re not interested in flashing their Montblanc pens just because they can afford them. When it comes to luxury items, they are looking for something that stands for their heritage, their relationships.”
“Boomers will spend money on quality and service; they’re not going to spend on the frivolous,” says Marcus. She also points out that the older that Boomers get, “the more they’re looking for a legacy; they’re looking to do good. And they tend to be more inclined to associate with a brand that they feel is doing right by somebody.”
Right and Wrong Approaches
Touting a product by saying, “Everybody loves this,” won’t move them, says Thornhill. “Boomers are not looking for brands to be an external match as much as an internal affirmation of who they are.” It’s more important to talk about things conditionally, explaining why a specific type of diamond or product is particularly interesting or distinct.
Appealing to being part of the in-crowd is a youthful message, says Green, which Boomers have outgrown; they’re not interested in proving their status. “Don’t say the best is yet to be; don’t be patronizing,” advises Marcus. And calling them “seniors,” says Migliaccio, is “poison. Even the oldest boomers at 62 don’t consider themselves seniors.” Half of the young Boomers, in fact, don’t like being called Boomers and align more with Gen X, “so you have to target your messages accordingly. Choosing a marketing image that they can identify with is key.
“Overall, and particularly for those who have the highest household and discretionary income, Boomers like the face-to-face,” says Migliaccio. “They’ll do investigating and window-shopping on the internet, but they like to have the personal contact, particularly with people they feel comfortable with.” Eight out of ten younger Boomers — up to age 60 — are online, says Marcus, and websites containing reviews are strong with Boomers.
Boomers are really the ideal media target, explains Thornhill. “They watch TV, read the paper and listen to real radio; outstanding magazine advertising for luxury products is still a viable way to go.” They can be influenced by social networking; they are on Facebook, if only to keep up with their children and grandchildren. The best strategy, he says, is integrated marketing with an offline and an online plan. And, advises Migliaccio, for the older segment, direct mail still works.
“You can’t lump these 78 million people together in one big ‘the Boomers,’” says Migliaccio. “It’s one of the key things marketers need to keep in mind, and those who do the best job at that will survive and thrive.”
Gen X & Gen Y
There’s a new kid on the block with the potential to give the Boomers a run for the money. Gen Y — or Millennials, as they prefer to be called — are the new darlings of marketers, who are pinning their hopes on these younger shoppers as the future of luxury retailing. And capturing Gen Y’s attention now is important, cautions Kit Yarrow, consumer psychologist, professor at Golden Gate University and co-author of Gen BuY: How Tweens, Teens, and Twenty-Somethings are Revolutionizing Retail. “Marketers need to build up an alliance that will carry them into this generation’s prime spending years.”
X Marks the Spot
Of course, there is also Gen X, born from 1965 through 1976, sandwiched between the Boomers and Gen Y, and somewhat overshadowed by the sheer numbers of the other two cohorts. But, says Bea Fields, president of Bea Fields Companies, a leadership consultancy for high-growth companies, and co-author of Millennial Leaders: Success Stories From Today’s Most Brilliant Generation Y Leaders, “they’re a grounding influence.” They are in the family-formative years, raising kids,” points out Christina Hloros, The Futures Company. And although they have less time than the Millennials to recoup lost savings and are feeling a financial squeeze, they do allow room in their budgets for luxury and for splurges. “But those purchases have to deliver because if they’re buying these products, it means cutting back somewhere else.”
It is the Millennials, the 16-to-30-year-olds, born between 1977 and 1994, however, who represent the future of the luxury market. Running neck and neck with the Boomers in size, “around the year 2017, Gen Y will have more financial means than Boomers,” says Yarrow.
“According to the November 2009 U.S. Census population estimate, Gen Y is at almost 63 million now,” says Hloros, “Gen X, about 56 million.” A study done by The Futures Company, fielded this past summer, was aptly called “Millennials Ahead.” It showed that this large group, despite everything, “has retained a sense of optimism for the future and wants to engage in the marketplace.”
The Millennial Mindset
The good news for the luxury market, says Yarrow, is that “Millennials have expensive tastes. I think we can count on a resurgence of enthusiasm for the biggest and the best.” And although their purchasing power might be down right now because of the economy, says Fields, and many have moved back home to live with parents, Yarrow points out that “They grew up until recently in an unprecedented period of economic prosperity. They were indulged more than other generations, which will imprint them for the future. They were pretty robust consumers of luxury products even in their teens. I think we can expect that Gen Y will continue to have an affinity for both spending and luxury products in general.”
As the “most diverse generation from an ethnicity viewpoint,” says Hloros, Millennials have a lot of different interests. “They don’t see race, class, creed as any issues,” says Fields. “They’re very open.”
Their big driver is what other people think of them, Yarrow says. “Technology is their third hand and second brain. It’s ingrained in who they are.” That factor, says Hloros, has fostered an inherent reliance on networks of family and friends. “Companies that facilitate connections to other Millennials with similar interests to help expand and strengthen these networks will be seen in a positive light.” Authenticity is vital. If Gen Y finds out a brand is not congruent on the inside, warns Fields, they’ll use social networking to get the word out quickly.
Gen Y, adds Fields, is really big into “bite-size things that are small and easy to digest. They’re multitaskers and want access to digital opportunities wherever they go. They will spend on something that will make their life easier, save them time.” Millennials, says Hloros, “are fluid using multiple sources — watching TV and going online at the same time. Both Xers and Gen Y are incredibly savvy when it comes to getting information. They know what the best sources are for this or that, so marketers need to think about being in lots of channels, not just one.”
The cool factor is a big plus. A product doesn’t have to have bells and whistles; it has to feel fresh, explains Yarrow. To find out what they consider cool, suggests Fields, marketers should “listen and watch online.” One site she recommends is called BrazenCareerist.com. “You have to be under 30 to blog for it, so all the conversations have to do with what’s going on with this demographic.” Other popular blogging sites, says Fields, include Lifehacker.com and TechCrunch.com. Social media, says Yarrow, is a way “to connect with them and humanize a brand so it seems more real.”
Not Your Boomer Shopper
Millennials want to be the ones to tell the retailer what they want and have products respond to their preferences, or have the opportunity to customize products, explains Yarrow. “If you’re constantly redesigning and coming up with new things, it means you’re thinking about them. That’s the effect of what they’ve seen in technology: The next thing is always better. So psychologically, they’re trained to value fresh design, fresh displays, fresh uses.”
If they’re going to buy a brand, adds Fields, “they want to get involved with product development — online, through commenting, through blogs, through live chats. They’re really big on crowd sourcing — where an idea is put out to thousands of people in the marketplace who offer feedback and the new product or service is based on what the public says.”
“Because they have had more than other generations, status for Gen Yers revolves more around their influence than their possessions,” sums up Yarrow. “They’re not going to be buying bling as a way to show they’re successful. In fact, it would be almost the opposite. They’re going to buy it because they want to have it and like it, not as a tool to communicate power or success. It’s a tool to communicate their personality and to get attention. What they crave much more than financial security is attention.”
If the 2000 Census awakened corporate America to the fact that the U.S. Latino population was growing fast, the 2010 Census is poised to alert marketers that this group is no longer merely a niche. The fastest-growing demographic in the U.S., it offers an unprecedented opportunity for sales growth. As Liliana Gil, managing partner at cultural marketing agency AG-XL Alliance, asserts, “It is going to be too big to ignore.”
Not everyone realizes that these days, Hispanic births are trumping immigration. “We are, essentially, the next baby boom,” explains Chiqui Cartagena, senior vice president of multicultural marketing at digital agency Storyworldwide.com.
Young and Buying
“Latino households are forming at four times the rate of the general population and there is a buying power of nearly $1 trillion,” Gil contends. Currently, the U.S. Census Bureau estimates that nearly 47 million Hispanics reside in the U.S., but the 2010 Census is bound to reveal even higher numbers.
Even better, geographic concentrations of Hispanic populations deliver value for the advertising dollars. Patricia Kelpie, director of strategic development at Revolucion Hispanic BrandMakers, says, “About 85 percent of Latinos live in ten states. If you do a media buy to reach them, that media buy is very efficient.”
An Untapped Market
In a challenging economy, and at a point where U.S. diamond and jewelry companies are being told that their country’s market is mature, Latinos represent a virtually untapped consumer segment. Cartagena notes, “Hispanic marketing takes up 5 percent of all marketing budgets, even though we are 15 percent of the population. We’ve seen corporate America be very slow and treat the market like a test. But the U.S. Hispanic population is bigger than the population of Canada.”
Connecting with this demographic takes an investment in research, time and some money to gain cultural understanding of the local market. By no means a monolithic group, U.S. Latinos trace their heritage to dozens of nations in South America and the Caribbean, which impacts their celebrations. For example, “Mexicans celebrate Mother’s Day on the tenth of May, no matter what day of the week,” Jorge Diaz de Villegas, bicultural strategic communications counselor at Fleishman-Hillard, points out.
Equally important, and diverse, is the level of this consumer’s assimilation into U.S. culture. Kelpie divides the U.S. Hispanic market into three groups. Unacculturated Latinos, nearly 40 percent of the community, are foreign-born, consume their media in Spanish and retain a lot of their homeland’s cultural traditions. Biculturals, about 25 percent, were born in the U.S. or arrived at a very young age. They consume their media in either English or Spanish and adopt aspects of both U.S. and Latino culture. Acculturated Hispanics, at 35 percent, are the second or third generation, who, in many cases, are culturally indistinguishable from the general market.
However, commonalities among these groups can be found. The significance of family and Catholic values resonates strongly throughout a majority of the Latino population.
A Culture of Celebrations
“Family gatherings are bigger and more frequent than with the general market,” Gil explains. “There are a lot of meaningful Catholic celebrations. In addition, Quinceañera, the fifteenth birthday, is celebrated like a bar mitzvah or even a wedding.”
All the experts who spoke with RDR stressed that diamond rings are not central to engagement traditions in Hispanic culture. Though it may seem inexpensive to tweak existing bridal ads by depicting Latino consumers and including a Spanish translation, such an approach is often a waste of money. Latinos do buy diamonds, but, depending on their heritage, they buy for a variety of gift-giving occasions.
Kelpie advises that the importance of family means “Mother’s Day and Father’s Day should not be overlooked.” Also, ear piercing is frequently done “immediately or within months” of a Latina’s birth, she notes.
Fashion has a prominent role, too. According to Kelpie, “Hispanics like to buy fashion at the beginning of the season to be on-trend, versus after it reaches the mainstream. Jewelry and accessory purchases are not far behind.” Kelpie believes that in general, “Men’s jewelry also represents opportunity, as Latino men are more likely to wear jewelry than non-Latinos.”
Cartagena suggests starting small, perhaps with direct mail and door-hanger campaigns. “You can monitor cost per sale (CPS) by including a discount card that consumers bring with them to the store.”
Kelpie advises including online, mobile and social media campaigns. “Hispanics are twice as likely to adopt new media formats and innovations as non-Hispanics.”
Gil estimates that “about 24 million Latinos are online,” many of them via their mobile devices. She says that text-messaging campaigns targeting Hispanics have twice the rate of return compared with the general market. Social media is also highly effective. “The very social nature of Latinos is actually manifesting itself online,” Gil remarks.
Once a campaign begins, be sure your staff is ready to serve this consumer, Gil warns. Depending on the market, “If you don’t have a sales rep who speaks Spanish, you may lose these customers in the last mile.”
The larger retailers do seem to be slowly recognizing the potential of this demographic. A report commissioned by HispanicAd.com, citing data from The Nielsen Company, named Kohl’s, JCPenney, Macy’s and Walmart among those who actively target Hispanics. “You disregard the Latino market at your own peril,” concludes Diaz de Villegas.
The African-American market has a buying power of $910 billion, with a population of 41.1 million. This eclipses the current buying power of Asian-Americans, at $509 billion, and nearly matches that of the 47 million Hispanics in the U.S., at $978 billion, according to 2009 data from the Selig Center for Economic Growth. As of July 2008, the U.S. Census Bureau estimates that Blacks make up 13.5 percent of the U.S. population. By 2050, the Census forecasts that the African-American population will total 65.7 million, which is 15 percent of the total population.
The 2010 Census is expected to reveal even higher figures. “The numbers are growing exponentially,” attests Andrea Hoffman, founder and chief executive officer (CEO) of Diversity Affluence, which specializes in marketing to affluent African-Americans.
An Influential Group
“Black people are the trendsetters in our culture,” states Byron Lewis, chief executive officer (CEO) of advertising agency UniWorld Group, noting how African-Americans dominate music, sports, entertainment and fashion. Yet diamond and jewelry marketers rarely target African-Americans as a distinct group.
In part, Lewis faults an ill-advised “trickle down” theory of advertising. Rather than assuming general market campaigns will motivate African-Americans to make purchasing decisions, retailers should understand that “Marketing done well to African-Americans provides double the bang for the buck, because it also provides a message that resonates with the general market. The influence is particularly important in younger demographics,” he stresses.
Lewis also blames “the perception that this market is undereducated and cannot afford things. Nothing could be further from the truth. There are more African-Americans who own Mercedes, Lexuses and BMWs than people want to recognize.”
In addition, Pepper Miller, president of the market research and consulting firm Hunter-Miller Group, observes that some marketers accept the need to launch separate campaigns for other demographics in the U.S. multicultural arena, such as Hispanics and Asians, but not necessarily for African-Americans. “The fact that African-Americans speak English has become a primary rationale for not targeting us,” she says.
Hoffman acknowledges that tight marketing budgets sometimes lead marketers to focus on the demographics they are most familiar with. “Not a good strategy for sustaining a brand,” she counsels.
Return on Investment
“Certainly, in a recessionary period, I would want to look into overlooked markets for growth,” Lewis says. There are more than two million African-Americans in New York City and over one million each in Chicago, Philadelphia, Baltimore, Houston and Washington, D.C. “These markets are bigger than many general-market cities,” he contends, so by targeting marketing to blacks in those cities, “marketers would get more return on their investment.”
However, Sonya Suarez-Hammond, vice president of multicultural marketing insights at The Futures Company, cautions, “The market is not homogenous. One message does not fit all.” Within the community, there are several neglected demographics: younger African-Americans; the dramatically expanding, higher-income Caribbean population in New York City, Boston, Philadelphia and Atlanta; and West African immigrants, who have disproportionately high incomes and often own small businesses, Lewis notes.
There are also variations in mindset to consider. Miller points to the largest survey ever conducted, Radio One and Yankelovich’s 2008 “Black America Study,” which interviewed 3,400 African-Americans, identifying 11 different subsegments, including Black Boomers and Black Onliners.
Despite the diversity, there are some general guidelines. “Don’t peddle pessimism,” Suarez-Hammond warns. This community sees the economic downturn as somewhat less dramatic than the general market, “because African-Americans have a history of overcoming obstacles,” she explains.
Aspirational shopping plays a big role with this demographic. “African-Americans use brand as ‘badge value’ to create and confirm who we want to be. Jewelry is so important to help make a statement,” Miller asserts.
Custom jewelry has strong potential, Hoffman recognizes. “Research shows that limited edition or one-of-a-kind items are highly desirable items among affluent African-Americans.”
Online, mobile marketing and social media efforts are critical, Lewis states. “It is the best method to fully engage the most important decision-makers in this demographic because we are so young.” The many African-American social media websites could “give Blacks opportunities to tell their diamond story,” Miller says.
A January 2010 study by Diversity Affluence revealed that 95.5 percent of wealthy African-Americans now shop online. “Currently, 48 percent of the approximately 300 survey respondents make at least 30 percent of all retail purchases online,” Hoffman reports.
Being a supporter of the community has always been an important part of the mix, Suarez-Hammond says. Also, “there are a lot of faith-based marketing opportunities,” she attests.
Sadly, inaccurate and offensive campaigns continue to appear in the media, Lewis warns. “You have to try to avoid stereotypical representation from having a lack of experienced people who can evaluate the proper messaging,” he stresses.
Ultimately, African-Americans should be part of every jeweler’s marketing plan “because they will buy more jewelry. Just as with the mainstream, you want to keep your brand in front of them,” Miller concludes.
“Overall, Asian-Americans are only about 5 percent of the U.S. population. But the trick here is that it’s not size that matters, it’s the income,” explains Jane Nakagawa, vice president of strategy at interTrend Communications. Median household income for Asian-Americans clocks in at $70,000, 35 percent higher than the national average. By 2014, this demographic is projected to have $700 billion in buying power, up 90 percent from 2007, according to Nakagawa.
Because of their small population size relative to other groups, this demographic is often overlooked by marketers. Saul Gitlin, executive vice president of strategic services and new business at Kang & Lee Advertising, remarks, “The irony is that many companies are heavily invested in targeting Asians in Asia.”
Wealthy and Educated
Nakagawa calls Asian-Americans “a perfect storm for the diamond industry.” These 15.5 million consumers can boast some impressive achievements. Though 70 percent of Asians in the U.S. are foreign born, 48 percent hold managerial jobs, compared with 35 percent of the general population. “The Asian segment is the most educated, most affluent and most likely to be white-collar professionals,” she says.
Most important, though, is that Asians are “very active consumers of high-end jewelry per capita, higher then any other consumer segment in the country. Asians view jewelry as a statement of status,” stresses Nita Song, president of the Asian American Advertising Federation (3AF) and president and chief operating officer (COO) of advertising and marketing company IW Group.
Jewelry is a central part of wedding ceremonies in many Asian cultures. “When you look at the Korean population segment, not only is it customary to buy the wedding ring, but the couple also buys high-end watches for each other as part of the tradition,” Song notes.
Song cautions that not all jewelers are prepared to serve this market. “To compete effectively, you’ll have to have the right kind of inventory. With diamonds, Asians are very particular in terms of the quality. And you need to have the latest line of Rolex and Omega watch designs.”
Asian-Americans may be a sliver of the market now, but they are poised for growth. “By 2020, the population is forecasted to be 23 million. In 2050, Asians will be 20 percent of the U.S. population,” Nakagawa predicts.
The U.S. Census Bureau categorizes 20 groups as Asian-Americans. “By population, the top six are Chinese, Indian, Filipino, Vietnamese, Korean and Japanese,” Gitlin notes. Happily, the costs to advertise in Asian media environments are among the lowest, Gitlin reports. “So any concern about targeting multiple groups is more than offset by efficient media costs,” he contends.
More than 90 percent of Asian-Americans are online, Song says, and Asian-Americans tend to conduct thorough online research about a product or company before they make a purchase. Word of mouth is also part of this research. When it comes to social media, “We have learned that Asians overindex on Facebook by 300 percent,” Song points out.
The Asian-American consumer has a strong sense of loyalty, Song asserts. “If you can get a few in this community to really believe in you and your product and trust you as a business person, you can count on the fact that they are going to be bringing you additional customers,” she says.
Nakagawa advises that cause-related marketing can be particularly effective in targeting Asian-Americans. “Show that you share common values. Education is an easy one. Asian-Americans view a brand as part of the community, because they see it as helpful in reaching life’s achievements.”
Song has observed good results with direct mail campaigns. “Response has been much higher than in some of the general market campaigns. I think these consumers don’t receive a lot of in-language materials at their home. So they look at it as a very direct invitation.”
Gitlin points to a range of affordable options for retailers. A card explaining the 4Cs can be produced “cheaply and easily,” he says. Another important step is to make sure there is someone on staff who can communicate with your Asian-American customers, Gitlin contends.
“Diamond-focused retailers should plan some carefully constructed and measurable research,” says Gitlin, to identify the local market’s potential and design the most effective approaches to reach that market.
Many industries that appeal to affluent consumers do focus on Asian-Americans. “Banks are targeting this group for higher-end financial products for a reason,” Gitlin recognizes. Car manufacturers have also wasted no time in reaching out to the demographic. “Asian-Americans buy larger cars and higher-end luxury makes,” he notes. Walmart, J.C. Penney and Sears have conducted some small campaigns as well. But for now, Asian-Americans seem under the radar for most jewelers. “I think it’s a real shame,” Song concludes.