Today's teens--the biggest bulge since the boomers--may force marketers to toss their old tricks
At malls across America, a new generation is voting with its feet.
At Towson Town Center, a mall outside of Baltimore, Laura Schaefer, a clerk at the Wavedancer surf-
and-skateboard shop, is handling post-Christmas returns. Coming back: clothes that fit snugly and shoes
unsuitable for skateboarding. Schaefer, 19, understands. ''They say 'My mom and dad got me these',''
At the Steve Madden store in Roosevelt Mall on Long Island, N.Y., parents, clad in loafers and Nikes
(NKE), are sitting quietly amid the pulsating music while their teenage daughters slip their feet into
massive Steve Madden platform shoes. Many of the baby boomer-age parents accompanying these
teens look confused. And why not? Things are different in this crowd.
Asked what brands are cool, these teens rattle off a list their parents blank on. Mudd. Paris Blues. In
Vitro. Cement. What's over? Now, the names are familiar: Levi's. Converse. Nike. ''They just went out of
style,'' shrugs Lori Silverman, 13, of Oyster Bay, N.Y.
Ouch. Some of the biggest brands on the market are meeting with a shrug of indifference from Lori and
her cohorts. A host of labels that have prospered by predicting--and shaping--popular tastes since the
baby boomers were young simply aren't kindling the same excitement with today's kids. Already, the list
includes some major names: PepsiCo Inc. (PEP) has struggled to build loyalty among teens. Nike Inc.'s
sneaker sales are tumbling as the brand sinks in teen popularity polls. Levi Strauss & Co., no longer the
hippest jeanmaker on the shelf, is battling market share erosion. Meanwhile, newcomers in
entertainment, sports equipment, and fashion have become hot names.
What's the problem? These kids aren't baby boomers. They're part of a generation that rivals the baby
boom in size--and will soon rival it in buying clout. These are the sons and daughters of boomers.
Born during a baby bulge that demographers locate between 1979 and 1994, they are as young as five
and as old as 20, with the largest slice still a decade away from adolescence. And at 60 million strong,
more than three times the size of Generation X, they're the biggest thing to hit the American scene since
the 72 million baby boomers. Still too young to have forged a name for themselves, they go by a host of
taglines: Generation Y, Echo Boomers, or Millennium Generation.
Marketers haven't been dealt an opportunity like this since the baby boom hit. Yet for a lot of
entrenched brands, Gen Y poses mammoth risks. Boomer brands flopped in their attempts to reach
Generation X, but with a mere 17 million in its ranks, that miss was tolerable. The boomer brands won't
get off so lightly with Gen Y. This is the first generation to come along that's big enough to hurt a
boomer brand simply by giving it the cold shoulder--and big enough to launch rival brands with enough
heft to threaten the status quo. As the leading edge of this huge new group elbows its way into the
marketplace, its members are making it clear that companies hoping to win their hearts and wallets will
have to learn to think like they do--and not like the boomers who preceded them.
Indeed, though the echo boom rivals its parent's generation in size, in almost every other way, it is very
different. This generation is more racially diverse: One in three is not Caucasian. One in four lives in a
single-parent household. Three in four have working mothers. While boomers are still mastering
Microsoft Windows 98, their kids are tapping away at computers in nursery school.
With the oldest Gen Yers barely out of high school, it's no surprise that the brands that have felt their
disdain so far have been concentrated in fashion, entertainment, and toys. But there's a lot more going
on here than fickle teens jumping on the latest trend. While some of Gen Y's choices have been driven
by faddishness and rebellion, marketing experts say those explanations are too simplistic. ''Most
marketers perceive them as kids. When you do that, you fail to take in what they are telling you about
the consumers they're becoming,'' says J. Walker Smith, a managing partner at Yankelovich Partners Inc.
who specializes in generational marketing. ''This is not about teenage marketing. It's about the coming
of age of a generation.''
Smith and others believe that behind the shift in Gen Y labels lies a shift in values on the part of Gen Y
consumers. Having grown up in an even more media-saturated, brand-conscious world than their
parents, they respond to ads differently, and they prefer to encounter those ads in different places. The
marketers that capture Gen Y's attention do so by bringing their messages to the places these kids
congregate, whether it's the Internet, a snowboarding tournament, or cable TV. The ads may be funny
or disarmingly direct. What they don't do is suggest that the advertiser knows Gen Y better than these
savvy consumers know themselves.
Soon a lot of other companies are going to have learn the nuances of Gen Y marketing. In just a few
years, today's teens will be out of college and shopping for their first cars, their first homes, and their
first mutual funds. The distinctive buying habits they display today will likely follow them as they enter
the high-spending years of young adulthood. Companies unable to click with Gen Y will lose out on a
vast new market--and could find the doors thrown open to new competitors. ''Think of them as this
quiet little group about to change everything,'' says Edward Winter of The U30 Group, a Knoxville
(Tenn.) consulting firm.
Nike has found out the hard way that Gen Y is different. Although still hugely popular among teens, the
brand has lost its grip on the market in recent years, according to Teenage Research Unlimited, a
Northbrook (Ill.) market researcher. Nike's slick national ad campaigns, with their emphasis on image
and celebrity, helped build the brand among boomers, but they have backfired with Gen Y. ''It doesn't
matter to me that Michael Jordan has endorsed Nikes,'' says Ben Dukes, 13, of LaGrange Park, Ill.
Missteps such as Nike's disastrous attempt to sponsor Olympic snowboarders two years ago and
allegations of inhumane overseas labor practices added to Gen Y's scorn. As Nike is discovering, success
with this generation requires a new kind of advertising as well as a new kind of product. The huge
image-building campaigns that led to boomer crazes in everything from designer vodka to sport-utility
vehicles are less effective with Gen Y. ''The old-style advertising that works very well with boomers, ads
that push a slogan and an image and a feeling, the younger consumer is not going to go for,'' says James
R. Palczynski, retail analyst for Ladenburg Thalmann & Co. and author of YouthQuake, a study of youth
Instead, Gen Yers respond to humor, irony, and the (apparently) unvarnished truth. Sprite has scored
with ads that parody celebrity endorsers and carry the tagline ''Image is nothing. Obey your thirst.'' J.C.
Penney & Co.'s (JCP) hugely successful Arizona Jeans brand has a new campaign showing teens mocking
ads that attempt to speak their language. The tagline? ''Just show me the jeans.''
NET EFFECT. Which isn't to say echo boomers aren't brand-conscious. Bombarded by ad messages since
birth, how could they not be? But marketing experts say they form a less homogeneous market than
their parents did. One factor is their racial and ethnic diversity. Another is the fracturing of media, with
network TV having given way to a spectrum of cable channels and magazine goliaths such as Sports
Illustrated and Seventeen now joined by dozens of niche competitors. Most important, though, is the
rise of the Internet, which has sped up the fashion life cycle by letting kids everywhere find out about
even the most obscure trends as they emerge. It is the Gen Y medium of choice, just as network TV was
for boomers. ''Television drives homogeneity,'' says Mary Slayton, global director for consumer insights
for Nike. ''The Internet drives diversity.''
Nowhere is that Net-driven diversity more clear than in the music business. On the Web, fans of even
the smallest groups can meet one another and exchange information, reviews, even sound clips. Vicki
Starr, a partner in Girlie Action, a New York-based music promoter, last year booked No Doubt, a band
with a teen following, into a small Manhattan venue. She says that on opening night the house was
packed with teenage girls dressed just like the lead singer. ''How do they know this? How do they keep
up with what she's wearing? It's not from network television,'' says Starr. ''It's online.''
The Internet's power to reach young consumers has not been lost on marketers. These days, a well-
designed Web site is crucial for any company hoping to reach under-18 consumers. ''I find out about
things I want to buy from my friends or from information on the Internet,'' says Michael Eliason, 17, of
Cherry Hill, N.J. Even popular teen TV shows, such as Warner Bros. (TWX) Television Network's Buffy the
Vampire Slayer and Dawson's Creek, have their own Web sites.
Other companies are keeping in touch by E-mail. American Airlines Inc. recently launched a college
version of its popular NetSaver program, which offers discounted fares to subscribers by E-mail. ''They
all have E-mail addresses,'' says John R. Samuel, director of interactive marketing for American. ''If a
company can't communicate via E-mail,'' he says, ''the attitude is 'What's wrong with you?'''
This torrent of high-speed information has made Gen Y fashions more varied and faster-changing. Young
consumers have shown that they'll switch their loyalty in an instant to marketers that can get ahead of
the style curve. No brand has done a better job of that than Tommy Hilfiger (TOM). When Hilfiger's
distinctive logo-laden shirts and jackets starting showing up on urban rappers in the early '90s, the
company started sending researchers into music clubs to see how this influential group wore the styles.
It bolstered its traditional mass-media ads with unusual promotions, from giving free clothing to stars on
VH1 and MTV to a recent deal with Miramax Film Corp., in which teen film actors will appear in Hilfiger
ads. Knowing its customers' passion for computer games, it sponsored a Nintendo competition and
installed Nintendo terminals in its stores. Gen Y consumers have rewarded that attentiveness by making
Hilfiger jeans their No. 1 brand in a recent American Express Co. (AXP) survey.
Compare that record with Levi's, one of the world's most recognized brands and an icon of boomer
youth. It got a harsh wake-up call in 1997, when its market share slid, and research revealed that the
brand was losing popularity among teens. With its core boomer customers hitting middle age, both
Levi's advertising and its decades-old five-pocket jeans were growing stale. ''We all got older, and as a
consequence, we lost touch with teenagers,'' says David Spangler, director of market research for the
Levi's brand. Now, Levi's is fighting back with new ads, new styles, a revamped Web site, and ongoing
teen panels to keep tabs on emerging trends. quot;We never put much muscle into this sort of thing before,
but now, we are dead serious about it,quot; says Spangler. quot;This is a generation that must be reckoned with.
They are going to overtake the country.quot;
Marketers who don't bother to learn the interests and obsessions of Gen Y are apt to run up against a
brick wall of distrust and cynicism. Years of intense marketing efforts aimed directly their way have
taught this group to assume the worst about companies trying to coax them into buying something. Ads
meant to look youthful and fun may come off as merely opportunistic to a Gen Y consumer. That's what
happened to PepsiCo in its attempts to earn Gen Y loyalty with its Generation Next campaign, says
William Strauss, co-author of the 1991 book Generations: The History of America's Future. The TV ads, in
which kids showed off branded trinkets, from jackets to gym bags, fell flat. ''They were annoying,'' says
Philip Powell, 14, of Houston. ''It was just one long 'Please, please, buy me.'''
Ironically, Pepsi already has one of the biggest teen soda hits with Mountain Dew, but the drink's
success has little to do with advertising. Instead, kids found out about Dew from their most trusted
endorsers--each other. ''[Kids] believe--true or not--that they're the ones who figured out and spread
the word that the drink has tons of caffeine,'' says Marian Salzman, head of the brand futures group at
Young & Rubicam Inc. ''The caffeine thing was not in any of Mountain Dew's television ads. This drink is
hot by word of mouth.''
Along with cynicism, Gen Y is marked by a distinctly practical world view, say marketing experts. Raised
in dual-income and single-parent families, they've already been given considerable financial
responsibility. Surveys show they are deeply involved in family purchases, be they groceries or a new
car. One in nine high school students has a credit card co-signed by a parent, and many will take on
extensive debt to finance college. Most expect to have careers and are already thinking about home
ownership, according to a 1998 survey of college freshman for Northwestern Mutual Life Insurance Co.
''This is a very pragmatic group. At 18 years old, they have five-year plans. They are already looking at
how they will be balancing their work/family commitments,'' says Deanna Tillisch, who directed the
GRASSROOTS. That means marketers who want to reach worldly wise Gen Yers need to craft products
and pitches that are more realistic. To rejuvenate its Gen X hit House of Style, for example, MTV
switched the emphasis on the weekly fashion show from celebrity lifestyles to practical information,
with segments on decorating your bedroom and buying a prom dress. ''We adapted the show to be
more of what they wanted to see,'' said Todd Cunningham, director of brand research for MTV.
To break through Gen Y's distrust, marketers are also trying to make their campaigns more subtle and
more local. A growing number, including Universal Studios, Coca-Cola (KO), and McDonald's (MCD), use
''street teams.'' Made up of young people, the teams hang out in clubs, parks, and malls talking to teens
about everything from fashion to finance, trying to pinpoint trends as they emerge. Other marketers are
trying to build grassroots support for their brands. Following the lead of underground rock bands, mass
marketers have taken to ''wild postings,'' that is, tacking up ad posters on street corners and
construction sites. Others sponsor community events or hand out coupons and T-shirts at concerts and
ball games. Golden Books Publishing Co. distributed sample chapters from a new teen book series at
movie theaters. The idea is to let kids stumble onto the brand in unexpected places.
Last year, when Lee Apparel introduced Pipes, a line of oversize, multipocketed pants aimed at 10- to
14-year-old boys, it spent its marketing dollars on the Internet, outdoor posters, and skateboard
magazines. ''As a brand, you need to go where they are, not just pick a fashion statement, put it on TV,
and wait for them to come to you,'' says Terry Lay, president of the Lee brand. Even Coke, a master of
slick advertising, looks for more personal ways to reach Gen Y. Last summer, it courted teens with
discount cards good for movies and fast food. To build credibility, it mailed them directly to high school
sports stars and other leaders first before handing out more at stores.
Of course, plenty of marketers continue to reach for this group with national TV campaigns. The ones
that work are funny, unpretentious, and often confusing to older consumers. Consider Volkswagen of
America Inc. Although VW doesn't market directly to teens, both its Golf and Passat models show up on
surveys as Gen Y faves. Part of the credit goes to the carmaker's quirky TV commercials, which are about
as far from the traditional image-building ads Detroit churns out as possible. ''We're a little edgier, a
little more risk-tolerant, and not so mainstream,'' says VW marketing director Liz Vanzura. While other
marketers fled the airwaves when Ellen DeGeneres came out of the closet on her show last spring, VW
used the groundbreaking episode to introduce a new commercial showing two guys in a car who pick up
a discarded chair. The ad, funny and oblique, became a favorite among young adults and teens.
With the oldest Gen Yers turning 20 this year, a lot of other companies will soon find themselves
grappling with this new generation. Toyota Motor Corp. (TOYOY), noting that 4 million new drivers will
come of age each year until 2010, unveiled the Echo at this year's Detroit auto show. With low emissions
and a price well below the Corolla, the new subcompact is aimed squarely at boomers' kids who are
buying their first cars. General Motors Corp. (GM) is putting together a task force to figure out how to
appeal to Gen Y. The auto maker brings teens and children as young as sixth-graders into car clinics,
where researchers probe their opinions of current models and prototypes of future cars. Michael C.
DiGiovanni, GM's head of market research and forecasting, says Gen Y kids have an entirely different
aesthetic from their parents. Their sense of how a product should look and feel has been shaped by the
hours they spend at the keyboard. ''One of the trends that will manifest itself is computers,'' says
DiGiovanni. ''The design of products will be influenced by the way a computer screen looks.''
Meanwhile, computers and other high-tech products are starting to look less industrial and more sleek
in an effort to attract younger buyers. By using bright colors and cool designs, Motorola Inc. (MOT)
helped transform the pager from a lowly tool for on-call workers to a must-have gizmo for teens. Apple
Computer Inc. (AAPL) appeals directly to the same group with products such as its rounded, space-age-
looking iMac computer. ''For this generation, the computer is like a hot rod,'' says Allen Olivo, Apple's
senior director for worldwide marketing, who says kids are constantly comparing features and styling
with their friends' systems.
Apple's stylish iMac may or may not become the computer of choice for this new generation. But Apple
and other marketers that attempt to chart the Gen Y psyche now could have an advantage as this
generation moves into adulthood. After all, some of the biggest brands on the market today got their
start by bonding with boomers early and following them from youth into middle age. Will the labels that
grew up with baby boomers reinvent themselves for Generation Y? Or will the big brands of the new
millennium bear names most of us have not yet heard of?
BUSINESSWEEK ONLINE : FEBRUARY 15, 1999 ISSUE