Many successful strategies rely on understanding generations — generational investment strategy and generational marketing strategy to name a few. In marketing, understanding generations has two important areas of impact:
1) Size of the Prize
In my profession, we often talk about “size of the prize,” a.k.a. the market opportunity, and the amount of revenue we could earn — a shorthand that refers to the size of a potential action, like entering a new product category. In eCommerce and technology, where we deal with ambiguity and gray areas often (some might call it an occupational hazard, but I call it fun), the number of people within a generation is a key data point for a given market.
Due to its smaller size in comparison to other generations, Gen X, is often an overlooked cohort when it comes to marketing. However, Gen X has the highest average expenditure in comparison to other generations right now. Gen Xer are at the peak of their earning potential - and their spending- as a result of this life stage goes up as well. Brands and retailers can easily miss out if they focus only on Gen Z or Millenials.
A cohort, by definition, is a group that shares a particular characteristic. For our purposes, a generation (cohort) shares a birth year. Generations vary in size; the size of a generation drives the size of prize at any point in time for dozens of categories or industries.
As an example, the very name “baby boomer” comes from the boom in births that occurred after the return of soldiers from WWII. In the fall of 1945 when the war ended, 7.5MM men were in uniform. By 1946, those 7.5MM were home, out of uniform, starting families, buying houses, and moving to the suburbs. My father tells me that my grandfather had a hard time building his house as a result. Because raw materials were in such demand at this time, he would buy whatever building materials were available and then barter those to get what he needed as soon as he could to continue building.
It was the events of the times and the size of that cohort that birthed the baby boom generation and drove the longest protracted period of economic growth ever, as well as post-war suburbanization that created the American suburb as we know it today. And without that economic growth, great suburban-based flicks like American Pie, The Breakfast Club, Sixteen Candles, and Ferris Bueller’s Day Off would have never been born.
Admittedly this is an extreme example, and anyone predicting the tsunami of demand for cars, housing, appliances, and furniture in 1946 would have more than benefitted.
The “Forgotten Generation”
A generation’s size may either allow a size of prize to be large enough to make certain industries or categories very attractive at various points in time. I made this chart from various sources which makes clear why Gen X (anyone born from 1965 to 1980) is often called ‘the forgotten generation.” It also explains why there has been so much focus, marketing dollars, research, and literature on Millennials as they make up nearly a third of the population, and in 2020 exceeded the size of Baby boomers!
While you see above how Gen X, as the smallest generation, became ‘the forgotten generation,’ yet today marketers would be passing up a very lucrative segment on a per-person basis. At the peak of their spending within their lifetimes, Gen X had the highest average annual expenditure of over $83K, data below from the World Economic Forum:
One of the reasons Gen X spends so much is because many financially care for both their own children and their aging parents, thus the moniker: the “sandwich generation.” Every generation has their own unique hardships.
The other marketing advantage to understanding generations is one of mindset and perspective, which is arguably more important than size of prize as it determines the success of a marketing message and its ability to ‘hit home.’ Generations, since they go through life stages together as a group, share a perspective as a result of the unique life events they experience. Quite simply, this perspective or worldview is the key to unlocking relevance and thereby driving response and conversion rate.
The Power of Shared Experiences
The life events that a generation is exposed to and their age at the time of said events are very formative to an individual’s view of the world around them throughout their lifetime.
Take the topic of college education and the burden of student loans today from the perspective of Gen X and then, alternatively, Millennials and Gen Z.
As Gen X-er, I saw the Challenger explode and the fall of the Berlin Wall. In 10th grade, my high school cohort had Mr. Butchko for physics (the rumor was he was struck by lightning not once but twice, completely unverified but also completely hilarious given his chosen subject matter…). We Gen X-ers were the first latchkey kids — the first kids who would come home from school and unlock their doors to an empty household due to the increase of women joining men in the full-time labor force. At this same time, divorce rates spiked. We saw the Lockerbie flight bombing, the Fall of the Berlin Wall, the Gulf War, and the end of job security in the corporate world. September 11 was our ‘where were you when’ moment, followed by the War in Afghanistan, and Hurricane Katrina. The best parts of my adolescence I recall were the birth of Yo MTV Raps and Snapple. We are the ones sandwiched between bigger generations: the Boomers and Millennials. Is it any wonder why the Gen X view is described as “skeptical” and “practical” and our values include “self-reliance”? Is anyone surprise that we grew up “resourceful,” and “independent?”
It’s no wonder, with these experiences, values, and worldview, we may share the general lack of support from Gen X on Biden’s now-canceled loan forgiveness program. Our resourcefulness, self-reliance and the ‘pull yourself up by your bootstraps mentality birthed from those life events described - the latchkey kids, the spike in divorce, the end of corporate loyalty and the start of the ‘corporate layoff,’ all build to this perspective. So, the lack of enthusiasm for this program existed from a worldview perspective before you even start to consider that most of us worked our tails off for years (decades in some cases) to pay our own student loans off.
Let’s look at the other side of the coin (and an example of when messaging works well) for this same topic of the burden of student loan debt to later generations: Millennials and Gen Z.
Millennials, born 1981-1996, are tech-savvy and more socially conscious than previous generations. They were young in the Great Recession and lived through the start of school mass shootings. They value convenience, experiences, and personalization in their purchasing decisions. They graduated college when the ‘value’ of a college degree was often an ROI negative proposition, very different from Gen X who experienced college as the rubber stamp requirement to get started on what was most often a ‘promising,’ or at worst, ‘decent’ career.
Generation Z, born 1997-2012, is the most diverse generation and are true digital natives who value authenticity, inclusivity, and social responsibility in their purchasing decisions. They are in school or have just finished school and value financial stability because of the stress they experience surrounding personal debt.
Here’s an example from the subway targeting Millennials and Gen Z. It’s not particularly attractive, but the messaging and copy, for these generations’ live events and perspectives, is dead-on.
The headlines are done well in that they are bold and are clearly the ‘hook’ or ‘handle’ of the ad. There is no question about the messaging hierarchy, and the secondary messaging in both cases is compelling and firmly rooted in data (my favorite).
Why this is an effective ad to its target audience - where the rubber meets the road here - is in messaging, copy, and tone. You can see in this example how getting these things right will not only grab the attention of your target consumer, in this case, Millennials and Gen Z, but then also keep it. You also give them the feeling that the brand really ‘gets them,’ which is the precursor to ‘this brand is for me.’
Arguably, a marketer’s holy grail.
There are all other types of dimensions that can be used to your advantage in generational marketing, including choice of ad platform (where you reach them) and ad format (the digital product that you use to deploy your creative). You also have the perspectives and worldviews of a generation’s purchasing decisions and lifestyle choices (how long do I live with my parents, for example).
For us in eCommerce and marketing, given today’s high CAC and traffic costs, the focus on conversion and retention has never been higher. These are also the most sensitive metrics in your e-commerce and sales equations and the main tools at your disposal to drive efficiency when ad costs go up and your budget is most likely flat to down.
By understanding the size of the prize, the current life stage, and their worldview and perspective of a particular generation, you can increase the effectiveness of your marketing to your target generation, driving higher relevance, conversion rates, and eventually, enduring loyalty to your brand.