Many costs of living the Boomers may take for granted are too expensive for Gen Xers and Gen Yers, even adjusted for inflation.
Things are more expensive than they used to be.
Take home ownership and cars, for example, the two pinnacles of middle-class Baby Boomer acquisitions that helped fuel the post-World War II economy.
According to Time Lemke of the Wise Bread personal finance website, The Case Shiller Home Price Index shows current housing prices have increased by about 40 percent, even adjusting for inflation, compared to the period between 1960 to 1980.
The average price of a car is $10,000 more expensive in today’s dollars that it was nearly 50 years ago.
Related Article: Going Millennial: The Perks of Hiring Generation Y
Here are a few other things that were more easily affordable to Baby Boomers than Generation Y and X consumers:
- College. It is now more than four times the cost of a public university in 1975.
- Child care. About a $100 more a week than the average payment in 1985.
- Food. Price increases have outpaced the rate of inflation.
- Healthcare. It increased roughly $6,000 per person over the period from 1970 to 2010.
- Entertainment. The average cost of a movie or sports event ticket has at least doubled.
This has implications not only on marketing to different demographics, but how it affects the economy and, thus, new business ventures. Consider the case of the Ford Fiesta, as reported by Derek Thompson and Jordan Weissmann in The Atlantic.
Fiesta Time (Not)
The Fiesta was a small car Ford sold in Europe. In 2009, the Fiesta was introduced stateside specifically to target Millennials. Despite some initial social media frenzy (because that’s all you need to do get the attention of Gen Yers, right?), sales have steadily declined. Why? Because Ford was selling cars the way it always has, promoting a mix of performance, image and experience. The problem was, while Baby Boomers as a whole may perceive the car as a sexy means of escape from suburbia (even if they were in fact buying vans to transport their kids), Gen Yers and Xers see it as, well, just a mode of transport that someone else can provide.
Of course, affluent segments are always going to go for the “sexy” attributes of luxury brands, regardless of demographic. But, today, what sells to the average car consumer under the age of 40? Affordability — because everything is so much more expensive. And if there’s a good interface with an iPhone — note how car ads today are more likely to tout wi-fi connectivity over horsepower or handling.
Assuming, of course, that in today’s sharing economy, coupled with an exodus from suburbia to the city among twentysomethings, the average consumer wants to deal with the hassle and expense of a car in the first place; it’s much easier and with less capital expenditure to just order up a Zipcar or Uber driver when you need it.
Related Article: 10 Surprising Facts About Millennials and Content Marketing
Indeed, an Alix Partners study reported that car sharing has displaced vehicle purchases in 10 metropolitan areas at a rate of 32 to 1! Lesson learned: In the same year that the Fiesta sales hit a new low of a 30 percent decline, Ford entered an agreement to become the world’s largest vehicle supplier to Zipcar University program. More recently, Ford introduced its own Peer-to-Peer Car Sharing program in a pilot program for six U.S. cities and London.
New Home Features
According to The Wall Street Journal reporter Laura Kusisto, builders are making fewer starter homes aimed at the less-affluent buyers that typify younger demographics. The share of first-time home buyers in the U.S. fell to 32 percent of all purchasers, the lowest level in three decades, far below the normal historic rate of 40 percent. Meanwhile, lower demand is driving up housing prices, further exacerbating affordability for younger buyers.
But the goal of home ownership is hardly going away. However, the goalposts are set differently. As the Boston Business Journal reports, Generations X and Y are preferring smaller homes closer to public transportation (see above for what we just said about the declining necessity of owning a car). Whether that’s out of necessity or preference is besides the point.
That said, Millennials now outnumber Baby Boomers overall as a buying segment. How would a builder market differently to younger buyers versus their parents? Builder points to two key features:
- Personalization. The cookie cutter houses are of no interest as “starter houses.” Millenialls aren’t in the market for entry level homes they’ll turnover; the expectation is they’ll be living in their first home for awhile. Consequently, this isn’t just a place to live; it’s a place that reflects their personalities. This means comfortable hangout spaces and outdoor living take precedence over exterior curb appeal.
- Technology. No surprise here. No high-speed Internet can mean no sale. Smart home devices that connect to a smartphone is not just a feature, but increasingly a standard. Trends in the housing and automotive markets translate to any business. The general economy and rising costs of necessities requires different strategies for both new and established products and services, particularly to address younger generations.
Related Article: Swipe Right to Engage: How to Make Your Brand Match with Millennials
Looking ahead to Generation Z, Stacy Wood of The Institute for Emerging Issues at North Carolina University notes these emerging consumer characteristics consumer marketers must address:
- Increasing Innovation. Product obsolescence is a given. This year’s model must keep pace with smaller and better convenient versions.
- Convenience. While Baby Boomers are more likely to opt for privacy over convenience to allow marketers access to personal behavior and buying patters, for younger consumers, and particularly their children, it’s a non-issue.
- Value. Younger consumers grew up in economically difficult times, and they themselves as a whole have reduced earning power. Consequently, value is more important than brand loyalty in getting more for the dollar.
- Escapism. This may tie into economic insecurity, but is primarily the result of growing up when access to multiple entertainment sources is at your fingertips 24/7. Features that are entertaining and provide an enhanced experience of the product are key selling points.