Upcoming Forums:

BirdsEye View

Today's article focuses on a looming market opportunity that merits your attention. Gen X and Gen Y, 100 million strong, are entering the work force and becoming a consumer force to contend with and capitalize upon. Marketing and recruiting these newcomers requires out-of-the-box thinking, since the old adages don't apply. These folks don't use media the way their parents did, nor do they view their jobs the same way. Selling to these segments and recruiting them is a challenge worth facing, and the article below should help start the dialog on this topic in your bank.

Meanwhile, the faux credit crunch panic is taking off, and bank stocks continue to get hammered. I consider this an excellent buying opportunity of solid bank stocks... but also believe that the storm is still gathering momentum, so timing might be off a bit. I hope we'll all weather this hurricane and emerge from it even stronger.

The New Math: Gen X + Gen Y = Great Business

Banking traditionally had limited interest in younger, deposit-poor retail customers. Our prospecting (and everyone else's) focused heavily on the cash-rich and the highly profitable affluent segment. This tide has turned in recent months, as fee income patterns and the industry's addiction to overdraft fees shifted attention to heavy plastic users and folks with lower sensitivity to NSF fees. Student loans, banking the "unbanked" and lifeline checking are back "in", and, with them, the interest in adults who were born between 1965 and 1994.

Gen Xers were born between 1965-1976. As a gross generalization, this group is both independent and skeptical, existing in the shadow of the baby boomers. They are now coming into their own, starting families, owning homes and cars and accumulating wealth.

Gen Yers were born between 1977-1994. This group is generally is idealistic, optimistic and patriotic. They consume media in very fragmented ways, which makes marketing to them an expensive yet interesting challenge.

It is interesting to note the differences among these two groups, as well as the baby boomers, in their expectations of life, work patterns, buying habits and media consumption, and to apply this to banking concepts (or something like that…). The differences are as fundamental as where they shop. Gen Yers go to Best Buy, Macy's, Victoria's Secret, Apple, American Eagle at a higher rate than boomers or Gen Xers. They use gift cards extensively. Many still live in their parents' homes and rely on their support for the basics, which gives them more discretionary income. Today's teens are the most affluent generation of young people to date. Many of them work, including around the house. Bombarded by advertising, they have become somewhat immune to print and TV ads that attempt to tie image and celebrity to product benefits, but respond well to irony and humor in advertising. The internet plays an enormous role in their life.

Gen Xers, on the other hand, are less store-focused and more product-focused, i.e. they decide what they want to buy first and then identify the best store from which to buy it. The only store where Gen X says they shop at significantly more than boomers, based upon a 6 month old study, is Apple/iTunes. They shop with quality in mind, and have strong brand loyalty, but started cross-channel shopping. They do not shop at a single store but pick the store based upon how much advice they think they are going to need. They spend their money carefully, and their priorities are clear, with the goal of paying down debt topping the list. While quality comes first, they'll pay more for a cool design. They receive gift cards more than the other generations, unlike older folks, who say they will not give gift cards. They are only 37 million (vs. 83 million baby boomers).

The younger generations have strong brand affinity, greater discretionary income than prior generations at their age, and a willingness to spend it. Yet, the way they utilize media is piecemeal. They're watching TV while using the computer, taking calls on their cell phones and flipping through a magazine or a catalog. They are open to all media channels, including direct mail, as well as promotional messages relevant to their interest. Reaching this multitasking demographic segment calls for a holistic approach to marketing and product development, using various channels and messages.

Given this brief introduction to these emerging consumers, what are the implications to banks? I see several elements:

• Need to break with tradition. Tried-and-true advertising and marketing programs won't work on these prospects. New and fresh approaches that take into account their specific buying habits need to be developed.

• Brand development is key. Brand is central to the buying behavior of Gen X and Y people. Bank brand spending has been limited in the past, and for good reason. It's time to rethink that strategy.

• Polish up your internet site. Internet is fast becoming your "face" for these consumers. They often do research online but execute purchases in person. Creating interest and motivating them to see you can be done efficiently through the internet, but only if your website is more than a boring billboard to them.

• Branches and people still count. Gen Xers and Yers still prefer to make major purchasing decisions in person. Training your branch staff to effectively handle these people and repositioning your branch space to respond to their yen for style and functionality are challenging opportunities that banks need to investigate further.

• Recruit to the target market. Gen Xers are having a difficult time juggling family and job; help them select you by your flexibility and creative solutions to their needs. Gen Yers (76 million strong) just want to spend their time in meaningful and useful ways. Give them that job satisfaction. Know they can be picky, since more than half of them move back to their parents' homes after graduating, so they can afford to pick the job they really want. And last, friendship is such a strong motivator for then that Gen Y workers will choose a job just to be with their friends, another interesting recruitment opportunity.

Most banks' product lines and distribution points have not been reworked to attract and retain these emerging generations. Given their penchant for brand loyalty, this can become a major mistake in years to come. The time to snag these customers is now, not when they have $100,000 in the bank.