Callahan & Associates' Blog
Off The CUFFRSS
Some retailers are giving up on youth targeted business models. Credit unions can learn from their mistakes.
By Aaron Pugh
More By Aaron Pugh
Forget for a moment that at some point, Gen Y and subsequent generations will one day constitute the majority of consumers. What other possible reason could businesses have to cater to a generation that is broke and unemployed, high maintenance, prefers to borrow or rent goods over buying, and holds out for group deals or discounts so steep they damage the bottom line?
Many retailers are asking themselves the same question, and have since turned the cold shoulder to Gen Y to focus on an older, wealthier clientele.
“The age group GAP is marketing to (18-to-34-year-olds) is only drawn in by sales and promotions,” says Eric Beder, an analyst for Brean Murray, Carret & Co. in an interview with Businessweek. “This customer doesn’t pay up for product, and they might not turn into a 45-to-50-year-old who will.”
Beder, like many others, believes consumer behaviors established early on stick with them for life. But if the drippy hippies and free spirits of the 1970s matured financially, then so can Gen Y.
Financial institutions themselves have a role to play in this shift, and credit unions in particular can step up as other institutions step back.
Gen Y has high aspirations for future earnings, but today the demographic suffers from joblessness and underemployment that trumps national levels.
They stay afloat mainly through unconventional tactics like job speed dating, working off-the-wall odd jobs, or monetizing their talents and hobbies on websites like Fiverr. But Gen Y also has a fire for entrepreneurship, even when the odds are stacked against them. “Owner” is the fifth most popular job title associated with 18- to 29-year-olds on Facebook.
Credit unions can address the joblessness among this demographic by providing frequent access to free training, job fairs, and other resources. Even better, credit unions can provide paid internships or step up as full-time employers. Valuable job experience and a secure income is the quickest way to transform Gen Y into financially stable consumers, profitable long-term members, and champions of the credit union cause.
Financial institutions should also renew their efforts to make safe, well underwritten student, micro, and line-of-credit loans to under-employed Gen Y, as well as MBL loans for the small businesses and startups that typically hire them. Only 7% of Gen Y work at a Fortune 500 company.
This generation may seem cheap, but just like Baby Boomers and Gen X , they’ve simply realigned when and where they spend big money. They want to get more for what they put in, whether its quantity (H&M, Target), quality (Apple, Whole Foods), or some other benefit.
To secure their membership now, serve up free checking and other benefits that competitor’s charge for, even if you have to be more lean and efficient to accommodate it. And avoid retailer’s mistakes of bloated brick and mortar networks, overly complex product suites, or other high-cost features that young consumers applaud, but hate to pay for and rarely use.
While big tickets items and frugal purchases rarely overlap at a single retailer, financial institutions are in a unique position to buck this trend. Those who develop Gen Y relationships now will have first (and sometimes exclusive) access as these individuals move to more advanced services like auto loans, investments, or mortgages.
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Apr 03, 2012
7/26/2012 04:04 PM
Thanks for the reminders about the importance of credit unions need to appeal to the Gen Y's.
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