Millennial Frugality

For most millennials, the effects of the recession go directly against what they want and believe in. Yet the economic downturn has the potential to continue to shape the values and attitudes of millennials past the end of the recession, more than it will for any other generation. "While there is a stereotype that it is aging boomers who are most likely to make shopping lists, clip coupons and generally practice the most draconian money-saving strategies, it is actually Millennials, shoppers under the age of 30, that represent the most frugal consumer segment," says IRI Shopper Marketing & Innovation President Thom Blischok. "Additionally, our research indicates that Millennials' frugal ways will persist long after the recession ends." (Press Release Point)

Since the recession is occurring directly in the midst of their formative years when most attitudes are set, there is a strong potential that millennials will suffer a similar fate to their grandparents, who developed a long-lasting penchant for frugality after growing up in the Depression of the 1930s. The overly optimistic are starting to turn cynical. Although “Historians note that the economy became more dependent on consumption after the Depression and World War II”, this is “something most experts say isn't likely for the Millennials” (USA Today). Instead, it is predicted that millennials will devote less care to money, possessions and materialism. They will focus on autonomy and freedom over economic success and achievement when determining their life happiness. Many of my friends and I personally have started to adopt ‘new age’ viewpoints along these lines. Millennials may even move into what Trendwatching.com calls in their 2010 Trend Report the “Unconsumption Sphere”, an area where the mere act of consuming less is becoming a status symbol. With the cropping up of Facebook events such as “Buy Nothing Day”, I wouldn’t be surprised.

One of the few surveys on the effects of the recession on American Millennials was performed by the New York City-based marketing and advertising agency JWT (formerly J. Walter Thompson). It found that 60% of millennials “feel their generation is being dealt an unfair blow because of the recession” (USA Today) Another survey conducted by an integrated communications agency network called Lumin Collaborative attempted to unveil the changing mindset and workplace expectations of millennials. Its results demonstrate that the generation’s distaste for the recession is not surprising, since “Over half (55 percent) of Millennials have experienced a layoff or loss of work in their family within the past year, and nearly three-fourths (72 percent) feel threatened by a possible layoff or loss of work in the coming months…Sixty-six percent of Millennials say they have lowered their expectations of being promoted versus 51 percent of other workers.” (Earth Times). Indeed, the general consensus regarding hiring and firing among my fellow almost-graduates is negative at best. If you have a job, any job, you better hold onto it. The recruiting statistics are like never before – many students have graduated jobless and gone on to do graduate school programs that they may not have any desire to do as an alternative.

Although for the most part millennials have a negative view towards the recession, some are able to see the light at the end of the tunnel. On the entrepreneurial side, “25% say that if they have trouble finding a job, they'll just start their own business.” (USA Today) I have seen a couple of friends who have graduated start their own businesses, but for the most part everyone seems to want a job. Decreased expectations about job security don’t mean all millennials will be moving into their parents’ basements anytime soon: “44% say they might be able to afford a house now that home prices have plummeted.” (USA Today) They also don’t mean millennials are putting their wallets away – in fact, they are “saving and investing less money and increasing their credit card debt more than any other adult generation.” (Earth Times) This agrees with psychologist Tim Kasser’s findings: “Most people, when they go through economic recession, may become more frugal, but they respond to moments of psychological insecurity by becoming more materialistic." A professor of consumer culture named James Burroughs says, “It wasn't necessarily that they weren't going to consume, but they were giving a lot more thought to consumption." (USA Today) Studies show that characteristics typical of millennials include shopping without a budget, making quick purchasing decisions, and refraining from stocking up on items. Millennials are time-strapped and always ‘on’, so they prioritize getting things done over getting the best deal. Important factors when choosing a store to shop at include location, user-friendly layout and value proposition. Checkout counters, coupons and loyalty shopping cards are not so important. Perhaps the profound implications of the recession have yet to set in on millennials – perhaps they are still able to spend as they wish, with the aid of credit cards, debt and parents. It seems as if millennials will continue to supplement their insecurities with spending until they can no longer do so.

Yet evidence exists that millennials are indeed already starting to penny pinch. For example, Generation Y female acceptance of private label is much higher than that of Generation X: 70% percent of Millennials perceive store brands to be of “excellent quality”. They have “cut back on indulgent food categories like frozen poultry, chewing gum, salty snacks and frozen pizza,” according to a report called “Winning With Millennial Women Shoppers” by Information Resources. (Brand Week) Many of my friends frequently discuss how they don't have enough money for this or that. It seems that millennials are indeed on the road to decreased spending in the face of the recession.

So what is a marketing executive to do to deal with the impending millennial frugality?

1. Provide appropriate in-store messaging and packaging sizes so millennials can make quick, easy value comparisons at the shelf. Emphasize quality as a reason why your brand should be selected over private label brands.

2. Use non-traditional means to reach millennials. Traditional advertising media (e.g. TV, print) is no longer as effective. Think outside the box because “The same old, same old is probably not going to create a lot of success” with Millennials given that their spending and shopping habits are different. (Brand Week)

3. Use internet or email coupons. There was an 80% increase in usage of coupons printed from the internet from 2007 to 2008, and 44 percent of shoppers indicate they are looking online to find coupons. “Among those who receive permission-based e-mail from a CPG company, an enormous 91 percent have downloaded or printed a coupon based on that e-mail. (Press Release Point) With millennials’ high usage of email and social networking, chances are they would be more receptive to coupons received through these mediums than any others (e.g. newspaper, flyers).

4.  Use mobile phone coupons. Retailers now have the ability to scan barcodes from cell phone screens, and we all know how much millennials love their cell phones.