The New Consumer is a Timely Focus for Financial Services Companies
Although we are taught as young children that money doesn't grow on trees, it's a harder concept to sell to the current crop of youth. Having grown up in times of extraordinary economic expansion, today's kids, with guilty dual-income and divorced parents eager to fill their pockets and their own well-paying after-school jobs, have a lot of money in their hands.
With about $90 in pocket money a week, it comes as no surprise that retailers and manufacturers of all sorts are trying to coax teens to dispose of it. What is surprising is that more businesses in the financial services sector have not actively targeted this market as well. There are a few notable exceptions, however. For instance, the Stein Row Young Investor Fund has catered to kids since 1994. In fact, a whopping 85 percent of the fund's 200,000 shareholders are 18 or younger. Online entities like AllowanceNet and DoughNet also target youth with shopping, banking, and educational initiatives.
However, with the exception of the glut of credit card solicitations aimed at the older end of the teen demographic, banks and investment services firms by and large have yet to make a significant and effective play for market share among youth.
As customers in the infancy of their affluence, financial institutions who reach out now to New Consumers have a tremendous opportunity to forge long-term banking relationships with them or establish early roles as financial advisors. In addition, it offers an occasion to make a positive impact in the lives of these youth by teaching them the importance of saving and investing for their futures.
Research also shows that kids are interested in saving and investing their money, which is surprising given that their parents' rate of saving is at an all-time low. As Mark Clausen, president and cofounder of AllowanceNet, states in the December 1999 issue of American Demographics, "We see kids having an affinity and desire to want to feel more educated about money. They want to feel smart. They want to succeed in school. They want financial security and they want to have the ability to effect that at an earlier age than previous generations."
Two studies, one conducted by Merrill Lynch and another by the American Savings Education Council, support Clausen's impressions. The Merrill Lynch study shows that 82 percent of kids 12 to 17 say they save at least half their money, while the other shows that half of 16- to 22-year-olds always save part of their money and another 41 percent save their money sometimes. This same study found that 53 percent make a monthly budget, although they might not always follow it. Both studies suggest that millions of youth are regularly putting money into mutual funds and the stock market. Merrill Lynch found 11 percent of teenagers investing money in mutual funds and as many owning stock. These numbers are up from 9 percent and 7 percent, respectively, in 1998, and there is a lot of room to grow.
Brick and mortar banks and investment services firms aren't the only ones who should be examining the potential of this demographic. In fact, an argument could be made that it is even more important and timely for online banking ventures, beyond the "e-wallet" firms, to forge a bond with these young consumers. Never knowing a world without computers, these kids are incredibly comfortable with the internet as a medium and most have access to it daily.
The most important question is, however, how will targeting this group ultimately affect the bottom line? For brick and mortar establishments, increasing your number of New Consumer banking customers may eventually lower operating costs through increased use of electronic and online transactions—most members of this group are familiar with, and often prefer, these tools. As mentioned above, they have grown up in a world with easy access to advanced technology, not only to computers, but to cell phones and pagers as well.
In addition, New Consumers can help transition your existing customer base to these services—this generation of teens has a remarkable influence on their parents, particularly when it comes to new technology, and parents often rely on their children for help and advice when making purchases or using new devices or programs. As intermediaries, these kids can be instrumental in accelerating the acceptance of online banking.
Attracting this customer is not an easy task. Not because they are so hard to talk to, but because you are trying to sell them on an idea that is not particularly attractive in your tween and teen years—delayed gratification. Despite the statistics cited above, saving and investing money is neither inherently cool nor glamorous and does not exude anything approaching youthful exuberance. Especially when there is a pair of amazing leather pants hanging in the window right in front of you.
Anyone who argues differently has completely lost touch with their own adolescence and will fail to attract young customers if they take this route in their communications strategy. As Sanjay Nazerali, managing director of the Marketing Depot, bluntly puts it in the October 1999 issue of Viewpoint, "…financial services are not cool. They can be relevant, important, meaningful, and desirable, but the idea that a credit card can become cool simply by using a piece of pop music is naive." Sponsoring rock concerts or obtaining celebrity endorsements are probably inappropriate marketing choices for banking institutions because there is little relevance or resonance between the two—it doesn't suggest to the New Consumer how your products and services can fit into her life in a meaningful way. Instead, advertise products and services useful to teens through relevant alliances and forums.
As mentioned throughout this article, the internet provides a number of opportunities. Given kids' increasing computer usage, consider advertising on websites popular with teens. As a bonus, these ads could allow teens to set up accounts online with click-through features. Incorporating more advanced multi-media technology, such as video-streaming, is also important in gaining the attention of these visually-sophisticated consumers.
Partnering with online retailers to provide payment services is another option. As mentioned above, there are already a slew of internet companies out there offering digital wallets, which allow parents to deposit money via credit card to a separate online account for their kids to use when shopping online (in addition to DoughNet and AllowanceNet, don't forget Rocketcash and ICanBuy). As an alternative, give your young customers the opportunity to set up payment systems linked to their own brick and mortar bank accounts, giving them control over their purchases.
A publication tailored to youth is another idea to try. Stein Roe's Young Investor fund sends a printed newsletter to it's shareholders each quarter. It includes games, puzzles, and articles on some of the companies the funds invest in. Kids also share ways in which they've augmented their income, which are then published in the newsletter.
Consider crafting a similar product, or instead, take it to the web: E-zines are favored among this set—"magazines" which are e-mailed to subscribers regularly by various online entities, from retailers to academians. Some have corresponding or related print versions, others exist solely as electronic publications. An interesting and innovative choice would be to set up an e-zine that addresses topics relevant to finances and the New Consumer. Depending on the nature of your institution, subject matter could encompass everything from shopping to student loans.
Or, set up a website strictly for your young customers. Stein Roe's parent company, Liberty Financial, for example, has created younginvestor.com, where visitors can choose from six guides to help them learn about money and investing.
An integrated internet presence is equally important for both brick and mortar and online establishments. These online strategies not only provide desirable and convenient features for New Consumers, but actively reinforce offline as well as e-banking relationships.
Conducting sweepstakes and competitions, both popular among this set, presents another marketing opportunity, and represents a promotion which could take place in either the online or offline worlds or involve crossover between the two. Offer teens a chance to win a prize or purse when opening a new account, or link the winnings to a feedback program - monitor the success and relevance of your services to your teen customer by entering them in the sweepstakes when they complete online or offline surveys and feedback forms.
With all this talk of the internet, one must not forget that it is critical to speak to kids in other venues as well—where they live, work, and play. The importance of such multi-channel advertising has become increasingly apparent with the online revolution, along with the need for internet companies to create a more physical presence. Consider reaching youth in their communities through print ads in school newspapers, hosting informational sessions at high schools, or establishing booths at college or career fairs.
Incorporate a computer terminal or kiosk into your visit or presentation so kids can check out your website, electronic banking or other special features you offer which may interest them. Also, consider creating "teen" versions of existing bank brochures and pamphlets in order to better speak to them. They should be highly graphic and direct, demonstrating the importance of saving money in their immediate lives—how it fits in today as well as tomorrow—whether that be for a college education or even an expensive big-ticket item in the near future. In fact, short term savings might also be a theme on which to build an advertising campaign.
With all of these ideas in mind, it is vital to remember that marketing is only as good as the product itself. Although inherent in a few of the strategies mentioned, make sure that some of the accounts and services you provide offer useful features for young people (e.g. a low or no minimum balance) or create accounts or programs specifically for them. New Consumers are smart shoppers who clearly discern whether companies have their interests at heart and if they fit into the overall lifestyle to which they subscribe.
There's no beating around the bush—the banking relationship is a hard sell to youth of any generation. It's in the realm of finishing your spinach before you get dessert. However, given recent statistics, the New Consumer is a far less hopeless and elusive target than the generations which preceded it. In fact, it may be easier to make finance attractive to kids today than it once was, as the technological age has blessed us with tools that make banking and investing more convenient and interactive. Indeed, although one must not dismiss the value of an established physical presence, those institutions which offer sophisticated online banking functions, especially those tied to the stock market, will have a leg up on their competitors when it comes to increasing their ranks of New Consumer customers, particularly as they age and the online revolution moves forward. Even now, it makes sense that online investing and trading is more attractive to this set than their offline counterparts. Certainly, parents and grandparents have been buying stocks and bonds for their children and grandchildren for years, but the internet makes it appealing to kids by giving them easy access to the market, a certain level of independence and initiative, and is an active, participatory endeavor. Within a few years, especially with vehicles created and tailored for this set, it is likely to become a popular New Consumer activity.
Who knows what the future might bring—teenagers eschewing financial dependence on their parents through the money they make through online trading? The development of youth-oriented mutual funds? IPOs from teen businesses supported by their peers' investments? You might want to consider developing a virtual youth board of directors in response to such transformations.
Plant your seeds now, and these little money trees will grow. Encourage young customers to do the same, and they can be promised equally successful results.
SOURCES:
Jeff Brazil. "Play Dough," American Demographics, December 1999.
Jordan, Simon. "Deadly Sins in Youth Marketing," Viewpoint, Issue 6, October 1999.