The Greatest Generations?

Don't ignore Gen X and Y consumers when developing your store brand program — these consumers will lead America to economic recovery.

It's more critical than ever for retailers to focus their attention on Gen X and Y consumers. According to a March 2010 report from the global firm PricewaterhouseCoopers, these consumers will pave the road to economic recovery.

The report — "The New Consumer Behavior Paradigm: Permanent or Fleeting?" — notes that baby boomers, who fueled retail sales for many years and helped lead America out of several recessions, are nearing retirement and must conserve their savings. Meanwhile, Gen Xers (those born between 1965 and 1981) are entering their peak earning years. And Gen Yers (those born between 1982 and 2000) have not changed their spending habits during the current economic downturn.

Gen X and Y consumers also are more likely to buy store brand products than older generations, says Michelle Fenstermaker, executive director, insights with Dublin, Ohio-based WD Partners. According to the firm's "Grocery's Next Generation" white paper, 51 percent of Gen Y consumers and 48 percent of Gen X consumers "always" or "very often" purchase private brand products (compared to 41 percent of boomers).

Where the action is

Looking closer, the top-selling private label categories for the two generations are milk, cheese, bread and baked goods, and paper products, says Todd Hale, senior vice president, consumer & shopper insights with New York-based Nielsen.

However, the two generations' purchasing habits vary in other categories, Hale notes. Although pet food is the 10th best-selling store brand category among Gen Xers, it is 24th for Gen Y consumers. And although diapers make up the 11th best-selling private label category among Gen X households, they are 32nd among Gen Y households.

Gen X and Y consumers' reasons for purchasing store brands also vary, says Steve Beckman, vice president of creative services with Vertis Communications, Baltimore.

"Gen X [consumers] are spend-conscious — they will pay attention to any product with a value message. Thus, the concept of private label really resonates with this generation," he says. "Gen X also favors a big-brand look, so copycat designs that mirror national brands work with them."

Gen Y consumers, however, can see right through a retailer's attempt to emulate a national brand's design, Beckman notes. Consumers in this generation also are value-minded, but they seek store brand items that are fashionable and unique — products that cannot be found at any other retailer.

"For example, trendy cosmetics coming from small suppliers that use better-quality materials — especially those that are responsibly sourced — are key for Gen Y," Beckman explains.

But members of both generations have a desire for adventure, and they seek products with an exotic twist, says Brad Hanna, senior vice president, group account leader with Kansas City, Mo.-based Barkley.

"One of the biggest complaints from younger consumers is that store brands lack variety," he explains. "Younger consumers are looking to create experiences through their food. Store brands could benefit from expanding their selection to include mainstream international flavors."

Responsibility matters

Both generations also desire store brand packaging that is responsibly sourced and manufactured, Beckman says.

Packaging, therefore, should sport a transparent message, Hanna notes. Gen X and Y consumers want honest statements that help them understand a product's source, ingredient quality and eco-friendliness. I

Digital touchpoints also resonate with both generations, Beckman points out.

"Just putting a website on the back of a package isn't enough anymore," he says. "In these generations, almost everyone has a smartphone, which they're using more than computers to get on the Web. Consider ways to tie in mobile communications through packaging and connect all marketing touchpoints."

Beckman notes that Vertis has been working with Boulder, Colo.-based Sunflower Farmers Market to add quick-response (QR) codes on select packaging.

"Once someone snaps a picture of the QR code on their phone, they will be linked to non-traditional graphics that capture the consumer immediately in the brand experience," says Sage Horner, Sunflower's vice president of merchandising and marketing. "For example, we can tell the story of our sourcing practices to find local, organic and natural producers, something Gen Y, in particular, cares a lot about."

Understand Gen Xers and Yers

Before retailers can cater to Gen X and Y consumers, they first need to understand them.

"Gen X moved toward higher education when the cost of education soared but the job market declined, leaving many of them highly educated and downwardly mobile," says Steve Beckman, vice president of creative services with Baltimore-based Vertis Communications. "They came out of school with debt and were promised a system that wasn't there. They're pessimistic and cynical and they're a generation reactive to the past."

While Gen Xers grew up during the dawn of the Internet, Gen Yers have never known a time when it didn't exist, Beckman adds.

"They're the 'Google generation,'" he explains. "As children of boomers, [Gen Yers have] some more wealth than Gen X, and they have a vision of what life should be like. They are hyper-materialists with a high degree of consumer confidence."

Online and on-target

Online and social media strategies also are critical for communicating deals and promotions to Gen X and Y consumers. Although Gen Xers and Yers read print newspapers and circulars to find special promotions, Hale says they're more likely to search for deals online, in retailers' e-mails, and through social media and smartphone apps when making purchase decisions.

Sunflower considers its social media approach — which incorporates Twitter and Facebook — to be "an ideal strategy" that opens the door for two-way communication between the brand and consumers, Horner says.

"It gives [consumers] a voice and a promise of being heard — something they most likely will not get with a national brand," Horner says.

Younger generations also want "information and inspiration" when they set foot in a store, Fenstermaker says.

"They want stores to educate them about products and issues — especially healthy choices, meal solutions and recipes," she explains. "Gen X/Y [consumers] told us they want stores where there are live demos, sampling and product experimentation."

And whether they do it in-store or online, these consumers want to provide comments and ideas to help retailers build their brands, Beckman says. Retailers that interact with consumers to develop the store brand products they desire will end up with cutting-edge products, packaging and promotions.