Teen Power?

Teen Spending Power Declines

A recent report on teens discloses common misperceptions that influence teens’ attitudes toward money and financial matters such as, banking practices and spending power. Contrary to popular perception, the spending power of todays teen population is not increasing, but has actually declined 12% from 2003 to 2006. Though the current teen generation is large, the teen population is not expected to grow significantly in the next ten years because parents have chosen to have fewer children.

Despite the declining spending and population, their estimated spending power was $153 billion in 2006. Therefore teens still represent a vast marketing opportunity, but to successfully target teen consumers, manufacturers and marketers must be aware of demographic changes in the teen population. The proportion of Caucasian teens is diminishing while the number of Hispanic and Asian teens is rapidly growing. These demographic changes could have significant changes on the groups tastes, preferences and perceptions.

On the retail front, much has been made of teens’ attraction to the youthful image projected by retailers like Abercrombie & Fitch where teens themselves have given high marks to this retailer as one “for someone my age.” Yet when it comes to actual shopping behavior, their money tends to go to more affordable stores like Old Navy and American Eagle Outfitters, and even Wal-Mart and Target.

Teens Still Impact Advertising

The Echo Boom generation, also known as Gen Y or Millennials, comprises the offspring of the Baby Boomers. This generation rivals their parents’ generation in size but differs greatly in buying habits and reactions to advertising. Echo Boomers have grown up bombarded with media and are more resistant to advertisers who try to attract them with image or celebrity appeal. Nearly half of Echo Boomers surveyed say that all advertisements seem the same, more than any other age group surveyed. Even worse for advertisers, this generation tends to show little brand loyalty. But this may change as Echo Boomers mature as consumers.

In 2005, Echo Boomers span the ages of 11 to 28 and so are just beginning to develop their own consumer preferences. Their tastes are more varied than previous generations, and they are more ethnically diverse. The majority of the generation is still at an age where they are likely to still receive parental financial support (roughly half live with their parents), which means they are able to spend what money they have on discretionary purchases.

By 2010, approximately 63 million Echo Boomers will have reached driving age and are expected to rival Baby Boomers in purchasing power. And though Echo Boomers do not earn as much as Gen Xers, there are 55% more of them. Both of these make them a top-priority for retailers. For example Toyota launched Scion, a new brand of automobile in 2003, with Echo Boomers specifically in mind. In 2004, Toyota spent $60 million to advertise its new brand, 20% of which went toward magazine ads. However, taking into account the fact that Echo Boomers are unlikely to read conventionally popular magazines, Scion places 75% of its magazine budget in obscure, youth-oriented lifestyle magazines, such as Modified, Scratch, or XLR8R, which helped it build street credibility as the “cool” car. As a result of its non-traditional ad campaign, almost 90% of Scion owners are completely new to Toyota.