Editor's note: This is the third in an eight-part series (BusinessWeek.com, 11/10/08) of Viewpoints by author Don Tapscott, who draws on the $4 million research project that inspired his new book, Grown Up Digital, to explain how digital technology has affected the children of the baby boomers, a group he calls the Net Generation.
When Alison Fetherstonhaugh was 15, her father, Brian, who is chairman and chief executive of OgilvyOne Worldwide, asked her to keep a diary of her media activities. What she recorded back in 2005 was startling—at least, for anyone in the traditional advertising business. Half of the TV she was watching wasn't live. She zipped through TV ads. She didn't read newspapers. After hearing the same story from Alison's friends, Fetherstonhaugh realized that the advertising industry had underestimated the impact of the Internet.
Figures showing the percentage of disposable income spent online did not tell the full story. "I knew from other sources that teenagers don't spend a lot of money online," says Fetherstonhaugh, whose company is a global leader in managing customer relations. "E-commerce hasn't really caught on, in large part because teenagers don't have credit cards. What I learned from Alison and her friends is that they spend a lot of time online, researching products they end up buying in stores. They always consult the Internet before making a purchase. This sort of behavior doesn't show up in the cold, hard e-commerce data. The Net Generation's arrival means that many of marketing's fundamental tenets must change."
He's right. In business schools they still teach the Four Ps of marketing—product, price, place, and promotion. To market a product effectively, you create products and define their features and benefits. You set the prices. You select places to sell products and services. You promote aggressively through advertising, public relations, direct mail, and other in-your-face programs. You control the message. We, the consumers, just have to listen and buy.
But the Net Generation—as I call the young people aged 11 to 31 who have grown up immersed in digital technology—is changing this game. They won't accept this one-way approach, not when they've been immersed in two-way communication from childhood. They were raised in a world of marketing and advertising, so they can detect a sales pitch with heavy topspin in a second. While they are not impervious to the power of advertising, they are more adept at filtering, fast-forwarding, and/or blocking unsolicited advertising than previous generations were. They can compare the company line with other versions of the story, and they have plenty of ways to find out from a wide variety of sources—including critics of the company.
The Net Generation has the power to change the way goods and services are bought and sold because they're an enormously powerful segment of consumers. In the U.S., students earn almost $200 billion a year in part-time or full-time jobs, and in 2006, they purchased $190 billion worth of goods. What's more, they influence their baby boomer parents. Net Geners age 21 and under influence 81% of their families' apparel purchases and 52% of car choices. Even younger children have powerful sway, with those between 5 and 14 influencing 78% of total grocery purchases. And, as they age, their direct purchasing power will soar. In 2003, only 5% of cars were purchased by people born between 1980 and 1995; by 2020, this will climb to 40%.
As shoppers, the Net Generation are tough customers. They usually go online to scrutinize a product—both its features and its price—before setting foot in a store. They expect plenty of choice and high-speed service. They think fun should be embedded in the product. They're not satisfied with one-size-fits-all items that can be bought only in certain places and at certain times. They want something that fits them—where, when, and how they want it. They're no longer passive consumers of the broadcast model. That's yesterday's news. They aren't just consumers, either. Some Net Geners are eager to contribute to the brand—something that wouldn't have occurred to most boomers.
Out With the Old Rules
Traditional TV advertising doesn't work well for this generation. They turn to their friends for shopping advice online—a small circle of best friends, a larger circle of acquaintances, plus the world. It's a puzzling change for marketers who are trying to be a "friend," but this is where the action is now.
I think the Net Generation will cause marketers to rewrite the rules of marketing for this generation, and ultimately for the future. Companies will play by ABCDE rules of marketing—Anyplace, Brand, Communication, Discovery, and Experience. Net Geners want to buy things Anyplace, where and when they want. They'll help shape the Brand, and the product. And they won't tolerate a lecture, however amiable. The standard ad will be replaced by Communication, a two-way conversation. As in any relationship, integrity will be one of the key building blocks of this new interactive brand. Since Net Geners research the product and its price online, they'll negotiate the price. I call this the Discovery of Price. And finally, they expect products to be at the same time an Experience.
Marketers, in other words, will have to change the way they operate in order to reach this generation.