Gen Y's are growing up. Believe it or not, 27 million are already old enough to drive. Automakers, meet your customers of the future.
They're young. They love cars. And there are a lot of them - about 70 million - a cohort nearly as big as the baby boom. But Generation Y doesn't think or act much like boomer consumers. They've already driven pop culture icons like Nike and Levi's to distraction with their fickle interest in alpha brands. Immune to tried-and-true brand strategies, they'll decide what's cool, thank you very much, and for reasons only vaguely grasped by their elders. All of which makes Gen Y both a tempting target and a formidable challenge for automakers worldwide.
Winning young hearts and sales may be even more of a challenge than many car marketers realize, if the purchase decisions of a group of Gen Y car buyers are any indication. More than 1,200 new-car acquirers between the ages of 16 and 22 were part of a survey of people who bought 1999 vehicles between September and November 1998, conducted by AutoPacific Inc., an automotive market research company with offices in Detroit and Los Angeles. What these young consumers told researchers, according to an exclusive analysis for American Demographics, is an early indication that the industry may be in for a bumpy ride.
For one thing, despite being putatively the most cyber-hip generation in history, these car buyers prefer to get their information about new cars from friends and relatives, and then confirm (or stomp on) those impressions with test drives. Despite the millions being sunk into automaker and other car-related Web sites, the Internet doesn't even rank in the top ten as a source of information for these Gen Ys. "Word of mouth will be the `viral' method of marketing in coming years, infecting someone with your enthusiasm," says J. Walker Smith, president of Yankelovich Partners Inc., a generational-marketing specialist based in Norwalk, Connecticut. The problem is figuring out how to get in on the conversation.
It helps to know who these kids are. Born between 1977 and 1994, the first Gen Y drivers got their licenses seven years ago. Now, despite the fact that auto companies just recently started noticing them, there are already about 27 million Ys out there old enough to hit the road, according to U.S. Census Bureau estimates.
Although they were between 16 and 22 years old when they were surveyed, only 21.9 percent of the AutoPacific respondents said they were students, either in high school or college. The rest are probably already in the workforce trying, among other things, to better afford new cars. The most common job categories are service, sales, administrative/clerical, and technical - jobs that don't necessarily call for a college degree.
In general, they seem to lead relatively quiet lives, not the revved up party-a-go-go that ads aimed at them would lead us to believe. A majority of them sa id they regularly spend time listening to music, hanging with friends, going to movies, dining out, and watching TV. Almost all of them shy away from political activity, tennis and, surprisingly, motorcycling.
What's even more surprising, at least to automakers planning to sell cars over the Internet, is that only 35.9 percent of those surveyed by AutoPacific say they regularly use a home computer. Part of the reason could be attributed to the racial and ethnic make-up of the group. Minorities, also less likely to own computers, make up a larger proportion of Gen Y, according to the Census Bureau - 34 percent, versus 27 percent of the total population. And the lack of college degrees - again, a strong indicator of computer use - may also be a factor.
About half of those surveyed by AutoPacific live at home with their parents, which may make buying a car a bit easier. Those who are driving new cars may have purchased them on their own or they may have benefitted from the largess of mom and dad.
But even that largess hasn't been very large: the average purchase price of a Gen-Y ride was significantly below that of the average for buyers of all ages in the survey: $21,116 versus $25,122. "Gen Yers appear to be `sentenced' to their vehicles," says Brad Fox, an AutoPacific analyst. "That is, they end up in a certain type of vehicle, not necessarily because they want to, but likely because of their financial position." The top category choices among these buyers, at 40 percent, were high-end small cars (like Dodge Neon and Ford Focus), among the cheaper cars on the market, but certainly not the cheapest. Indeed, of the top-five purchase reasons given by Gen-Y buyers, four were money-related (value for money, sticker price, warranty, insurance rates). The number one reason for selecting a car, though, was overall quality.
Jennifer Schardt, 20, a telephone representative and full-time student who lives (with four roommates) in East Lansing, Michigan, had to give up her dream vehicle after a dose of reality at the auto dealership. "I wanted a Jeep, but the payments were too high for a person my age," she says. Schardt eventually settled for a Pontiac Sunfire. She has to pay 17 percent interest on her loan (for people with no credit), but at least she got the sunroof, stick shift, and sporty look she wanted.
Other preferences emerge clearly when Gen Ys are compared to the total sample of new-car buyers, including their boring boomer parents. Younger buyers, male and female, are more likely than the total sample to want a car that's "fun to drive," with a CD player, convertible top, good tires, sleek design, and an image they can be proud of. They're also much more likely to pick a two-door model with four-cylinders and a manual transmission. Sigh. Money again.
Males and females differ significantly, though, both when it comes to what they bought this time out...and what they hope to buy. For their first purchase, almost half of Gen-Y women bought what AutoPacific calls "small-car high" - a Dodge Neon, say - compared to only 27.1 percent of the men. Another 15 percent of women bought a "middle-low car," like a Toyota Camry. Twenty-one percent of young men, on the other hand, bought a full-size pickup like the Ford F-Series, while 14 percent bought a compact pickup such as the Ford Ranger.
Brad Fox of AutoPacific explains: "[Gen-Y] guys are dumb dogs. The girls are cats - a little more finicky. Guys want their cars to go fast and have flash and dash. Girls want the car to start." But for their next car, even the girls would like more flash: 22.2 percent are hoping to buy a "middle-high SUV" such as a Jeep Grand Cherokee. But 13.2 percent are sticking with those good old middle-lows. Among males, the most desirable trade-up is, once again, the full-size pickup (17 percent) followed by the ever-popular "Don't Know."
Ask Gen Y for the preferred brand of their next vehicle and the usual suspects come out on top: Honda, Chevrolet, Ford, Toyota, and Dodge - in the same order for young buyers as for the total sample. Gen Y preferences for these brands, however, is much stronger than those of the total, with 41.4 percent planning to consider Honda next time, for example, versus only 24.8 percent of the total sample. Other brands attracting the consideration of at least 25 percent of Gen Y were BMW, Jeep, Lexus, and Volkswagen. Coming in last among the major brands in the mind of Y were Buick (2.8 percent) and Lincoln (3.2 percent).
Another little surprise lurks in the brand numbers, too. Some brands were mentioned much more often as a possible future purchase by Gen Y than by consumers overall (in order of preference): Mitsubishi, Hyundai, Kia, Land Rover, and Porsche. Absolute numbers of respondents mentioning these brands were small, but their high indices to the total sample may indicate that these brands could become considerably hotter as Gen Y matures.
Whether these preferences translate into actual purchases in the future is anybody's guess. But closing the deal will very likely depend on the automakers' ability to "become a part of the teen head-set," says Yankelovich's Smith. "Automakers should now be involved in establishing relationships with Gen Y, even if they're not ready to buy cars."
Manufacturers are beginning to get the message. In the past 20 years, Toyota has shown the world that it is possible to keep a generation as it ages, constantly creating the next popular car for baby boomers. It is currently trying to repeat that success with its Genesis Initiative, an effort to market the new Echo, MR2, and redesigned Celica to younger drivers. Part of that effort is www.isthistoyota.com, a Web site bursting with video clips, rock groups like Filter, and bad language - "stuff you can't say on television," according to Scott Gilbert, president of Saatchi & Saatchi Los Angeles, Toyota's creative agency. The site is aimed mostly at Gen-X buyers, but Gilbert hopes it will also entice Gen Ys to at least look at the brand in "a different light," to quote a recent Toyota TV spot. Perhaps that also explains "Driver's Ed," a geeky Toyota employee featured in recent teen magazine ads, dispensing such driving tips as "Attention Nose Pickers: Just because you are alone in your car - NEWS FLASH - you are not invisible."
A recent convert to the notion that it's never too early to create car buyers, Ford is reaching out to drivers and nondrivers alike with its campaign for the new Focus, a retooling of the basic Escort. It's being launched over 18 months to give good teen buzz an opportunity to sell the cars. And kids are buzzing about the souped-up Focus "statement cars" that Ford has loaned to key influencers like DJs, clubbers, assistants to stars, and X-gamers. It has also been noticed that the Focus sponsors Ricky Martin's tour, and that his dog was featured in a recent live commercial about cable diva Annabella Gurwich's life with her Focus. (If you're over 30, don't ask.) "Although very few of (Generation Y) are car buyers now, it is vital to create a relationship with them so they'll think of Ford when it's time to buy a car," says Julie Roehm, Focus brand manager.
Volkswagen, on the other hand, isn't doing anything special to attract Gen Y, counting instead on the broad appeal of its cars. "We don't target any age group. Rather, we target a psychographic that is active and performance-oriented," says Tony Fouladpour, spokesperson for the company. "We think our ad campaign, `Drivers wanted,' is an invitation to that experience."
Maybe so. At any rate, Gen Ys are definitely thinking more about cars than they used to. On the latest Coolest Brands list from Teenage Research Unlimited, a semi-annual ranking of the hot brands among kids aged 12 to 19, car companies made it onto the lineup for the first time ever. Among the hottest of the cool? Chevrolet, Ford, and Honda.