Getting Ready for gen y

Set the stage internally before targeting this segment with external efforts

(Article appears in the October 2007 issue of Community Banker Magazine)

by: Brady Walen; bwalen@formarketinsights.com

From their preference for multi-channel delivery, to their demands for ease and convenience; the needs and behaviors of Generation Y are undeniably influencing the financial services industry.  And while some institutions embrace the opportunities brought about by this younger generation, others continue to write them off as an irrelevant segment of the market; regardless of where you stand, their ultimate impact on products, delivery channels and marketing efforts is inevitable.  If your community bank hopes to effectively target this important subset of the marketplace, you must look carefully at the way you do business – and understand that substantial internal changes are not only likely, but certain. 

Generation Y (Gen Y) is generally considered to be those individuals born sometime between the early 1980’s and the late 1990’s; and, at some 75 million strong, they simply can not be ignored.  Within the next ten years, this extraordinarily diverse market segment is projected to become more financially powerful than any generation before it, and as a result, today’s financial institutions must address the issue of targeting Gen Y in planning for long-term growth. 

The degree to which you target Gen Y today obviously depends on your specific market and the current demographic profile of your market area.  But keep in mind that the impact of this group will eventually influence all financial institutions, and your efforts to reach them must go well beyond marketing alone.  Currently, too many financial institutions think only about this as a marketing issue and end up taking random and misguided steps in an effort to reach this market. 

We have all seen banks that try to launch a YouTube ad or offer a free iPod for opening a new account.  Sadly, most of these institutions haven’t made any changes to products, services, delivery channels or other operational areas necessary to appeal to Gen Y beyond these one-time marketing schemes.  This generation expects more from their retail relationships, and their banking behaviors and attitudes require you to address the internal aspects of the way you do business before you lead with flashy websites or give-a-ways. 

So if you are serious about targeting and serving Gen Y, you should keep these three important points in mind:

• Targeting Gen Y is a long-term initiative;
• Gen Y’s delivery preferences extend well-beyond the internet; and
• Building a multi-generational perspective internally can play a major role in influencing perceptions of this discerning group of consumers.  

Short-term vs. Long-term

Many institutions’ marketing initiatives, undoubtedly influenced by aggressive competitive pressures, are being driven by short-term goals.  This translates to reactive and unfocused efforts that are often price-based and disconnected from an institution’s messages and value proposition.  Examples of this are seen in the endless number of rate-driven advertisements and campaigns run by community banks in response to the actions of their competition. Perhaps you have experienced similar pressures, made similar choices in hopes of a “quick hit” and ended up with similar short-term, unsustainable results.

Similarly, many institutions have made reactionary, superficial attempts to target Gen Y.  Institutions can not simply develop a catchy marketing message or external marketing campaign and expect to attract Gen Y.  In fact, internal considerations like employee training, product development and operational issues must be addressed prior to launching external marketing initiatives to ensure that communications are supported by the customer experience.  And, while these changes may be more involved, and may require more time and resources, they are unavoidable if you expect to gain measurable market share from Gen Y.

A recent study by Javelin Strategy & Research concluded that today’s institutions are more focused on the “short term goals of gaining an increased share of wallet from their currently more lucrative customers.”  While it makes sense, in many cases, to pursue a target market with the potential to use a greater number of products and to carry larger balances, the study goes on to say that “not planning for the long-term with respect to Gen Y will leave banks and credit unions in the same position they find themselves in today, fighting for short term profits.”

The very nature of Gen Y’s needs require you to think about the long term.  Unquestionably the current financial needs of Gen Y are more limited than the needs of Generation X and Boomers, and this translates into less of an opportunity for immediate results over the short-term.  However, serving Gen Y’s current needs works to establish a connection upon which you can build a lasting and profitable banking relationship.  Many institutions are creating educational programs – both online and in-branch, to teach members of Gen Y about financial products and services that they are likely to need or want in the near future.  And others have created life-stage marketing programs designed to present a series of products and services that certain segments (i.e. Gen Y) may want to consider based on the financial needs at their specific stage of life.  

Delivery beyond the internet

Perhaps the greatest misconception about Gen Y is that their interactions with financial institutions are limited only to the internet.  While Gen Y may be more likely than other generations to use the internet to conduct basic transactions and to research financial services, it doesn’t necessarily eliminate their need for branches and human interaction.

The previously referenced Javelin study states that “Despite the popular belief that Gen Y is primarily focused on alternative channels and technologies, Javelin found that this generation is actually more likely to choose providers and manage their finances through a mixture of traditional and new methods.”  Their research found that “in the last 12 months 80% of older Gen Y used an ATM for either a deposit or withdrawal, 59% used an automated telephone system to perform a banking transaction, and 90% visited a branch, demonstrating apparent demand for multichannel availability.”

Because convenience and ease are drivers for Gen Y’s consumer behaviors, and the fact that this group grew up using and shaping technologies, it’s not surprising that Gen Y would be apt to use a mix of delivery channels.  When targeting Gen Y, you not only need to ensure that your institution is fulfilling the delivery preferences of this group by offering services online, over the telephone, at automatic teller machines and in-branches, but also that these delivery channels all work together to create a consistent experience for the Gen Y customer.  You should consider the sophistication, speed and ease of use of each of your delivery channels and take steps to ensure that each meets the expectations of this tech-savvy group.

That kind of institutional analysis and overhaul cannot be left to your marketing department.  There are obvious system-wide operational implications for creating a positive customer experience for Gen Y, especially if you are dealing with outdated or nonexistent technologies and delivery channels.  At a minimum, making changes to accommodate the preference for multichannel availability is the first step in creating an attractive delivery network for Gen Y. 

When it comes to marketing, you should take into account Gen Y’s social interactions and consumer behaviors before choosing new media to add to your marketing mix.  Some financial institutions are already hosting blogs, creating MySpace pages, participating in Second Life and adding mobile marketing to their more traditional initiatives.  And while these may be logical for some institutions, it’s important that you carefully evaluate and fully understand these media prior to investing time and resources in using them.  Remember, Gen Y is generally tech-savvy, and if these initiatives aren’t done with a relatively high-level of sophistication, they can create more negative than positive perceptions of your institution with this group.  

The multi-generational perspective

Decision making within most financial institutions is often left to senior management – and as the term “senior” implies, it usually involves one generation and often fails to include members of Generation Y.  Baby Boomers, who are often inclined to view Gen Y through the filter of their own needs and preferences, are being called upon to recognize the value of incorporating the perspectives of more than one generation in setting and implementing strategy.  And research has already revealed that you cannot hope to effectively target Gen Y consumers if you don’t actively recruit, develop and listen to your Gen Y employees.

Gen Y employees are smart, opinionated, and have grown up with a multitude of choices.  They are not afraid to challenge management and willing to confront the status quo.  Given the traditional nature of the financial services industry, many institutions must obviously be willing to make changes in both policy and practice to become a more attractive workplace for Gen Y employees.  Work-life balance isn’t just a buzz word for this generation, and static job descriptions with dead-end career paths are almost certain deterrents to Gen Y. 

A recent Deloitte study discussing strategies to attract and engage Gen Y employees, suggests that there are four characteristics that can serve as a guide for organizations targeting Gen Y.  These characteristics reflect the needs and values of this group, and include: flexibility, balance, respect and accessibility.  You can use these four characteristics as a starting point in assessing how attractive your institution may be as a place of work for Gen Y.  Think about the areas within your institution where these characteristics are evident; and, think about the areas where these characteristics are absent.  

As you attract members of Gen Y to your team, you can then begin creating a multi-generational perspective within your institution by including Gen Y employees in your decision making process.  This generation brings a unique perspective to the table, and can provide great insights relative to your local market, the perceptions and preferences that younger customers have, and about organizations with which you may consider partnering in your community relations.   

Hiring Gen Y employees is many times considered to be as difficult as attracting Gen Y customers.  You may find that, in addition to making internal changes, you need to adapt your recruiting process to target this group.  Rather than placing ads in a local paper’s employment section, you may find that an online job board, local school career fair or word of mouth referrals are more effective tools for recruiting Gen Y.  Furthermore, institutions looking to become a more attractive employer may consider outlining individualized career paths for younger employees, rethinking traditional job titles – which tend to be more rigid, encouraging teamwork and mentor relationships, and creating a sense of purpose for their work.

Becoming an employer of choice for Gen Y may be a difficult task for many community banks; however, think about how Starbucks continues to attract younger employees.  Starbucks has created an attractive environment that appeals to Gen Y’s needs and preferences – flexible hours, casual dress, a variety of multi-tasking assignments and an acknowledgement of individuality.  They have found a balance in becoming an attractive place of work for younger people while still appealing to their target customers and continuing to offer their unique value. 

Think about your next steps

When your institution makes a decision to move forward in targeting Gen Y, an assessment of your current situation relative to the three points discussed above is a sound starting point.  Consider the balance between your short-term and long-term marketing goals, and think about what more immediate internal changes can be made within your institution to better position your institution to target Gen Y over the long-term.

In addition, take a careful look at your delivery network.  Where a physical presence, a few ATM’s and a website may have been sufficient to serve your markets in the past, you should identify the steps you can take to make your delivery network more accommodating to this group’s preference for multichannel availability.  Think about how your delivery channels can work together to create a more consistent and branded customer experience for Gen Y.

Finally, think about your bank in terms of a workplace for Gen Y employees.  Identify areas that could be improved to make your institution and your recruitment procedures more attractive to Gen Y.  And, with any of these initiatives, make some decisions and take action!  A plan or an idea will do you no good in targeting Gen Y until it’s made a reality.