PBT Consulting

THE STATE OF U.S. HISPANIC CONSUMERS: YOUNG, MOBILE, BUYING POWER AND GROWING, PLUS TIPS FOR TARGETING THEM

More than 52 million strong and representing the majority of population growth over the next five years, Latinos have become prominent in all aspects of American life. A growing, evolving population, Latinos are a fundamental component to future business success, with a buying power of $1 trillion in 2010 that is projected to grow 50 percent to $1.5 trillion in 2015.

In State of the Hispanic Consumer: The Hispanic Market Imperative report, Nielsen has identified several unique circumstances that combine to make Hispanics the largest population group to exhibit culture sustainability—ever. Borderless social networking, unprecedented exchange of goods, technology as a facilitator for cultural exchange, retro acculturation, and new culture generation combine to enable Hispanic culture in the U.S. to be sustainable. In other words, Hispanic culture may evolve but will not go away.

For businesses, this makes understanding Hispanic consumers essential. Key findings of The Hispanic Market Imperative include:

• The overall U.S. population is graying, but the Latino population remains young and the primary feeder of workforce growth and new consumption. The median age of the Latino population is 28 years old, nearly ten years younger than the total market median age of 37 years. Given that the age for a new home buyer is between 26 and 46 years old, Latinos will become a force in residential purchasing over the next ten years.
• Technology and media use do not mirror the general market but have distinct patterns due to language, culture, and ownership dynamics. For example, Hispanics spend 68 percent more time watching video on the Internet and 20 percent more time watching video on their mobile phones than non-Hispanic whites.
• Latinos exhibit distinct product consumption patterns and are not buying in ways that are the same as the total market. Hispanics make fewer shopping trips per household than non-Hispanics, for instance, and spend more per trip.
• Rapid Latino population growth will persist. Between 2000 and 2011, Hispanics accounted for more than half of the U.S. population increase; in other words, their 10-year increase was slightly greater than that of all other non-Hispanics combined. Hispanics will contribute an even greater share (60 percent or higher) of all population growth over the next five years.
• Hispanic culture is sustainable. A 2011 national survey of Hispanic adults found that nine out of ten Hispanic parents and parents-to-be want their children to be able to speak Spanish, even though they also want them to become fluent in English.

To download The Hispanic Market Imperative, visit nielsen.com.

COMMENTARY:   The U.S. Hispanic population is the largest minority segment and is growing at a dramatic rate towards ethnic plurality, which has already occurred in the most populous states and is beginning to occur among the U.S. baby population. Ethnic plurality refers to the coexistence of numerous ethnicities and races with no one segment in the majority. If the present U.S. economy substantially benefits from Hispanics, the future U.S. economy will depend on Hispanics by virtue of demographic change and the social and cultural shifts expected to accompany their continued growth.

It has become increasingly important to challenge commonly held misconceptions about the Latino market that undermine the importance of its size, uniqueness, and value. The topics that follow are fully addressed in the report and draw on compelling evidence of market change and the perspective of marketers who have proven success in the Latino marketplace.

• Latinos are a fundamental component to business success, and not a passing niche on the sidelines.
• Rapid Latino population growth will persist, even if immigration is completely halted. 
• Latinos have amassed significant buying power, despite perceptions to the contrary.
• Hispanics are the largest immigrant group to exhibit significant culture sustainability and are not disappearing into the American melting pot.
• Technology and media use do not mirror the general market but have distinct patterns due to language, culture, and ownership dynamics.
• Latinos exhibit distinct product consumption patterns and are not buying in ways that are the same as the total market. The information in this report confirms what many marketers have known for some time, and yet, for some this is a wake-up call about change that is here to stay

Hispanics are big business now

The United States is on a path to ethnic plurality, which is largely driven by remarkable Latino consumer market growth. The country’s vibrant demographic composition, with its healthy multicultural dynamic and youth, are a critical American asset in the global economic competition. At the heart of this asset, both now and over the next several decades, is the Hispanic population.

Over 52 million strong, Latinos are impacting every aspect of the national landscape including popular culture, the workforce, consumerism, politics and American national identity. The Hispanic market’s size, growing clout, and buying power of $1 trillion in 2010 and $1.5 trillion by 2015 require thoughtful understanding about what the market represents to a company’s bottom line. Latinos are no longer just a sub-segment of the economy, but a prominent player in all aspects of American life.

Many companies believe that significant growth opportunities come from outside the U.S., but the Hispanic market offers unique growth prospects within our borders. If it were a standalone country, the U.S. Hispanic market buying power would make it one of the top twenty economies in the world.  What’s more, the per capita income of U.S. Hispanics is higher than any one of the highly coveted BRIC countries (Brazil, Russia, India, China).  Despite the recession, U.S. Latino households that earn $50,000 or more are growing at a faster rate than total households.

Companies like Procter & Gamble, General Mills, Unilever, Coca Cola, and Walmart have made the Latino market an imperative for growth. Many have recognized that the American marketplace has changed and Latinos are a primary driver of growth, essential to future success. Similarly, major political candidates are specifically targeting Hispanics who are critical to the vote when considering Latino driven change in the electoral map and the sizeable presence of Latinos in swing states like Florida, Nevada, and Colorado. In politics or business, Hispanics can be the difference between winning and losing the battle.Based on above average consumption of many consumer products and their continued demographic growth, Hispanics will be the dominant and in many cases the only driver of domestic CPG sales growth.

Hispanic account for most of U.S. future growth

Between 2000 and 2011, Hispanics accounted for more than half of the U.S. population increase with slightly greater growth than that of all other non-Hispanics combined. Hispanics will contribute an even greater share (60 percent or higher) of all population growth over the next five years. Even though immigration is down sharply,  Hispanics continue to experience dynamic growth. In fact, Hispanics are the fastest growing ethnic segment expected to grow 167 percent from 2010 to 2050, compared to 42 percent for the total population.

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The overall U.S. population is graying, but the Latino population remains young and the primary feeder of workforce growth and new consumption. Over 60 percent of the U.S. Hispanic population is under age 35, and 75 percent is under age 45. The 2011 graph demonstrates a reversal of population trends around age 45, where Hispanics are concentrated in younger segments and non-Hispanic Whites in older groups. The median age of the Latino population is 28 years old, nearly ten years younger than the total market median age of 37 years. Given that the age for a new homebuyer is between 26 and 46 years old, Latinos will become a force in residential purchasing over the next ten years.

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Because of Latinos’ favorable demographics and increasing economic buying power, IBISWorld, producer of Industry Research Reports, has identified seven economic sectors expected to benefit most from Latino demographic change: residential buying, food (grocery and restaurants), retail (especially clothing and electronics), education (higher education and technical schools), financial services, transportation (automotive and airline), and entertainment and media industries.

The U.S. population map shows continued growth in traditionally Hispanic areas and dramatic dispersal and new growth in areas where Hispanics were recently unknown. The raw growth numbers (represented by dots) show that even with very large established bases, growth persists in California, Texas, the Southwest, most of Florida, New York metro and Chicago metro. 

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Hispanics are 16 percent of the nation’s population, and have much higher concentrations in Texas (38 percent), California (38 percent), Florida (22 percent), Colorado (21 percent), Nevada (27 percent), and New Mexico (46 percent). Areas within these states contain large pockets of Latinos where marketers can analyze communities and anticipate new trends that affect a growing proportion of their business. In a very real sense, Hispanics are a bellwether for the rest of the country’s future.

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Hispanic growth in the top Hispanic DMA s is approximately two or more times larger than total population growth demonstrating their growing influence across many of the country’s major markets.

Latinos are at the intersection of language, technology and data

Latino usage rates of television, smart phones, social networking, online video and other forms of entertainment make Latinos one of today’s most engaged and dynamic targets. The distinctive combination of relative youth, community, culture and language preference positions Hispanics to become pioneers in new media trends and further accelerate technology uptake.   

Multiple platforms for television and online viewing

Due to sheer numbers, Hispanics have wielded significant influence on the media landscape, shaping programming content, dedicated channels and vehicle offerings. 

Hispanics access media from every platform available and often lead the general market as early adopters of emerging technologies. Approximately 60 percent of Latino households own at least one video- and Internet-enabled cell phone, compared to 43 percent of the general market. In monthly time, Hispanics spend 68 percent more time watching video on the Internet and 20 percent more time watching video on their mobile phones compared to nonHispanic Whites.

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Real-time TV viewing still ranks high with the Latino market. Hispanics are less likely to use a DVR player than the average household, with only 31 percent of Hispanic households owning a DVR player versus 41 percent of the general market. Interestingly, Hispanic DVR households are two to three times more likely to timeshift English than Spanish language programming. 

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Language serves as a cultural constant threading through many of the trends discussed in this report. Nielsen Universe Estimates show that 56 percent of Hispanic adults speak primarily Spanish at home, compared to 40 percent who speak primarily English. These data underscore the importance of using Spanish to reach Latinos.

Cultural influences such as family size and presence of children, as well as language aptitude determine TV viewing habits. For example, the co-viewing phenomenon is particularly prominent in the Latino community with parents and children sharing the viewing experience. In May 2011, Hispanics co-viewed 59 percent of all Spanish language broadcast prime time programming. In the same period, the general market co-viewed 48 percent of all English language broadcast prime time programming. 

Programming genre reflects culture differences as well. Latinos over-index in certain genres such as talk shows, news documentaries, daytime dramas and sports news. In contrast, general market viewers spend much more time on police dramas, situation comedies, science fiction and evening animation. This difference is tied to Hispanics’ focus on engagement in relevant information and culture-related programs more than on pure entertainment.

Technology adaption and adoption

Latinos may use the same technology as the rest of the country, but adapt it differently making it more of a culturefocused tool. The following discussion of Internet and mobile phone use addresses similarities and differences when comparing Hispanics and the total market.

Approximately nine out of ten Hispanics have access to the Internet, when extended family, work, school, and other public places are included. Hispanics are less likely to have Internet access at home compared to the U.S. average (62 percent and 76 percent, respectively).  

Over the past year, Hispanics increased home broadband use by 14 percent, which is more than double the 6 percent growth of broadband use in the general market. 

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There is an emerging segment of tech savvy Hispanics who have leapfrogged Internet home access altogether. Hispanics are three times more likely to have Internet access via a mobile device, but not have Internet at home (9 percent vs 3 percent, respectively). Overall, Hispanics are 28 percent more likely to own a smartphone than non-Hispanic Whites, which is a significant avenue of opportunity for marketers. Hispanics outpace all ethnic groups in mobile data service consumption including music and picture downloads, and at a growing rate. Hispanic dependence on mobile devices for Internet connectivity could explain why their average bill is 8 percent higher than the general market.

Latino Differentiated Consumption 

Evidence from many sources demonstrates that Hispanic product consumption is indeed unique in many respects, and well differentiated in comparison to other U.S. consumers. Hispanics do not necessarily mirror consumption patterns of all consumers and therefore it is essential to understand their needs, wants, and shopping tendencies. Across all retail channels, Hispanics tend to shop less often, but spend more per trip, and are less likely to buy products at promotional prices.

In many categories, Hispanics have different consumption growth rates than Non-Hispanics. Beverage sales trends show powerful evidence of Hispanic consumers acting as the accelerators for growing categories and the brakes for declining ones. This can be described as the Hispanic Advantage that is found in the projected Compounded Annual Growth Rates (CAGR) from 2010 to 2015 in eight of nine beverage categories, where Hispanic CAGR is equal to, and in many cases higher than the CAGR of nonHispanics. These projections mirror trends of the past several years and substantiate Hispanic’s growing contribution to future beverage business.

Hispanics spend substantially more than the total market in the top ten Hispanic product use categories which include baby products, hair care, and toiletries. These figures show a small sampling of highly personal and meaningful categories, where marketers benefit from understanding whether Hispanic category consumption differs from the general market.

For instance in the hair care category, Latinas begin dying hair at an earlier age than the total market, and purchase hair color dye more frequently. Hair color is seen as an important and inexpensive path to self-expression and beauty, which can bring light to potent consumer insights for hair care marketers. In baby care, several companies have shifted how they approach the Latino market, no longer relegating them to second tier consideration, but making Latinos a focal driver of business growth. 

Latino name brand loyalty fact check

Total retail channel data for all CPG categories shows that Hispanics are just as likely to buy name brands and private label as the general market.  

That said, Hispanic name brand loyalty prevails in three hotbed CPG categories with significant consumption - hair care, baby products, and health and beauty - where Latinos are more likely to buy name brands than the total market. In hair care, Latino name brand buying is 43 percent higher than the total market, while private label buying levels are comparable.

Latinos spend 15 percent more on branded baby products and 10 percent more on private label making baby care a win-win for all types of products targeting this segment. In health and beauty, Latinos spend 10 percent more on name brands and 9 percent less on private label versus total market. In these very meaningful categories, Latinos say they buy store brands “due to the economy,” and not necessarily because of preference.

Companies spend their dollars where they see the most potential and today they are spending $5.7 billion on Spanish media, the majority of which is spent on Spanish television. Spending in almost all Spanish advertising mediums increased from 2010 to 2011, further evidence that marketers will continue to invest in this growing marketplace as the economy recovers. While not quantifiable, there is also some Hispanic media spending allocated to English language initiatives by advertisers mindful of English speaking Latinos.

The top ten list of Spanish advertisers is made up of leaders who have made a serious commitment to this market. Companies who were on the top ten list in both 2010 and 2011 were Procter & Gamble, McDonald’s, AT&T, Verizon, Toyota, General Mills and General Motors. McDonald’s says they “lead with ethnic insights,” reflective of the fact that 40 percent of their revenue comes from ethnic consumers. McDonald’s is the fourth largest Spanish language advertiser spending $131 million in this arena. Procter & Gamble has also stated the importance of using ethnic insights to lead total market campaigns in certain categories. These marketers, and many others, are intensifying and fine-tuning their Latino strategies to stay competitive in the changing marketplace.

COMMENTARY:

Courtesy of an article dated April 17, 2012 appearing in the Nielsen Blog and the Q2 2012 State of the Hispanic Consumer: The Hispanic Market Imperative

MAKE LEGO MOVIES THE EASY WAY WITH THE NEW MOVIE MAKER APP

A new app for Lego allows users to create stop-motion movies with DC superhero characters, edit them, and share them--all on an iPhone.

There are few things the Internet likes better than a Lego-based video. This has not gone unnoticed by the people at Lego, who have just released an app that lets users of all ages create mini movies based on the toy.

 

San Francisco-based agency Pereira & O’Dell worked with Lego to launch the DC Super Hero Movie Maker app, which is now available on iTunes. The app helps kids (and adult nerds) pretend to be Tim Burton and create stop-motion superhero movies on their iPhones.

Pereira & O’Dell account supervisor Izzy Weberbauer says.

"We wanted to create an unique experience that helps bridge the gap between the digital world and the physical world of Lego," 

The agency worked closely with the Lego Super Heroes brand team to develop the concept and design of the app and brought in Portland mobile development and design studio Uncorked to bring the idea to life.

The app turns your phone into a functional edit bay, where you can trim down scenes starring DC Universe Super Heroes, and add title cards and music. The odds are you’ll do a better job of it than Joel Schumacher did with Batman & Robin. And since you won’t be ashamed of the finished product, you can use the app’s easy sharing functionality to show it off.

COMMENTARY:    The LEGO® Super Hero Movie Maker  by The LEGO Group was released April 18, 2012 and is available for FREE downloading through iTunes.  Requirements: Compatible with iPhone 3GS, iPhone 4, iPhone 4S, iPod touch (3rd generation), iPod touch (4th generation) and iPad.Requires iOS 4.3 or later.  

The LEGO DC Super Heroes Movie Maker iPhone app helps your child bring their LEGO DC Universe Super Heroes come to life.  

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This fun, kid-friendly app brings the whole family together to create a LEGO stop motion movie on the iPhone. Simple tools and guides make it easy to shoot, edit, even score your movie with music. Add one of the customizable title cards and share it online and who knows, you may have the next summer blockbuster in your hands…literally!

LEGO DC Super Heroes Movie Maker App Features:

• Add & delete frames to your movie
• Choose from 5 different soundtracks
• Add a color filter to the camera
• Customize one of 11 different title LEGO Super Heroes cards
• Save your movie to your camera roll then share with your friends

 

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I wasn't aware of this, but The LEGO Group has several other iPhone apps available through iTunes:

• Life of George (Free) - The world’s first interactive game combining real LEGO bricks with apps for your iPhone/iPod Touch.  Rating:  4.5 stars.
• LEGO Photo (Free) - What would your child’s smile look like made of LEGO® bricks? Or your pet hamster?  Capture your child’s moments of brilliance in LEGO bricks.  Rating: 5 stars.
• LEGO® DUPLO® Farm Friends (Free) - LEGO® DUPLO® is a new toy every day designed for boys and girls aged 2-5.   Let your child explore the DUPLO farm through the Farm application – there is so much to explore from animal sounds to the big farm machines. Rating:  4 stars.
• LEGO® Creationary (Free) - How quickly can you guess what’s being built from LEGO bricks?   “Roll” the LEGO Dice to find out which of the 4 randomly selected categories you’ll guessing: nature, vehicles, buildings or things.  The game starts building an object from that category out of LEGO bricks, and you have to guess which of the four possible answers is correct by tapping the illustration that you think matches what is being built. The faster you guess correctly, the more points you earn. The more you play, the more difficult the game becomes. Guess incorrectly and the game ends.  The Creationary board game is an award-winning build-and-guess LEGO game that challenges the imagination, creativity, building and guessing skills of you, your family and friends with more than 300 bricks and accessories. With the LEGO Creationary app, you can guess what’s being built on iPad, iPhone & iTouch! Rating: 4 stars.
• LEGO ® Minifigures Collector (Free) - How to play?  Slide the LEGO (R) piece to get the minifigures parts rolling. Match all the 3 pieces of a LEGO Minifigure (head, torso and legs) and make it a part of your personal collection!  Rating:  4+ stars.

Courtesy of an article dated April 21, 2012 appearing in Fast Company Create

BOSTON CONSULTING GROUP IDENTIFIES SIX DISTINCT TYPES OF MILLENNIALS, AND 50% OF THEM DEFY THE STEREOTYPES

 

Mountains of research can attest to what experts say Gen Y has in common, from passion for the environment to tech love. But new research from the Boston Consulting Group breaks this massive block of humanity, some 79 million strong in the U.S., into six distinct groups. And about 50% defy the stereotypes most marketers live by.

Christine Barton, a partner at the Boston Consulting Group in Dallas and an author of its report on Millennial Consumers, tells Marketing Daily in an email.

“Our research reaffirmed the historic optimism of Millennials.”

But it would be a mistake to take that generalization too far.  She says.

“If there is an average media image of U.S. Millennials as sheltered, civic-minded, team-oriented, less consumptive, and socially conscious, that describes at most three of our segments, or about 50% of our Millennial respondents. Not all offerings and marketing images and messages will universally appeal to Millennials.”

The Boston Consulting Group survey classifies Millennials into six distinct groups:

• Hip-ennials - The largest group, at 29%, are the Hip-ennials, and are sheltered under the umbrella statement of “I can make the world a better place.” Despite that optimism, they are cautious consumers, hungry for information, and female-dominated, including many students and homemakers.
• Millennial Moms - The next-largest group is Millennial Moms, accounting for 22%. This segment is both the oldest and the most affluent, with a high online intensity, and commitment to working out, traveling, and pampering their children.
• Anti-Millennials - About 16% fall into Anti-Millennials, the third-largest group and one that runs counter to many of the generation’s stereotypes:  They’re conservative, for example, won’t spend more for green products, and are best typified by the statement: “I’m too busy taking care of my business and my family to worry about much else." 
• Gadget Gurus - And despite that the cell phone commercials would have you believe, just 13% can be classed as true Gadget Gurus. Characterized by “It’s a great day to be me,” this group is affluent, well-wired, and most likely to be male. They are also likely to be single, and to believe this is his best decade.
• Clean and Green Millennials - The most environmentally concerned are classed as Clean and Green Millennials, who account for just 10% of Gen Y. Cause-driven, green, and positive, they are also the most likely to contribute content, the youngest, and more likely to be male or Hispanic.  
• Old School Millennials - And finally, the consulting company discerns a group it calls Old School Millennials, also about 10% of the Gen Y population, that is far less tech-involved than others. They read the most, are older, and while they are also cautious in purchases, are confident, optimistic and self-directed, and would rather meet friends for coffee than over Facebook.

Overall, Barton says,

“The good news for companies is we didn't find a generation fundamentally less interested in consuming. In fact, we found a generation vocal in its self-perceived knowledge of categories and brands, of its enjoyment of spending, and of its influence on the spending of parents, siblings and friends.”

There is bad news, however, in that the research -- which included 4,000 people between 16 and 34 as well as 1,000 non-Millennials, ages 35 to 74 -- found that those in the 35-plus segment don’t like Gen Y all that much.  Barton says.  

“We saw much more negative and dismissive impressions of the generation by those over 35 years old, raising the question: If executives feel as negatively about Millennials as their counterparts, how will they bring authentic, relevant and resonant products that understand and meet Millennials' needs?”

Barton says she was also surprised by how strongly Gen Y is influenced by its generation, as opposed to lifestage. She says.  

“When we looked at the attitudes of Millennials with more discretionary income, or that were older, or that were in structured jobs, or that were married, or that had children, they had more in common with Millennials than with non-Millennials sharing their life stage.” 

COMMENTARY:    I love Millennials, because they are an illusive target to market to, and very suspicious of advertising.  Many of them are in debt up to their ears from student loans, but they are our future, whether we like it or not.  After the Baby Boomers, the Millennials are the second largest demographic.   If you want to reach the Millennials, forget just about everything you've read about marketing to Millennials, but read my blog post dated September 30, 2011.  You see folks, it takes more than just marketing.  You need to get inside their heads.

According to the Boston Consulting Group survey, " The Millennial Consumer: Debunking Stereotypes," when making purchases, 33% of millennials favor brands that have Facebook pages and mobile websites, as compared to 17% of non-Millennials. Similarly, nearly half of Millennials (47%) agree that their lives "feel richer" when they’re connected to people through social media; just over one in four of non-Millennials (28%) express this sentiment.

The report finds that Millennials and Non-Millennials spend roughly the same amount of time online, but Millennials are more likely to use the Internet as a platform to broadcast their thoughts and experiences and to contribute user-generated content. Millennials are also more engaged in activities such as rating products and services (60% versus 46% of non-Millennials); and uploading videos, images, and blog entries to the Web (60% versus 29%).

Millennials put a premium on speed, ease, efficiency, and convenience in all their transactions. For example, the survey notes, they shop for groceries at convenience stores twice as do often as non-Millennials. Millennials are also receptive to "cause marketing" and are more likely to choose products whose purchase supports a cause (37% versus 30%).

Of Millennials who make direct donations (34%), almost half donate through their mobile devices (15%), compared with only 5% of non-Millennials. More Millennials than non-Millennials report using a mobile device to read user reviews and to research products while shopping (50% versus 21%), the survey says.

More U.S. Millennials than non-Millennials report using MP3 players (72% versus 44%), gaming platforms (67% versus 41%), and smartphones (59% versus 33%).  Non-Millennials reported using desktop computers at home (80% versus 63%) and basic cellphones (66% versus 46%).

Millennials are also more likely than non-Millennials to explore brands on social networks (53% versus 37%).

For those of you conducting research on the Millennials, click HERE.

Courtesy of an article dated April 15, 2012 appearing in MediaPost Publications Marketing Daily and an article dated April 12, 2012 appearing in LifeHealthPro

GIRLS ARE SMARTER THAN BOYS WHEN THEY ARE YOUNGER. BUT WHY DON'T THEY PURSUE MORE CAREERS IN MATH AND SCIENCE?

IF GIRLS HAVE SLIGHTLY HIGHER IQS AND GET BETTER GRADES, WHY ARE THEIR NUMBERS DISPROPORTIONATELY LOW IN MATH AND SCIENCE CAREERS?

I still remember learning in grade school that men were better at math and science, and women were better at English and art. The teacher (who was a woman), presented the information as a general fact--noting that these were just loose guidelines that could differ from person to person--and I didn’t question it for a second. You know, until I grew up a bit and realized the very premise was preposterous.

But as this infographic (which is really a narrative of sorts) shows us, it’s not enough to right the wrongs of gender perception when people grow older, the damage has already been done.

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A lot of these facts are likely nuggets you’ve heard before, like girls performing worse on tests when they are required to mark their gender. But seeing each factoid lined up in pseudo-chronological order, from a grade schooler to a professional, it seems inevitable that women don’t stake their place in industries already dominated by men.

The picture is incomplete, of course. We don’t see how the comparative self-esteem of men evolves over the same time. But it’s safe to say that, when only 16% of students in engineering classes are women, we’re doing something wrong--especially when we can all benefit from some fresh perspective.

Twenty years or so after that day in grade school, I’m a writer and my wife is a scientist. I guess that, given these gender-professional norms, you could make a joke about who wears the pants in my family. But it could never offend either of us. No matter what we do, she’ll still be smarter than me anyway.

COMMENTARY:    These are alarming statistics.  Makes you wonder what is the underlying cause of the loss of self-esteem among females.  Perhaps it could be that women simply do not care to pursue careers requiring too much math and science.  There are fewer of those type of jobs, and many of them are in academia or technology centers like Silicon Valley, and they very often do not pay very much, than jobs in the private sector.   Whatever the reason, it makes you wonder if the math and science "gap" that economists talk about and reasons why American universities are producing fewer engineers than China, Europe and India per capita is because of that gender gap in math and science.  

In a blog post dated September 29, 2011, the U.S. is producing more science and engineer graduates (undergrad and graduate) in 2008 than they did in 1998.  However, the state of science and engineering in the U.S. is still strong, yet the nation's lead is shrinking, according to the latest report from the National Science Board.  Based on a wide range of data - from R&D spending to higher-education trends in science and engineering fields - the group's Science and Engineering Indicators 2010 report suggests that U.S. dominance of world science and engineering has deteriorated significantly in recent years, due in large part to rapidly increasing capabilities in China and other Asian economies.

However, U.S. high-technology employers have given our educational system a bad rap, claiming that we don't produce sufficient science and engineering students to fill their employment requirements.  They always seem to bitch about the limitation on H1B visas.  We have already outsourced nearly 20 million jobs overseas, and employers are trying to do the same thing by importing more science and engineers at lower wages.  I remember a "60 Minutes" documentary about why they hire foreign engineers.  They claim they are smarter.  I think that's bullshit.  The real reason is economic--they are cheaper.  U.S. employers are using the H1B visa as a gimick to reduce overall science and engineering wages.   I say, hire American, keep those jobs here, and provide incentives for U.S. students to pursue science and math courses. 

It appears that the shortage of females in careers requiring science and math is not strictly a U.S. problem.   A similar problem exists in India, a bastian of math and science graduates, and important source of software engineers for Silicon Valley.   In fact,  the percentage of females studying science, engineering/technology and medicine are in the low teens when compared to their Indian male counterparts.   Only 15.8% and 16.5% of India's graduate and doctoral candidates are female respectively.   It would not surprise me that similar numbers exist in Japan, a very male dominated society, but I don't have the data.    If anybody does, post it in the blog.   

Courtesy of an article dated March 21, 2012 appearing in Fast Company Design

21 FACTS ABOUT MILLENNIAL TABLET OWNERS AND THEIR MOBILE DEVICE SHOPPING BEHAVIORS

Once again, Apple had everyone all a-flutter last week with the announcement of its third generation "the new iPad,"  Given all the additional focus on tablets lately, it’s a good time to hone in on what is know about Millennial tablet owners. 

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21 Fast Facts about Millennial Tablet Owners

1. Slightly more than half of all tablet owners are Millennials. 
2. One in three new tablet owners are Millennial women. 
3. Thirty-five percent of adult Millennials own a tablet. 
4. Nearly half of all male Gen Yers own a tablet—that’s higher than any other gender/generation break. 
5. Millennials are more likely to have a tablet than to own and regularly use personal digital media players without wifi (think older-generation iPods), netbooks, HD radios, satellite radios or e-readers. They are just as likely to have a tablet as they are to have a handheld gaming device or Blu-Ray player. 
6. Male Millennials are about as likely to have a tablet as they are to have a DVR in their home. 
7. More than half of Millennial-owned tablets are iPads; one in ten are Kindle Fires. 
8. Male Millennials are more likely than any other gender/generation break to have a 64 GB iPad. Female Millennials are the least likely. 
9. In a broad sense, the tablet has more utility to the Millennial owner. They think of it as much more than an entertainment, information and communication device. It’s also an organizer, media storage unit, work device, social networking tool, style statement and recorder/documenter. 
10. Still, slightly more than half of Gen Y tablet owners classify their tablet as a toy, not a tool.  
11. Generation Y tablet owners are more likely than older generations to seek local news on their tablets. 
12. Millennial tablet owners aren’t the most likely to regularly use their tablets for social networking. (It’s actually Gen X tablet owners).  
13. Male Millennial tablet owners are more likely than any other gender/generation break to use GPS-based apps on their tablet to track friends and family (e.g., think find out where they are and then go meet up with them). 
14. Two in five Millennial tablet owners regularly get sport scores on their tablet. 
15. The three types of videos Millennials watch most on their tablets are, 1, user-generated videos (i.e. ,YouTube), 2, professional clips (i.e. movie trailers, TV clips) and, 3, full-length TV shows. 
16. One in five Millennial tablet owners regularly watches adult/erotic videos on their tablets. 
17. One-third of Millennial tablet owners regularly use their tablet at work. 
18. Half of Millennial tablet owners regularly use their tablet in their living room/family room/den during primetime on weeknights. 
19. Two in five Millennials tablet owners regularly take their tablet to bed during the week.
20. On the weekends, Gen Y tablet owners are more likely to use their tablets in their bedroom than any other place. 
21. Gen Y tablet owners multi-task. Forty percent regularly cook or bake while using their tablet, 38% watch TV, 27% get ready/get dressed, 32% do housework, 22% go shopping at a store and 41% talk on a cell phone. 

COMMENTARY:    Interesting information about Millennials and their tablets, especially that they use their tablets in bed.   

In a blog post dated January 8, 2012,  I had reported Apples iPad sales numbers for the calendar years 2010 and 2011 (Nine months):

• Calendar Yr Ending 12/31/10:  14.79 million
• Nine Months Ending 9/30/11:  24.67 million

Apple sold 15.43 million iPads for Q1 2012 (Quarter ending December 31, 2011), so total iPads sold for the calendar year ending December 31, 2011 is  40.10 million or nearly 90% of total global tablets. 

In a blog post dated February 11, 2012, I reported that Apple sold 40.1 million iPads and nearly 50% of iPad owners are classified as affluent.  According to the U.S. Census Bureau 20% of Americans are classified as affluent or making $100,000 in income or more. This would place number of Americans making $100,000 at about 58.5 million.  Roughly 20 million (50% of 40.1 million ipads) Apple iPad owners are classified as affluent.  Therefore, roughly one-third of the U.S. affluent demographic now own iPads.  That's a pretty hefty adoption rate for an Apple product that has only been available in the marketplace about two years.  How many more affluent Americans are likely to buy an iPad?  It begs the question whether the number of affluent Apple iPad owners is quickly reaching a peak.  

I don't normally equate Millennials with affluency, because nearly 40% of them are underemployed (hold temp jobs or part-time work)  and making less than $30,000 per year.  They are mostly consumers and save little.   The Millennial generation is also carrying the most debt of any generation.  Most of this from student loans whcih average nearly $50,000.  Shit!!  

So where the hell are Millennials able to obtain the money to purchase expensive tablets like the iPad and related accessories?  The answer may lie in that Millennials are known for taking on more than one part-time job or making sacrificies when it comes to owning one of Apple's magical devices (iPod, iPhone or iPad).  I did discover that up to one-third of Millennials are buying used automobiles, so I have a feeling that they are buying the majority of the used iPads that are out there (40 million older original iPads and iPad 2's).    

Another observation that I have made is that Millennials will simply not pay for WIFI or internet service, but prefer to use it for free.  They are a generatino of freeriders.  Starbucks realized that by offering free WIFI service they attracted a higher proportion of Millennials.  Today you will find Millennials in abundance at Starbucks, but a lot of them also use their Apple Macbooks.  This begs the question: Where the hell do they get the doe to buy an Apple Macbook?

If anybody knows the mystery as to where the Millennials are getting their money to buy Apple iPads and MacBooks please post it here.        

Courtesy of an article dated March 23, 2012 appearing in MediaPost Publications Engage:GenY

SOCIAL NETWORK DEMOGRAPHICS: FEMALES AND 45-YRS+ DOMINATE, MIDDLE INCOME, COLLEGE EDUCATED, YOUTH FLOCKS TO GOOGLE+

Females now dominate over males on social networks like Facebook, Twitter and Pinterest

Social networks are well known for being fairly secretive about the demographic of their users, but thanks to onlineMBA, and combining demographic data from several different sources, all that demographic data is now compiled into the impressive infographic below.

An analysis of the social media demographics reveals the following peculiarities and differences between social sites:

• Gender - Social networks definitely tend to appeal to one gender over another, sometimes by quite a margin.   
  • Facebook, Twitter and Pinterest - Females outnumberd males on Facebook (57%) , Twitter (59%) and Pinterest (82%).  Pinterest had the widest disparity with females greatly outnumbering males 82% versus 18%.
  • Google+, Reddit and Digg - Males greatly outnumbered females on Google+ (71%), Reddit (66%) and Digg (55%).
  • LinkedIn - LinkedIn was the only social network with gender parity with males and females evenly distriputed 50-50.
• Age - It used to be that social networks appealed to those under 25 years of age, but not anymore.  Social network users are definitely getting older, with the highest percentage of users being 45 yrs or older.  
  • Google+ - 50% 
  • LinkedIn - 49% 
  • Facebook - 46% 
  • Pinterest - 35%
  • Twitter - 33%
• Education - The majority of social network users lack college degrees (BA or graduate degrees), although many have some college education.
  • LinkedIn - 37% (BA or graduate degrees), 37% (some college).
  • Reddit - 36% (BA or graduate degrees), 48% (some college).
  • Digg - 28% (BA or graduate degrees), 59% (some college).
  • Pinterest - 25% (BA or graduate degrees), 61% (some college). 
  • Twitter - 24% (BA or graduate degrees), 59% (some college).
  • Facebook - 24% (BA or graduate degrees), 57% (some college).
  • Google+ - Data not available, but the majority of users tend to be in occupations definitely requiring college degrees (technology, software developers, designers and architects, engineers, etc.).
• Household Income - The majority of social network users tend to have households with upper middle class incomes between $50K-$99K (upper middle class), and $25K-$49K  (lower middle class).  LinkedIn has the highest percentage of professionals and they tend to have higher incomes.   
  • LinkedIn - 50% (upper middle class), 22% (lower middle class).
  • Facebook -  47% (upper middle class), 33% (lower middle class).
  • Pinterest - 46% (upper middle class), 37% (lower middle class).
  • Twitter - 37% (upper middle class), 38% (lower middle class).
  • Digg - 37% (upper middle class), 37% (lower middle class).
  • Reddit - 32% (upper middle class), 28% (lower middle class).
  • Google+ - Data not available, but it's assumed that the majority of users have higher incomes and lean heavily towards upper middle class incomes.

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Google has kept things very close to the vest when it comes to disclosing number of users on Google+ and providing demographics on its users, so we've had to depend on third-party social media research firms.   In a blog post dated September 17, 2011, I provided a fairly comprehensive analysis of the demographics of Google+ gathered from various sources.  

DataDial prepared the following infographic of Google+ Demographics for the top 5 countries, and regardless of country, the audience remains predominantly male.   Surprisingly, the majority of Google+users are between 18-24 years of age.  This may answer the questions as to where younger social media users are flocking to.  Answer:  Google+ 

In conclusion, the major social networks are quickly becoming dominated by older individuals (45 years and older) and come from upper middle class income households. The majority of social network users are college educated with some college or have college degrees.  

Teens and Millennials (Gen-Y's) are the most active social media users and dominated social networks, but this is no longer the case.  For quite a while I have been saying that younger social network users are leaving the social networks, and the above data clearly supports this.   

Younger users (Under 25 yrs of age) are now leaving the major social networks and flocking to newer social networks like Google+ (see above), location-based social networks (see below) like foursquare, Loopt, Gowalla, SCVNGR and Path, video sharing sites like YouTube, MySpace and numerous entertainment and gaming sites. 

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Whichever demographics you are targeting it is best that you do your research and take the above findings into account.  If you have been targeting young users on social networks, and have had poor results from your marketing efforts, the above may help to explain the reasons.

Courtesy of an article dated March 8, 2012 appearing in MBAOnline and an article dated November 11, 2011 appearing in ReadWriteWeb

USING DEVELOPMENTAL RELATIONSHIP MARKETING (DRM), THE KEY TO TUNING YOUR MARKETING MESSAGE TO CONNECT WITH THE BABY BOOMERS

 

My friend and mentor, David B. Wolfe, passed away Dec. 3, 2011, after a long illness. David’s special interest was mature markets. He wrote Serving the Ageless Market and (co-authored) Ageless Marketing, Firms of Endearment, and his last book, Brave New Worldview, was completed just before his death and will be published in the near future. He will be missed.

More than 20 years ago, our firm was created based upon David’s research and the principles of Developmental Relationship Marketing (DRM). This is a summary of the foundation/principles of Ageless Marketing.

The origins of Ageless Marketing stem from the five basic premises of DRM that define the origins of behavior, and its general path across the lifespan. They increase marketers’ effectiveness in linking product messages to the hidden (unconscious) drivers of consumers’ marketplace behavior by revealing behavior predispositions in various periods across the lifespan.

Finally, the five premises contain benchmarks for testing the validity of what people report about their attitudes, needs and motivations. This is critical given that recent brain research indicates that all motivations are rooted outside the realms of consciousness. We can only speculate about the foundations of our behavior; thus overly relying on the literal meanings of consumers’ testimonies doubtlessly accounts for many marketing failures. 

First Premise:  Origins of behavior

A person’s worldviews, needs, motivations and general approaches to needs satisfaction are predisposed – not predetermined -- by her/his current season of life, and originate in five systems of motivating underlying values (MUV Values).  MUV systems, from which all behavior emerges, are biologically innate and constitute the basic building blocks of behavior. In effect, the five MUV systems are the DNA of behavior:

MUV Systems	Source of Needs, Motivations
Identity Values	Sense of Self, and differentiation, maximization and perpetuation of Self
Relationship Values	Connections for orientation, grounding, validation of Self, and resources for help in meeting needs; includes institutions and belief systems
Purpose Values	Commanding focus of Self’s energy output and efforts
Adaptation Values	Skills, knowledge, for fulfillment of the Self’s potential
Energy Values	Health and well-being of the Self in the physical, psychological domains

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Second Premise:  Origins of motivations

Urges to satisfy needs arise from root motivations that are activated by tensions between five sets of bipolar forces. The first force (objective force) in each set dominates behavior in the first half of life; the second force (subjective force) in each set dominates behavior in the second half of life.

MUV Values	First half of life		Second half of life
	Objective force		Subjective force
Identity	dependence vs.		autonomy
Relationships	materialism vs.		experiential
Purpose	egocentrism vs.		altruism
Adaptation	novelty vs.		habit
Energy		disengagement/escape vs.		engagement/involvement

Third Premise:  Domains of personal development

Personal development evolves in two domains of the self. These domains contain the roots of all developmental potential. The two developmental domains are:

• Physical domain - the organic Self, which encompasses all body systems. Primary development is completed in adolescence.  Secondary development continues throughout life in order to keep body systems and functions in healthy states.
• Psychological domain - the inorganic Self which encompasses the conscious and unconscious mind.   Broadly speaking, following infancy, the mental Self develops through three cognitive styles across the lifespan as follows:
  • Subjective style: the primary cognitive style in childhood causing children to frequently experience the products of their imagination as reality.
  • Objective style: the primary cognitive style in adolescence and young adulthood when Self is experienced as an extension of the world.  They do not experience reality as an integrated scheme of the whole.  Reality to them is unambiguous, with truth being absolute or independent of context.
  • Integrated style - the primary cognitive style of people in midlife or older.  This style reflects a complex integration of subjective and objective styles. Reality is seen in terms of relationships whose elements are in constant flux.  Meanings depend on context.  This nullifies absolutism and renders reality in “shades of gray.”

Fourth Premise: Keeping information flow to levels the conscious mind can manage

The brain resolves this problem by conducting information triage. The criterion the brain uses to determine what information will be sent to the conscious mind is the relevance of information to a person’s survival scenario, a matrix of needs whose satisfaction is vital to a person’s comfort and pleasure and avoidance of discomfort and pain. 

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Fifth Premise: Seasons of life – stages of personal development

There are four seasons of personal development. The first two are dominated by social (psychosocial) development needs; the last two by inner (psychospiritual) development needs.

Season	Developmental Focus Years	Survival Focus
Spring	Initial development, 0 - 22	Play (learning) Comedic mode: “everything will generally break in my favor.”
Summer	Vocational development, 18+ - 40+	Work (becoming somebody) Romantic mode: heroic – “I can do anything I set out to do.”
Fall	Shift to inner development, 38+ - 60+	Work-play (search for meaning) Tragic mode: “I can’t do as much as I once thought; who am I really?”
Winter	Integration of life experiences, 58+ - ?	Reconciliation (making sense of life) Ironic mode: “There’s good in most every bad, bad in most every good – c’est la via!”

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Ageless Marketing is an excellent primer on connecting more effectively with boomers and older adults and further exploring DRM summarized above. Knowledge gained should result in a better understanding of whole brain, true-to-life models of customer behavior and consequently more effective links with targeted populations.

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COMMENTARY:    Before you get too entangled with the concepts and terminology presented in the above material, I would like to make the following very important points which relate to the above:  

1. The marketing message is more important than the messenger.  
2. A brand is the sum total of all the experiences, both good and bad, and heiarchy of human needs that a brand represents and satisfies in the mind of the consumer.  
3. The brand experiences and heiarchy of human needs it fills become even more important as a consumer becomes older.   

Therefore, in order to fully understand the above material, we need to backtrack a bit, and you need to familiarize yourself with the science of consumer marketing, not just what you read in Marketing 101 about the four/five P's and marketing strategy and tactics.   What I am getting at, and something that I have preached for a long time, is that marketers need to understand how consumers think and what processes go on inside the mind of the consumer that will get them to trust a brand and finally make a buying decision.  This is the very essence of Developmental Relationship Marketing (DRM).  

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Armed with the above valuable points and concepts, marketers will be in a better position to fine tune their brand marketing messages so they are more customer-centric if you are targeting the Baby Boomer generation.

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Through the miracle of neuro imaging, brain researchers can now eavesdrop on the goings on between a person’s ears as thoughts are being formed and decisions made. While they don’t exactly see pictures,what they do see is radically changing our thinking about how motivations form, free will works, and information moves from our sensory receptors through the brain into the conscious mind.

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What is being learned about human behavior in brain science or neuroscience, as well as in the hotly developing field of genetics, will inevitably change how companies view those who work for them and those to whom they market and sell things. However, it is not only genetics and brain science that will be changing how companies see workers and customers. Developmental psychology, which is a treasure trove of information about human behavior, though rarely drawn on in marketing, stands to assume an elevated role in business, especially in marketing. 

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Marketing revolves around predictions of consumer behavior. The primary purpose of consumer research is to get information that enables predictions of what consumers need, want, and do. However, developmental psychology, which delves deeper into the human psyche,offers crucial insights into consumer behavior that cannot be fathomed by traditional consumer surveys, interviews, and focus groups. In fact, developmental psychology may help resolve an ironic problem present in current marketing strategies: Despite information technology that provides us with more information on customers than ever before, marketing success rates have fallen over the past decade.  Scary thought, isn't it?

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Marketers' continuing preoccupation with youth and young adult markets makes no logical sense in scores of product lines and for thousands of companies.  The emergence of a New Customer Majority comprised of people 40 and older is the answer.   This seasoned group of consumers is 45 percent larger than those between the ages of 18 and 39 (123 million versus 85 million), and will become even more numerous over the next decadeand a half. A fact overlooked by the prevailing Madison Avenue mindset is that the majority rules in the marketplace as well as in politics. This New Customer Majority, not youth and pre-middle-aged adults, is the primary source of today’s leading views, values, and behaviors in the marketplace. This historic change in consumer behavior has made much of what once worked in marketing obsolete. It has changed the rules of marketplace engagement.

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Adapting successfully to these circumstances requires a different mindset than the one that has long governed marketing. As many thought leaders in business have already recognized, marketing success increasingly depends on abandoning the traditional  quantitatively framed product-centric mind-set to adopt a qualitatively framed customer-centric mindset. However, not many yet have figured out how to do this.  

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Customer relationship management (CRM) was supposed to be the silver bullet to accomplish effective customer-centric marketing, but has failed miserably.   CRM has become a more of a sales tool to assist salespeople track and qualify leads and communite with customers. Instead  of developing into a customer-centric marketing technology, all CRM has done is build a wall between the company and its customers, while creating more work for the salespeople.

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Social media came along and has given birth to the era of brand engagement with consumers, but as you have found out from my numerous blog posts, I have often questioned the effectiveness of social media to sell much of anything because consumers view their social media pages as a very private almost holy social space, and advertising is considered very invasive and an infringement on that space.  So long as social network users continue to blockout and resist social media ads, I don't see how social network sites like Facebook will become a marketer's Holy Grail.   As I write this, social network sites like Facebook and Twitter are embarking on more aggressive advertising strategies and introducing advertising products to meet the needs of brand marketers and justify their huge stock valuations. Exposing social network users to even more ads is not the solution. When this experiment is finally over in about a year or two, I think you should revert back to this blog post and you will discover the reasons why it all happened.  

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Since the social networks began selling ads, brand managers have encountered problems measuring the ROIs of their social media marketing campaigns.  Spending more on social media advertising only exasperates this problem. It piles on bad money on top of more bad money. It represents wasteful spending on advertising that simply will not work.  The smart ones, representing roughly 49% of brand managers have chosen to use social media the right way:  to increase brand awareness, increase fan engagement and brand influence, conducting marketing research through questionnaires and polls, and improving customer service.     

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With a growing body of knowledge, evidence and new information from neuroscience with which to work, we are now able to fold back the layers of the conscious mind to reveal the very origins of customers’ needs, motivations, and behavior, a feat that is simply not possible in conventional consumer research methodologies.  In doing this, neuroscience responds to a long-standing deficiency in marketing that costs companies tens of billions of dollars annually due to misleading research and marketing blunders.

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The spectrum of refracted images that results from neuroscience makes it clearer why consumer behavior has become less materialistic (less product-centered) and more metaphysical (more experience-centered).  This has occurred because for the first time ever, most adults are in the years when the forces of self-actualization needs (see below) exert decisive influences on lifestyle aspirations, buying decisions, and overall consumer behavior.  The marketer who gains an understanding of the dynamics of self-actualization will have a decided advantage in today’s markets over the marketer who doesn’t.

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Thus far, marketing remains rooted primarily in the materialistic values (product-centered values) that generally hold the most sway over people in the pre-middle-age years of adulthood. Because of this, many members of the New Customer Majority feel marginalized by companies and their marketers. Perhaps no other single factor has done more to reduce the effectiveness of marketing.

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Here's an incredible thought that marketers should take note of:  How a brand is perceived and what a marketing message means is more subjective in the older mind than is usually the case with younger minds. In fact, the older mind tends to be more resistant to marketers’ attempts to fully define the meaning, benefits, and values of a brand.  That's another scary thought for marketers to chew.  

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Abraham Maslow, a leader in the field of human developmental psychology and developer of Maslow's Hierachy of Needs postulates that an older, more mature mind “resists enculturation” (i.e. enculturation is the process by which a person learns the requirements of the culture by which he or she is surrounded, and acquires values and behaviours that are appropriate or necessary in that culture). This disposition calls for subtler and more deferential approaches in addressing older markets. This is made more challenging by the fact that unlike the young who tend to perceive matters in more absolutist black-and-white perceptions, older people tend to perceive matters in shades of gray. Absolutist perceptions of reality are easier to play to because they are generally more closely tied to social consensus. Shades of gray perceptions are more subjective, thus pose a fuzzier target to hit among members of the New Customer Majority.

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Maslow's Heirarchy of Needs

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Empathy—identifying with and understanding another’s circumstances, emotions, feelings, and motives—is the very core of an authentic customer-centric mind-set.    The last season of life is a more fortuitous stage than many younger people believe is possible.  It comes only with maturation.  The blessings that can be one’s good fortune to experience in the mature stage of ones life at higher levels of psychological maturation include entry into a new dimension of human existence from which comes a steady flow of lofty experiences—what Abraham Maslow called peak experiences—and in which there arises enhanced coping abilities for dealing with any later life declines and losses that are inevitable. Of course, not everyone reaches such an advanced state of maturation. Nevertheless, because these aspects of self-actualization reflect perennial desires in life’s second half, the marketer who understands them is more likely to connect most deeply with the more than 123 million people who make up the New Customer Majority.

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Bottomline, if you are marketing to the Baby Boomer generation you must employ more hollistic, socially conscience, and more subtle messages that run counter to the Generation Y or Millennial and Generation X cultural marketing approach.   To market the Millennial and Generation X,  I highly recommend that you read by blog post dated September 30, 2011 in which I talk about how to reach Generation X and Generation X.  Those two demographics require a Sensory Approach and Social Approach. 

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Courtesy of an article dated March 5, 2012 appearing in MediaPost Pubications  Engage:Boomers  and the book titled Ageless Marketing by David B. Wolfe

 

HOW TWO HARVARD GRADS BUILT 'RENT THE RUNWAY', AN ONLINE RENT-A-DESIGNER DRESS STARTUP, INTO A BIG SUCCESS

 

If the start-up world had fairy tales, Jennifer (Jenny) Fleiss and Jennifer (Jenn) Hyman would be the main characters. Once upon a time, the Harvard Business School classmates—Fleiss from the finance world and Hyman from sales and marketing—met casually for lunch every week to brainstorm entrepreneurial ventures.

Rent The Runway co-founders Jennifer (Jenny) Fleiss and Jennifer (Jenn) Hyman

The idea that stuck came over Thanksgiving break, when Hyman’s sister, Becky, wanted something gorgeous to wear to an upcoming wedding, but didn’t want to drop an obscene amount of money on a dress she’d only wear once. From that moment on, Fleiss and Hyman had their concept: Rent the Runway, a “Netflix for dresses” that allowed women to rent designer gowns for a fraction of the retail price.

Now, just over three years later, Fleiss and Hyman oversee the rapidly growing, 125-person, multi-million dollar enterprise with a cultish following of customers who get their own Cinderella experience—a new, gorgeous dress for every special occasion.

 

We got to chat with the incredible duo to hear more about how they turned an “I have nothing to wear” dilemma into an opportunity that looks like it’s headed for happily ever after. Read on for the story of how they got started, and the advice they’d give to every aspiring entrepreneur.

Why was Rent the Runway the right idea—and what made you move forward with it?

Jennifer Hyman, Rent the Runway Co-Founder and CEO

JH: Actually, I never said, “oh this is a brilliant idea, this is going to be a billion dollar company, we have to do this.” My reaction was: I had an idea, I thought it was interesting, Jenny thought it was interesting, we thought it was fun, and we thought, let’s figure out if this is a great idea.

JF: When Jenn came to me with this idea, we decided to do it as a course credit. But we also decided to spend the rest of the year figuring out if this was something we could do full time, instead of getting a job. We gave ourselves a fixed deadline—by the time we graduated, we’d see if this would actually work. And if it didn’t, we had other jobs that we were going to accept.

 

You didn’t write a business plan—you just got started! Why?

Jennifer Fleiss, Rent the Runway Co-Founder and President

JH: I think people waste so much time strategizing about what they should do, rather than just going and doing something, making mistakes, and then pivoting. The goal of a start-up should be: Launch as many things as possible, fail as quickly as possible, and then figure out how to move forward from there.

JF: We started by purchasing dresses at retail in our own sizes—we figured if the concept didn’t work, at least we’d have a great wardrobe! We just went to different undergraduate campus and started renting dresses to women.

We went to Harvard on a weekend we knew they had an event. Then we went to Yale, and we rented the dresses, but didn’t let women try them on. For the third trial, we sent a PDF out to students that said “call us if you want to rent this dress.” So, each time we were iterating a little bit closer to what our actual concept was—an internet dress rental site—to prove that it was really going to work.

 

Obviously, it did work! After you saw that the customers loved it, what was the reaction you got from designers and investors?

JH: The designers were initially skeptical—this is something that’s never been done before. But honestly, I appreciated their skepticism, because it made us dig deeper and figure out what we really wanted our brand to be, and who we wanted to market to and target.

JF: It was tough to prove to the investors that this concept was really going to work. It’s really hard for the 60-year-old men we were pitching to understand the emotional connection that women have with fashion. So we would take them to the trials, or we would take videos, and we would show them the experience that women were having—and that was huge.

JH: They loved our approach of just learning by doing, and running different experiments and seeing what traction we got—could we send something through the mail? Would a girl ruin a dress if she wore it to a party? I think we were able to eliminate investor skepticism by actually going out and doing stuff.

Here's the Rent The Runway website homepage:

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The following video provides an excellent review of Rent A Runway's website, the services the company provides, designer brands, styles, sizes, colors, etc.

 

What’s been your biggest challenge along the way?

JF: One is technology—Jenn and I came to Rent the Runway with no technology background. The other is around the fashion industry. We started a fashion technology company with no fashion or technology experience!

What’s been most surprising about the experience of growing your company to what it is today?

JH: That we’ve been able to do it! We were two women without any experience in leading companies. I had led teams before, but nothing like this. I don’t even think I dreamed as big for myself as this company already is, in just the first few years. It’s surprising when you don’t put blockades in front of yourself, and you just allow yourself to run, how far you can go.

JF: Literally every day I walk in the office, and it’s amazing to see all of these people working towards the same mission and goal!

Also, the reception that consumers have had from the product. We get photos, and hand-written thank-you notes, and gifts sent to the office from people who say “thank you, you’ve changed my life!” People feel like they’re getting this awesome Cinderella experience. In a small way, we feel like we’re changing people’s lives in a great and really fun way.

What advice do you have for entrepreneurs who’d like to follow in your footsteps?

JF: I’d say—go for it! But I mean that in a couple of ways. One, do it—there are not as many risks as you feel like there are. People think it’s this scary thing that’s going to make or break your career, and it’s not. If it doesn’t work out, you’ll get another job, and you’ll definitely learn more than you ever would otherwise.

But also, go for it in the sense that you need to test the concept out, and you need to be brutally honest with yourself if it’s not working. Going for it means don’t just sit there with your ideas—figure out a way to see if it’s going to work.

JH: Number one is to figure out how you are going to assess whether you have a good idea or not. So, go do something, learn from it, and be able to have an unbiased view as to whether your idea works.

Also, be very aware of what your strengths and weaknesses are, not just what your skills are. How successful you’re going to be as an entrepreneur is really a story of how compelling a leader you are.

Finally—you know we had to ask. What’s your favorite Rent the Runway dress you’ve ever worn?

JF: You know, it’s not only the dress—it’s also the memory associated with the dress. I actually wore a really great Catherine Malandrino dress when I was about eight months pregnant, and it looked awesome! It’s not a maternity dress, but it just happened to work and fit and fall really well. So that’s a great example of something I needed to wear for one day, but wouldn’t necessarily want to buy.

JH: That is a ridiculously hard question! I think my favorite dress is this incredibly sophisticated Nina Ricci sheath that I wore to the most important presentation I’ve ever delivered in my life. I felt more confident wearing that dress than I’ve ever felt before, and I think that I nailed the presentation because of it—I give 100% credit to the dress!

COMMENTARY:   Rent the Runway’s slogan might as well be: Friends don’t let friends wear H&M to the most important events in their lives. The company solves the perennial “closet full of clothes and yet nothing to wear” problem that most women face, by allowing them to rent designer clothes for a big event for about 10% of the price.

It’s clearly a problem women have. The question– like most rental businesses like Zipcar– is how many women want to rent clothes as the solution.

So far, there’s at least one million active users, spanning a wide demographic of women, from 15 years old to 45, says Jennifer Hyman, Rent the Runway CEO and cofounder.  She says.  

“That was a surprise. Initially we thought it would be only young women in their 20s.”

There’s a lot of heavy lifting behind the scenes in this business. A warehouse in New York dry cleans, repairs and re-rents thousands of designer pieces. An algorithm helps women pick age-appropriate, body-appropriate pieces. A social layer allows them get advice from a small circle of trusted friends and family.

The company had raised $16 million to date from Highland Capital and Bain Capital, bringing the total amount raised so far to more than $30 million. And, surprisingly given the costs to a business like this, the company was profitable before this round.

Hyman says the money will be used to build out its underlying technology, physical distribution hubs all over the country, a sophisticated inventory management system and the micro-social network aspect of the site. Kleiner’s Aileen Lee will join the board. 

I like Rent The Runway's business concept very much, but my main concern as a renter would be renting something via the internet and making sure that the garment fits properly when I receive it. When you are renting or purchasing apparel online and on short notice, the worst thing that could happen is to receive the garment, but it doesn't fit well.    

I do like that Rent The Runway is getting on the "celebrity bandwagon," by renting some of the designer dresses worn by celebrities at various events like the Academy Awards, Golden Globes, and so forth.   When you are renting designer dresses to a market consisting predominantly of Millennials (18-34 year olds), connecting a particular designer dress with a celebrity is very important.

I reviewed Rent The Runway's pages on both Twitter and Facebook, and its my opinion that they need to do more in the social media area.   Rent The Runway only has 25,730 followers, but only follows back 419.  What the hell is that?  They should be using Twitter more smartly by following back everybody, and using Twitter to get immediate feedback on events where designer dresses are worn.  This could tip them off to which designers and dresses are "hot."   They are doing a bit better job on Facebook where they have 88,000 fans, but if they should have ten times more fans and followers on both Facebook and Twitter.  

Rent The Runway should seriously consider developing their own iPhone and Android app.  Most Millennials are highly mobile and use their smartphones and tablets to log into their social networks and surf the Internet.  An app will allow Rent The Runway to "glue" right into every fan or follower, and they could provide them with real-time posts of events, new designers, new dresses, promotions, polls, and so forth.  App users should also be able to rent a garment right through the app, no matter where they are, 24/7, 365 days a year.

Rent The Runway claims to be profitable, but there is always the danger of copycats, especially from the designers themselves or major garmet makers eager to capitalize on a growing trend and new market opportunity.   I can easily see this happening.    

Courtesy of an article dated February 29, 2012 appearing in The Daily Muse and an article dated May 23,  2011 appearing in TechCrunch

HOW WHOLE FOODS BECAME THE LUXURY BRAND OF THE MILLENNIAL GENERATION

Does a bag full of organic produce say more about you than designer labels? For a new generation, does Whole Foods define the highest level of consumerism?

America’s definition of luxury is changing. Quiet, exclusive, and socially pedigreed extravagance is giving way to a new generation of affluent consumers (read: Millennials) who have grown up with a new definition of luxury that will forever change the way we market upscale goods.

As the founder of Pavone, an integrated ad agency that specializes in food and beverage marketing, I’ve had the chance to observe these changes up close and personally. The trend is especially relevant to me because it seems to have become most distinctive in the food and beverage industries. As a Baby Boomer, luxury is about designer labels and rarefied retail temples like Neiman Marcus. These outlets are full of lithe, headless mannequins, invisible cash registers, and generically attractive retail associates who all adopt the same quiet and impossibly dignified manner.

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Whole Foods’ retail model has turned this blueprint on its head by reinventing the way well-heeled consumers think about upscale goods. They’ve taken the old cues for austerity, economy, and frugality and applied them in new ways to spread their message of eco-friendly capitalism to the world (or at least to some of the better zip codes in America).

 

Instead of cold, intimidating retail vaults awash in tastefully, restrained colors, Whole Foods provides a hip, eclectic sort of vibe that feels like a Berkeley revival with no credit limit. Funky music blares, dreadlocked associates staff checkout aisles and shoppers are a mix of artsy-looking moms, retirees in pricey but well-cushioned running shoes, and a constant stream of suits taking a quick break from corporate America while awaiting a $15 turkey sub and some curried sweet potato couscous.

 

The rise of Whole Foods is important because it is emblematic of a larger shift in affluent marketing. Here’s how:

• Provenance: Premium pricing is rationalized in part by ensuring consumers’ awareness that real people are touching (or “curating”) the things they buy. Next to those beautiful $10 containers of fruit in the produce department, Whole Foods posts signs announcing that these goods are not only natural or organic, but were cut up by hand by real people named Miranda, Steve, or Bethina. To drive this personal touch home, Whole Foods features store employees’ names and sketches throughout the store on well-placed chalkboards.
• Inclusion: Despite Whole Foods’ locations in pricey neighborhoods, its personnel is diverse. Each location I’ve visited seems to feature a dynamic employee mix of various ages, genders, ethnicities, and funkiness.
• Egalitarian: Whole Foods’ employees seem to be united in their casual willingness to greet you (but not in a perfunctory way), to talk to you and with you (but not bog you down with chitchat), and to smile at you as you walk by. It’s as if they really like you. Like they’re happy to be there. Like you’re one of them.
• Informational: Whole Foods can’t stop talking about where they got the food they sell, how it was made, who made it, where it’s going, or what’s going to happen to it when you throw out the leftovers. This kind of information is on the pack, on electronic displays, on chalkboards throughout the store, in brochures around the store, on websites, and in press releases. They give new meaning to the word “transparent.”
• Authenticity: Whole Foods’ consumers want a reason to believe, and they love a credible, authentic voice that delivers on its promise.

Whole Foods has been able to create value (which justifies high prices) not just by providing hard-to-find organic or all-natural products and labels. They’ve also created a high-touch, overtly humanized experience that is designed to make you, the shopper, feel smarter, healthier, cooler, and wealthier than you do in any other food shopping experience.

 

Yes, in a world filled with slick iPhones, sleek cars, and perfectly constructed dress pants, locally grown, small-batch food touched by human hands has become the new luxury. Whole Foods tapped into this need, and has attracted formerly closeted affluents into its aisles, piled high with cheese wheels and homemade marshmallows, to explore new, previously unknown ways to spend their disposable income.

COMMENTARY:    Whole Foods is as much a lifestyle as it is about organic foods and eating healthy.  It's also a cool place to shop for groceries.  Definitely different than Kroger's or Safeway. The fresh organic produce beautifully piled high, the aromatic aromas, the great food selection from all over the world.  The food court is fantastic if you enjoy restaurant-quality healthy takeout food and tired from a rough day and not in the mood to cook.  The meat counter is my favorite, reminds me of oldtime butcher shops from the 50's, the wide shopping aisles.  You know what you are buying, and the butcher will cut it the way you want it.  Love the coffee, pastries and free WIFI. Women in particular, younger professionals, the Millennials this article talks about, make good money, tend to be more health concsience than men, and you will find them in abundance at Whole Foods.  Many of them show up in their yoga outfits.  This is a great draw for single guys.  Really, I am not kidding about this.     

Whole Foods really hit the nail on the head.  The organic food chain knows that its not just about the food, selection or prices, but about the whole consumer experience.  This is something that I have been talking about for quite a while.   If you are going to reach Generation-Y a.k.a. Millennials, you must use both a Sensory Approach and Social Approach in your marketing. You can read about it in my blog post dated September 30, 2012.  In that one blog post, I truly believe that I have handed you the key to how-to market to the Millennial Generation, so its a worthwhile read wheather you are starting a retail business or digital business.  

Courtesy of an article dated February 21, 2012 appearing in Fast Company Co-Exist 

GENERATION C: THIS GENERATION IS THE MOST CONNECTED SOCIALLY AND ELECTRONICALLY LIKE NO OTHER GENERATION

Born sometime between the launch of the VCR and the commercialization of the Internet, Americans 18-34 are redefining media consumption with their unique embrace of all things digital. According to Nielsen and NM Incite’s U.S. Digital Consumer Report, this group—dubbed “Generation C” by Nielsen—is taking their personal connection—with each other and content—to new levels, new devices and new experiences like no other age group.

The latest Census reports that Americans 18-34 make up 23 percent of the U.S. population, yet they represent an outsized portion of consumers watching online video (27%), visiting social networking/blog sites (27%), owning tablets (33%) and using a smartphone (39%). Their ownership and use of connected devices makes them incredibly unique consumers, representing both a challenge and opportunity for marketers and content providers alike. Generation C is engaging in new ways and there are more touch points for marketers to reach them.

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COMMENTARY:    BTW, Generation C is commonly referred to as the Millennial Generation or Gen Y's.

Courtesy of an article dated February 23, 2012 appearing in NielsenWire