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Knowledge@Australian School of Business

Marketing to Gen Y: An Ethical Emphasis Only Goes So Far

Published: June 21, 2011 in Knowledge@Australian School of Business
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Members of Generation Y, also known as the Millennials, variously classified as those born between 1980 and 2000, are reviled and revered in equal measure by older generations. They are despised because of a reputation – deserved or not – for arrogance, self-indulgence and lack of a traditional work ethic, yet admired for their idealism, team spirit and technical abilities. But it's their sheer numbers and buying power that is of most interest to business.

Not since the baby boomers – those born between 1946 and 1964 – has there been this spike in population with young people making up more than a quarter of all Australians today. Socialised into consuming much earlier than previous generations, Millennials spend roughly A$48 billion a year on hedonistic purchases, according to a study by Lifelounge Urban Market Research in 2008. By 2015, it's estimated Millennials will be the most significant retail spending group in Australia.

An issue of growing significance for business is the extent to which Millenials operate progressively by promoting and supporting ethical practices and the impact that has on sales. Certainly, Millennials' power as consumers will determine how global corporations market their products in the future.

In the US, the first in-depth study of marketing to this age group was the 2006 Cone Millennial Cause Study. It surveyed 1800 young people and its findings produced some big-figure statistics, including the fact that 78% of Millennials believed it was their responsibility to make the world a better place, and companies had a duty to join them in this effort. Not only that, but 83% said they would trust a company more if it was socially and environmentally responsible.

For marketers, the intriguing question is how this attitude translates into consumer choice. If Millennials are the new concerned citizens, does this mean that ethical products have greater appeal for them? Surprisingly little research has been done to find out if – and to what degree – ethics influences Millennials' spending habits. But astute companies are already looking at young people's behaviour in a scientific way to better understand what matters to them and how to communicate with them. In a 2010 article in The New York Times, Robert Polet, former president and chief executive of the Gucci Group, spoke for many marketing professionals when he said: "We think a lot about the mindset of the consumers – what are the youngsters doing, does it differ country by country, region by region – we need a deep understanding because that is crucial for the future."

To that end, Australian School of Business marketing researchers Tania Bucic, Jennifer Harris and Denni Arli have been studying Millennials' levels of engagement with ethical consumerism. Although the age grouping of Gen Y/Millennials varies, for the purposes of this study, the researchers substantially explored the attitudes of young people born between 1985 and 1999.

Issues & Influences

Uniquely, the research was cross-cultural, through self-completed surveys distributed in Australia and Indonesia, with the aim of determining the impact of cultural differences on purchasing behaviour. While Australia is a wealthy and developed country with a relatively small population, Indonesia is the fourth most populous nation in the world and economically still developing. In Australia, ethical concerns are built into business practice more so than in Indonesia where only one-quarter of companies claim to adopt ethical practices.

The researchers discovered differing levels of awareness and concern among young people and varying degrees to which they are amenable to ethical marketing. Broadly, they divided into three groups: one group was committed enough to buy an ethical product at least once a month, another group supported ethical issues but purchased less frequently and a further group was not engaged at all.

Although two-thirds of the sample were in favour of products that had an ethical dimension, "at the end of the day, ethical issues are not the be-all and end-all for Millennials", says Bucic. "When making ethical decisions about purchasing, there's a trade-off between traditional attributes of a product such as value for money, quality, convenience and ethical product attributes," she says.

The issues that particularly struck a chord with Australian Millennials were health and third world – or developing country – problems, while for Indonesian Millennials, who had witnessed the effects of a tsunami, climate change was of most concern. (Geologists have linked climate change with earthquakes that trigger tsunamis.)

However, when ethical concerns are pitted against a higher price, lower quality or a Millennial's need to go out of his or her way to make a purchase, ethics tend to go out the window. Ethical attributes are unlikely to sway the purchasing decision of young buyers when such trade-offs are required. However, when presented with two products of the same price and quality, young shoppers are more likely to opt for the one they perceive has a social agenda or ethical dimension.

Millennials are generally well-informed about the world, and the recent global recession has served to make them more suspicious of companies' motives. Research has shown their antennae are more finely tuned than other consumer groups and they will react negatively if they feel they are being coerced into doing something or buying something through subterfuge.

Neer Korn of the Korn Group, a social trends research organisation, believes trust is key when marketing to Millennials. "Young people have a heightened sense of awareness and can't stand having the wool pulled over their eyes," he says. "It's all about trust. Can they see the cause and effect of their behaviour? If they purchase a copy of The Big Issue – the magazine frequently sold by homeless and vulnerable individuals to generate income – they can see that the money will go to help the guy selling it. But if they buy this environmentally friendly product, what's actually changed? They're more suspicious about institutions. They see lots of reasons not to trust what they are being told," Korn asserts.

In Whom They Trust

However, what they do trust to a large degree is each other. Adam Penberthy, 27, runs Fresh, a marketing company producing campaigns geared to his generation. He says Millennials are strongly influenced by peer pressure with 78% making their purchase decisions based on peer review and only 15% saying that they trust traditional media. Social media sites, such as Facebook and Twitter, are hugely influential forums where young people exchange information about products and post recommendations – often in real time while they are experiencing them. Penberthy observes this has led to a change in marketing style. "Companies have moved away from the hard sell and simply talk to Gen Y about the product instead," he says.

Korn questions whether peer review translates into purchasing an ethical product. "Social networking is embraced by 75% of Millennials, therefore projecting a socially concerned image is as important as being socially concerned. Young people are no different to everyone else. They want to be seen in a favourable light and constructing a particular identity through social media is a way of doing that," says Korn.

Millennials are more likely to be committed to purchasing ethical products if their awareness has been raised, according to Bucic, Harris and Arli's research. Penberthy says this is often the result of travelling abroad. "Young guys and girls are experiential by nature. If they have been living in India, for example, and come face-to-face with poverty, they are shaped by that and their opinions around products change, too."

Women made up 59% of the most ethically conscious group in the Australian School of Business study, all of whom said that they made an ethical purchase at least once a month. All other factors being equal such as price and quality, Millennials are more likely to choose a product that has aligned itself with an ethical campaign.

"Take the Mount Franklin water breast cancer campaign," says Korn. Since 2006, the Australian spring water company has been marketing its products – still and light sparkling water – in bottles with pink lids to raise awareness of breast cancer research. "If a bottle with a pink lid is five cents more than a rival product, why wouldn't you buy one?" He believes that consumers are successfully shamed into some purchasing decisions.

Negative publicity has an impact as well, Korn suggests. "If it becomes known that a brand of clothes is made using slave labour then there's peer pressure to avoid buying from those shops," he notes, and there's a proliferation of successful retailers promoting sweatshop-free and socially responsible clothing, such as American Apparel, upholding this point. "It's a little like people purchasing free-range eggs," he adds. "You have to have a good reason for not buying them."

But Bucic is more sceptical, suggesting that the recent publicity about the conditions suffered by factory workers manufacturing Apple computers was unlikely to have affected a brand that enjoys enormous loyalty among young people. Penberthy agrees that a product with a devoted following among Gen Y, such as Apple, is immune to any kind of bad publicity. "For a young guy or girl to move away from a product because there's some immoral or unethical component, it would have to be a chocolate bar or a brand of shoes. The actual stuff they use day-to-day like their mobile phones, iPads, laptops, are things that they couldn't live without. These products are built into their DNA. It's like asking them to give up their bed," Penberthy suggests.

Korn believes that the extent of ethical purchasing is exaggerated. "If people do one thing, such as buying fair-trade coffee, it takes away the obligation to do anything else, to the detriment of everything else that they purchase. They've done their bit," he says. "People will always overstate their level of goodwill and also overstate the reasons for doing so. They're not lying – they're almost doing it subconsciously. I think, sadly, the reality is that ethical purchasing is much lower than we think."

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