Kids Marketing in the Restaurant Industry
Introduction
The ultimate goal of marketing is to match a company’s products and services to the people who need and want them, thereby ensuring profitability. Marketing segments targeting kids or Generation Y (also called the Millennial Generation), recognizes children’s roles as consumers, honors their roles as children and acts on this duality across every element of the marketing mix.[1]
Generation Y – born between 1982 and 2002, is reported to be between 72 to 81 million strong and is just as large as the Baby Boomers Generation. Members of Generation Y are primarily the offspring of the Baby Boomers Generation. Generation Y, like other generations, has been shaped by the events, leaders, developments and trends of its time. The rise of instant communication technologies made possible through use of the internet; such as email, texting, IM and newer media used through websites like YouTube and social networking sites like Facebook, MySpace, and Twitter, may explain Generation Y’s reputation for being peer-oriented and for seeking instant gratification. This trend of communication is continuing into Generation Z. This generation is predicted to make up the bulk of the US population within 20 years. [2]
Kids Marketing in Food Industry
According to Media Awareness Network (MNet), the advertisement industry’s spending on children has exploded in the past decade, increasing from a mere $100 million in 1990 to more than $2 billion in 2000.[3] A report by CBS Corporation says that in the year 1983 companies had spent $100 million marketing to kids and in the year 2007, they’re spending nearly $17 billion annually. [4]
Federal Trade Commission (FTC) report [5] on food/beverage ad spending mentions that the amount spent on food and beverage advertising to children aged 2-17 in 2006 was $1.618 billion. Approximately $870 million was spent on food marketing directed to children under 12, and a little more than $1 billion on marketing to adolescents ($300 million of these expenditures were addressed to both age groups).
A report from Association of National Advertisers and Grocery Manufacturers of America (GM) [6] found that there was a decline in the effect of ads on children’s TV in 2007 over 2006, with a 25% decline since 2004. Also, spending for food, beverage and restaurant advertising, adjusted for inflation, is down 6% year-to-year during the period 2007 to 2006.
Nutrition Business Journal (NBJ) Kid’s Nutrition Market Report estimates that the approximately $10.1 billion healthy children’s market is one of the hottest product trends in 2009, and believes that there are still plenty of opportunities for new innovative products to be introduced to the market. [7]
Gen-Y Population and Spending Growth
Generation Y numbers approximately 80 million [8] in population size and makes up 25% [9] of the US population. It is estimated that Gen-Y population in the US will make up 34% of the population in 2015. [10] As of February 2009, the United States has a total resident population of 305 million. The following table shows the estimates of the Gen-Y population:
It can be seen that the Gen-Y population has grown by 22.8% in 2007 compared to 2000, whereas the increase was only 7.11% for the total population during this period. It is estimated that the population will grow 21.4% in 2010 compared to 2007 and 44.7% in 2020 compared to 2010. Similar figures for total population are 5.31% and 10.41% only. This shows that the Gen-Y has been growing faster compared to the total population, and is estimated to grow faster in the future also. The following graph shows the pictorial representation of the above facts.
Purchasing Power of Gen-Y
A report from Business Insights mentions that the purchasing power of Gen-Y appears to be increasing as the amount of pocket money received by US children, aged 5-to-9, rose from $4.2 per week in 2001 to $8.2 in 2006. [19] The purchasing influence of children and youth increases with age and is currently estimated at $500 billion for 2–14 year-olds per the report of Institute of Medicine (IOM). [20] According to a report by Mintel International Group, Gen Y spent $175 billion in the US in 2003 and is expected to top $190 billion in the US by 2006. That’s about $4,000 per kid. [21]
A report from Harris Interactive (2003) suggests that Pre-teens (ages 8-12) spend at a rate of $19.1 billion annually, or $946 per capita. [22] Teens (ages 13-19) spend at a rate of $94.7 billion annually, or $3,309 per capita [23]. The per capita figures of segments under Gen-Y are furnished in the table below:
The report further states that American kids, teenagers, and young adults, aged 8 to 21 years, have annual incomes totaling $211 billion and the group is spending at a rate of approximately $172 billion per year and is saving at a rate of $39 billion per year.
According to a latest report from a study group (2009), Generation Y is estimated to have more than $150 billion in direct purchasing power and another $500 billion in indirect purchasing power. [24] Another report mentions that this group has disposable income because of their parents’ support. [25] Young consumers in the US wield considerable buying power. Among 13 to 21 year-olds alone, over $120 billion was spent in the year 2007. The group’s income is predicted to rise through at least 2017, when it will approach $3.5 trillion. [26]
Gen-Y Budget and it’s Growth Forecast
Gen Y’s annual income will rise from $1.89 trillion to $3.48 trillion in the next ten years, growing to near Gen X’s income ($4.2 trillion in 2017) and eclipsing Boomer’s ($2.96 trillion in 2017). The table below shows the income growth and variation with other demography of population in US. [27]
This table also shows that the annual income growth expected of Gen-Y far exceeds that of Gen-X and Baby Boomers. The growth rate expected for Gen-Y during 2012-2007 is in the range of 25.4%, and 46.8% during 2017-2012. The corresponding figures for Gen-X are 6.5% and 7.4%. The figures are negative for baby boomers at -4.4% and -10% respectively.
Pictorial representation of the above facts is shown below:
A report from Bureau of Labor Statistics – ‘Comparing the Economic Status of Young Singles in 1984-85 and 2004-05’ [28] states that after adjusting for inflation, the average total spending for young singles did not change in a statistically significant way for the period 2004 – 2005 compared to the period 1984 – 85, but are better off than the young singles of 1994 – 95.
A study conducted by National Restaurant Association for the year 1993 reveals that the households headed by persons under the age of 25 spent 42.1% of their food budget on food away from home – the largest proportion among all age groups. This group typically is unmarried, at the beginning of their careers or attending college. Persons in this age group may want to dine out, but may be curtailed by financial constraints. [29] In comparison, households headed by persons age 35 to 44 in the same income category spent $627 per capita and allocated 39 percent of their total food budget to food away from home. Another factor affecting household spending on food away from home is children. Households with a husband and wife spent $981 per capita on food away from home in 1994; more than 64% higher than the $596 per capita spent by families with children. Households with children accounted for 37.9% of all dollars spent on food away from home. Families with children under the age of six spent $1,597, whereas families in which the eldest child is over the age of 18 spent $2,716. [30]
There is a recent report which mentions that the average American household spends up to 40% of its total food spending on food eaten away from the home. [31] Taking into account the report from Bureau of Labor Statistics, we can conclude that the above consumer spending is valid as of now.
The tables and graphs shown below depict the above facts:
Using the increased per-capita forecast for the coming years, we can estimate an increase in the business of restaurants in the near future. By 2020, as the Baby Boomers start to pass away, Generation Y will take over as the largest adult generational grouping in the United States. Restaurant income will grow directly as the population growth increases, especially when Generation Y (as since the aging Boomers) population shifts, and changes in family sizes are changing the world. This literally shows the growth of Gen-Y population in the years to come and thereby their market share on restaurant food spending.
Marketing to Gen Y
To effectively market to Gen Y, marketers have to understand the four areas Gen Y considers before purchasing a product or service: [32]
• Cheap cost
• Good quality
• Fast service
• An experience
Another report says that Gen Y processes information quickly and are especially brand loyal. Gen Y likes innovative marketing approaches and advertising that uses humor or is “outside the box [33].
Consumer Dining Insights
A research study (2007) done by Restaurants & Institutions(R&I) mentions that 50 percent of New American Diner Study’s Gen Y respondents strongly agree that food tastes better at a restaurant than at home. Supermarkets are a source for prepared meals for 44.3% of Gen Y, not a warehouse of ingredients. Gen Y is comparatively more likely to use a drive-thru window or have food delivered for dinner than are other groups. [34] 18% of Gen Y respondents say they had ordered wine in the past year, according to R&I’s 2005 Tastes of America Study, but it may have been because many of its members are under-age. [35] 36% of Gen Y respondents say they ordered a cocktail. That bests the 32% of Baby Boomers who say they ordered spirits. [36]
14% of Gen Y respondents to R&I’s New American Diner Study strongly agree that they are making a sustained effort to eat healthy at restaurants, the lowest of any other age group. They are the least likely to say that nutrition issues influence their meal selections, although 24% strongly assert that they like menus that provide nutrition information. [37] Nearly 25% of Gen Y members agree strongly that “Restaurants I choose reflect my personality”; 16% strongly agree that restaurant choices “reflect my social status,” according to R&I’s New American Diner Study. Both percentages are higher than any other age groups. [38]
25% of Gen Y respondents say bottled water accompanied their most recent restaurant lunch (versus 8% of Baby Boomers); 12% say they ordered bottled water with their most recent dinner (also highest among all age groups). [39] For Gen Y, coffee may have become a separate-occasion indulgence – at Starbucks or wherever – and less a meal beverage: Only 29% say they have ordered it in a restaurant in the past year, compared with 45% of Gen X and 52% of Baby Boomers. [40] 68% of Gen Y members who frequently eat dinner away from home say that they’re likely to order something different from what they usually eat at home (compared with 58% of their Baby Boomer parents). [41]
Surefire Strategies for Marketing to Generation Y
Generation Y is not difficult or complicated. They are truly unique. Bea Fields [42], Founder of Five Star Leader Coaching and Training, gives the following tips to win over Gen Y.
- Respect them as consumers: Members of Generation Y are tech savvy and highly intelligent. Don’t talk “at” or “down to” them.
- Get to know them: Before they will do business with you, Generation Yers want to know that you care enough to find out what makes them tick. Find out how they spend their free time, the music they listen to, and what they eat, wear, read, watch, and drive. You might just be surprised by what you learn!
- Look cool and hip: Generation Y will buy based on a sleek, beautiful, cool-looking package.
- Be socially responsible: Generation Y is incredibly conscious about social causes including the environment, animal rights, and world hunger. They want to know that your company is aligned with a cause that creates an emotional connection with them.
- Be real: Be honest and open. Drop the old sales-speak and be sincere when marketing your products and services.
- Join their networks: Generation Y will not come looking for you. If you want to attract Generation Y, go where they hang out: social networking sites.
- Take it to the streets: Today’s youth love experiences. Today’s smart marketers use street teams and event marketing to reach Generation Y.
- Give them a chance to win: Generation Y is wild about winning a contest or receiving a gift, especially if it’s meaningful to them, like an iPod, a trip to a national snowboarding competition, or tickets to a hot concert.
- Go viral: Video (vodcast) and audio (podcasts) bits uploaded to your site can spread across the Internet as Generation Yers share their favorites with their friends, who pass it along to their circle, and so on.
- Text them: Learn how to integrate mobile technology in your marketing efforts to get into their networks and be seen.
Top 10 Tips for Marketing a Restaurant to Gen Y
The Food Service Warehouse [43] gives the following ten tips for Marketing a Restaurant to Generation Y;
- Consult a young person: The best way to determine if the company’s marketing, design and operational strategies appeal to young people is simply to ask teenagers or young adults what they think.
- Try email and text message marketing: Young people are communicating with each other digitally. Implement a direct email and text message marketing campaign. Just be careful not to annoy young customers. Make sure they opt to receive the promotions.
- Maintain a website: Any restaurant that hopes to attract young people should have a website
- Focus on value: One do not want to be perceived as cheap, but the menu items need to be a good value. They want to feel that what they buy is really worth the price.
- Avoid flagrant sales pitches: Young people today are very independent, and they do not want to feel pressured. Present the marketing messages in an educational or entertaining form, rather than as a traditional sales pitch. Be as honest as possible.
- Implement viral marketing: Enlist a few students or young adults with lots of friends and social networking potential to be part of your marketing team and spread the word about your restaurant.
- Hold events at the restaurant: By hosting concerts, movies, bar trivia, karaoke or other events, you can attract students and teens and give them a good reason to keep coming back.
- Do not try too hard to be “cool.”: Marketing to young people is a lot like middle school. The best way to seem “cool” is to remain “real” and low-key. Let the restaurant speak for itself.
- Get onto social networking sites: If the restaurant has its own Facebook, MySpace or Evite account, it can be used to inform customers of new promotions, special events and any changes in your menu selection or services.
- Choose the music carefully: With the prevalence of iPods and music sharing in their culture, young people have more independent tastes in music than previous generations.
Channels of Marketing to Gen Y
Print: Choose advertisement target publication carefully. Dog magazines, cat magazines, nature, nurture, body-building, body art could be some of the media.
Mobile: It might be because 94% of Gen Yers own a cell phone, and comprise a shocking 46% of total iPhone users, according to the 2008 demographics released by Apple. This makes mobile marketing a prime outlet for reaching these consumers. Set up a SMS system to send users a certain article when they text you a certain code.
Web: For Gen Y, the web represents a personal connection with the virtual world around them. Twitter, Facebook, LinkedIn, Mixx, delicious and the social networking list goes on and on.
Outdoor: GenY has trained themselves to ignore billboards and other outdoor advertising. The exception is innovative, impactful or cultured advertising. The billboard is meaningful, clever and interesting; all a combination to open the eyes of Generation Y.
SOURCES:
[1] http://www.kidprospect.com/uimages/3191.pdf
[2]http://en.wikipedia.org/wiki/Generation_Y”>http://en.wikipedia.org/wiki/Generation_Y
[3] http://www.media-awareness.ca/english/parents/marketing/marketers_target_kids.cfm
[4] http://www.cbsnews.com/stories/2007/05/14/fyi/main2798401.shtml
[5] http://www.ftc.gov/os/2008/07/P064504foodmktingreport.pdf
[6] www.ana.net/advocacy/getfile/14980
[7] http://nutritionbusinessjournal.com/healthy-foods/market-research/02-26-kids-nutrition-report/
[8] http://www.brandmercenaries.com/generationystats/
[9] http://www.alcatel-lucentbusinessportal.com/private/active_docs/AN_HospitalityTechnologyforGenY_EPG3310090501_EN_May09.pdf
[10] http://www.theventurecatalysts.net/files/Download/TVC_Newsletter_Gen_Y.pdf
[11] http://en.wikipedia.org/wiki/Demographic_history_of_the_United_States
[12] http://www.google.com/url?sa=t&ct=res&cd=11&url=http%3A%2F%2Fwww.mediamanagementcenter.org%2Fblogs%2Fmike%2Fgeny.ppt&ei=JbhpSoOHL4qgkQWckr2cCw&rct=j&q=generation+y+spending+by+2010+and+2020&usg=AFQjCNEiLBWA0ZmtoMpcBy3e0tZKTQW6fg
[13] http://en.wikipedia.org/wiki/Demographic_history_of_the_United_States
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[15] http://en.wikipedia.org/wiki/Demographic_history_of_the_United_States
[16] http://www.theventurecatalysts.net/files/Download/TVC_Newsletter_Gen_Y.pdf
[17] http://www.theventurecatalysts.net/files/Download/TVC_Newsletter_Gen_Y.pdf
[18] http://www.google.com/url?sa=t&ct=res&cd=11&url=http%3A%2F%2Fwww.mediamanagementcenter.org%2Fblogs%2Fmike%2Fgeny.ppt&ei=JbhpSoOHL4qgkQWckr2cCw&rct=j&q=generation+y+spending+by+2010+and+2020&usg=AFQjCNEiLBWA0ZmtoMpcBy3e0tZKTQW6fg
[19] http://www.globalbusinessinsights.com/content/rbcg0192m.pdf
[20] http://www.iom.edu/Object.File/Master/31/337/KFM%20Overview.final.2-9-06.pdf
[21] http://generationy.typepad.com/petersheahan/2005/01/gen_y_spend_up_.html
[22] http://www.mediapost.com/publications/index.cfm?fa=Articles.showArticle&art_aid=17669
[23] http://www.harrisinteractive.com/NEWS/allnewsbydate.asp?NewsID=667
[24] http://www.nassm.com/files/conf_abstracts/2009-208.pdf
[25] http://www.entrepreneur.com/marketing/article202334.html#ixzz0MMPMsmSK
[26] http://www.emarketer.com/Article.aspx?R=1006354
[27] http://www.emarketer.com/Article.aspx?R=1006354
[28] http://www.bls.gov/cex/generation.htm
[29] http://www.allbusiness.com/marketing/market-research/592154-1.html
[30] http://www.allbusiness.com/marketing/market-research/592154-1.html
[31] http://www.kpho.com/money/16588883/detail.html
[32] http://www.genybuzz.com/gen-y-buzz-special-report.html
[33] http://www.entrepreneur.com/marketing/article202334.html#ixzz0MMptrCW8
[34] http://www.rimag.com/article/CA6521427.html
[35] http://www.rimag.com/article/CA6521427.html
[36] http://www.rimag.com/article/CA6521427.html
[37] http://www.rimag.com/article/CA6521427.html
[38] http://www.rimag.com/article/CA6521427.html
[39] http://www.rimag.com/article/CA6521427.html
[40] http://www.rimag.com/article/CA6521427.html
[41] http://www.rimag.com/article/CA6521427.html
[42] http://www.4hoteliers.com/4hots_fshw.php?mwi=3557
[43] http://www.foodservicewarehouse.com/education/restaurant-marketing/top-ten-generation-y.aspx
