Scarcely a presentation on marketing trends is complete without reference to the Boomer, Gen X, Gen Y, and Gen Z segments and allusions to each generation’s unique expectations, behaviors, attitudes, and values. The grand conclusion is always that these distinct demographic segments define generation-specific consumption patterns that marketers ignore at their peril. Gen Xers, born between the mid-1960s and 1980s, are the successor generation to Boomers, born between the end of World War II and the mid-1960s, and each successive generation takes up about 20 years. The contention is that each generation has a set of defining experiences that have shaped it and that in turn shape them as consumers. This segmentation scheme is perhaps marketers’ most successful product. And it is, unfortunately, mostly nonsense. By Niraj Dawar, November 18, 2016, HBR
Here’s why. For it to be useful, a segmentation scheme must meet two simple criteria: (1) It must explain the variance in the behavior of interest better than other available variables, and (2) consumers within segments should be more homogenous than those across segments.
Below are some questions to ask the next time you hear someone describing generational segmentation.
First, are the labels just shorthand for the age group, or do they provide some additional insight? For example, is it more informative to say 30–40 year olds or Gen Xers? Calling them Gen Xers presumes that there is something generational about their characteristics that will remain constant as they traverse different age groups. But most often the label is used as a substitute for an age bracket. Retirees are more likely to be interested in savings products, health care, and travel and leisure, while younger consumers are more likely to be interested in education, job searches, budget travel, and so on. And that has always been the case. Adding the generational labels does little to enlighten us on product category usage and even less to tell us about brand or feature preferences.
Still, the generational schemers will argue, each generation has different media preferences, depending on when they came of age. For example, older consumers rely on print and TV as sources of information, while younger consumers prefer to be reached through the internet and mobile media. But this distinction is so obvious as to not require a generational segmentation scheme; age brackets remain sufficient (and more predictive) for media preference.
It is worth keeping in mind, also, that the cutoff dates for the generations (every 20 years after WWII) are entirely arbitrary, with an arbitrary starting date. And by lumping consumers into generational brackets, we lose a lot of information. If we have to use demographics (and we no longer have to — see below), we are better off using finer variables such as age or even age brackets. As a corollary, if the world is truly moving faster (with new technologies changing the marketing landscape at an ever-quicker pace, adoption of new products occurring faster than ever before, and product life cycles shortening), then the defining experiences of each successive generation should be entirely different. Should marketers adapt by defining generations as 10 years or even five years, rather than 20? This is not to suggest that we should, but rather to highlight the arbitrariness of our generational cutoffs.
But a second consideration makes the generational segmentation scheme even more meaningless, and indeed obsolete. Demographic segmentation is so 20th century. In a world rich in behavioral data, accurate assessment and targeting of the individual consumer is not only possible; it is easy. Using coarse demographic segments is unnecessary. Demographic segmentation was valuable when marketers needed to lump individuals into large enough groups to make it economically viable to target them as a whole. Mass media was too coarse a tool to allow individual level targeting, so marketers made assumptions about the similarity of consumers who were of similar age, lived in similar geographies, or earned a similar income. Demographics offered a rough proxy for expected behavior. Lumping consumers into generations based on when they were born is among the crudest forms of segmentation.
Today, individualized media (smartphones) have made those segmentation exercises as obsolete as rotary dial. It is far more viable and profitable to target individuals based on their individual media and consumption habits than by grouping them into segments that marketers hope are homogenous. You can find and reach the 60-year-old who reads and watches Vice News (a news outlet aimed at younger viewers) and the diligent 25-year-old who is saving for retirement — individuals you would miss with a coarser demographic segmentation scheme. What’s more, the very nature of pull versus push media make cross-demographic consumption much more likely.
Third, are consumers really more homogenous within generations than across them? For example, generational segmentation gets weird when it is used to predict generational values. Millennials, we are told, are endowed with a sense of civic responsibility and enlightened attitudes toward the environment, and these qualities so define the generation that they will endure even when Millennials are 50 years of age. But there is little evidence that this generation is any more environmentally conscious than the generation that eliminated phosphates from our rivers 50 years ago, or that they are any more civic-minded than the generations that fought for civil rights. And there is little predictive value in stating that this generation’s values will endure. (It precludes the possibility of defining experiences to come — for example, a war or an economic depression.)
Finally, are generation segmentation schemes really predictive of brand preference, or brand loyalty, or a preference for certain product features? The answer is no. There are far better predictors; the best of them is past behavior. And past behavior is now recorded and available as a variable.
So the next time you’re at a presentation and you hear about generational segmentation, try asking some of the questions above instead of tuning out and checking your smartphone.