Three American Generations and the Real Estate MarketerDec. 1, 2011
By: Charles S. Madden, PhD
Over the past 50 years, groups of people in the United States have been classified into generational categories to better understand how age groupings tend to behave similarly. From early in the twentieth century, age cohorts have been given names based on their common experiences. For example, the group of people born between 1946 and 1964 are called "Baby Boomers" (Kotler 2000). Baby Boomers represent the children born after the end of World War II, as a very large number of veterans returned from war and established their families. The similarity of anyone's behavior to anyone else in that cohort is assumed to be a result of shared experiences such as President Kennedy's assassination, the Vietnam War, the Cold War, easy drug access and the sexual revolution.
Today, the Baby Boomers cohort is made up of people who range in age from 47 years to 65 years. While they all have many common events in their lives, such as those mentioned above, those of each age may have a different view of certain iconic events. For example, when President Kennedy was shot in 1963, some Baby Boomers were 17 years of age while others were yet to be born. When the Vietnam War ended in 1975, some Boomers were only 11 years of age while others were 29 years of age. From a marketing perspective, each cohort has been seen as distinct from one generation to another. Unfortunately, the Baby Boomers and other defined cohorts (e.g. Generation X and Generation Y) are seen as monolithic groups with very similar experiences. In reality, the people in each of these generational groupings can be further segmented into two to four generational sub-groupings, based on common experiences and similar ages at the times of the exposures to the experiences.
This article looks both at the traditional methods marketers use when approaching different generational cohorts and at a non-traditional, trend-based approach to understanding generational marketing, which can have impact for both real estate marketers and salespeople.
What Makes a Generation?
When examining the three generations identified in this article, it is obvious that the length of time does not define the group as they vary in years. Throughout U.S. history, the length of a described generation varies greatly with the average being about 20 years. One definition of a generation is " a group of people who have grown up during a specified time period and share experiences, memories and symbols that translate into similar preference patterns" (Arnold, Price and Zinkhan 2002). Another author writes that, "a generation is a group of persons who have experienced a common social, political, historical and economic environment" (Hawkins and Mothersbaugh 2010). Regardless of how we define a generation, we must remember that the definition is based on shared and common experiences available to people in the formative stages of their lives. Although people who were born in a previous generation may also experience important events with those of a focus generation, it is the age at which people are forming their personalities and preferences that makes them a part of a defined generation.
Three Generations of American Consumers1
Consumers born between 1946 and 1994 are generally classified as members of the "Baby Boomers Generation," "Generation X" or "Generation Y." Some authors refer to these three groups as "Baby Boomers," "Baby Busters" or "Echo Boomers." The underlying idea of behavior being rooted in the experiences of an age-based group has led generational groupings to become a popular paradigm in market segmentation. It is clear that the behavior of those born in the late 1940's varies significantly from those born in the late 1970's. Understanding generational differences can be very helpful in marketing.
As discussed earlier, Americans born between 1946 and 1964 are associated with the Baby Boom Generation. People in that age cohort are now between the ages of 47 and 65 years. This is the largest identified generational group in American history with approximately 77 million people and comprising just over 28 percent of the current U.S. population.
The second group, known as Generation X, is made up of individuals born between 1965 and 1976 and currently represents about 45 million people. Generation X currently makes up slightly over 16 percent of the U.S. population and is the smallest of the three generational cohorts discussed in this article. In 2011, the Generation X population is between 35 and 46 years of age. The most notable event that occurred during the formative years of this cohort was the fall of the Soviet Union.
The third group, Generation Y, is an age cohort that includes individuals born between 1977 and 1994 and is made up of people who are currently between 17 and 34 years of age. This group is second only to the Baby Boom Generation in size with approximately 71 million people, representing just over 25 percent of the current population of the United States. Among the formative events of this generation were the discovery and growth of HIV and AIDs as well as a major recession.
1Statistics in this section can be found in Hawkin and Mothersbaugh 2010.
When Cultures Collide
These three generational groups coexist in the population and must try to understand each other. This is not an easy task. When an individual relocates from one part of the world to live in a different country, he must learn the social ways of that new country. Until he becomes familiar with social mores, values, language and other social and geographic differences, he must recognize the needs of acculturation to the ways of the new community. Much in the same way, a person of one generation must expect some significant differences when interacting with someone from another generation.
Despite living in the same place, different generational groups may find that their differences make living together quite difficult. The term "acculturation," is the process through which an individual encounters people of a different culture and makes attempts to embrace the customs and beliefs of that culture (Hoyer and MacInnis 2007). An example of acculturation may be the way a person adapts to a new job assignment and living arrangement when relocating from the United States to Scotland. Even though many cultural similarities may exist between the U.S. and Scotland, there will undoubtedly be many differences. There are common examples of such attempts to acculturate within the United States between people of different regional cultures, such as when a person relocates from New England to the Deep South and finds that many customs, figures of speech and values are different than one would find in the New England culture.
Despite people living side-by-side in the same macro-culture, they may be different in the way they view the values and the micro-culture in which they live. An example might be the difference in reliance on text messaging by Generation Y relative to Baby Boomers. Baby Boomers, having adapted to certain communication technologies such as texting, have the ability to select from and use multiple vehicles to communicate effectively. Members of Generation Y, on the other hand, were born into text messaging and often do not see other methods like phone and email as viable communication options.
Generational Differences in Real Estate
Based on population statistics, roughly 9 out of 10 real estate brokers probably fall into of one of these three generational cohorts. Thus, when real estate marketers interact with customers, they may likely deal with a different generational cohort. While matching brokers with customers may be a feasible approach in some settings, many real estate companies cannot match sales people to customers. Also, most professionals build networks of customers that yield buyers and sellers of various ages and backgrounds. Marketing efforts, then, must be strategically orchestrated to target and impact desired audiences using the breadth of information available.
Each of the generational groups holds slightly different views of home ownership because of their differences in buying experiences. Boomers generally believe that a single family, detached home, financed over 20 to 30 years is the norm and for many the "American Dream." Due to a career mentality that may consist of multiple job/location changes, they have likely owned 3-5 homes over the course of their life. Many have seen interest rates as low as 4 percent and as high as 18 percent. The Generation X'ers, believing they should own a home, are likely to have acquired one or more homes by "creative financing" and also are likely to have had some credit problems or have friends who have had such problems. Many members of the Generation Y cohort have a much more pessimistic view of buying a home because they have either seen older friends lose houses, or have experienced such loss themselves. They lack trust in the home building, home marketing and mortgage financing industries.
The generations also have different views of careers because they have experienced very different outcomes through their working lives. Baby Boomers were the first generation to experience dual-career households and significant career mobility. Generation X was the first cohort to experience a significant number of career changes, some personally driven, others driven by their employers. Generation Y experienced turn over and mobility as youngsters watched their parents and others lose jobs and reposition careers... sometimes multiple times. As a result, these "Echo Boomers" were the first generation to trust their skills more than the companies for whom they worked.
There is an emerging difference across the generations regarding advertising and personal selling. Boomers typically see advertisements as informational and somewhat entertaining. They also see salespeople as a good source of information. The members of Generation X are somewhat less trusting of advertisements and salespeople. Generation Y has very little trust of either advertisements or salespeople. While there are exceptions in each cohort, generally over the past 60 years these three generations have become increasingly more skeptical of marketing efforts.
Over the past six-plus decades and the three generations, the nature of "community" has changed significantly. Boomers still think of community as mostly face-to-face in nature with some use of telephones. Generation X now relies on a combination of face-to-face, telephone, e-mail and texting. The Generation Y cohort is relying much more on technical bases of communication to form and maintain communities (Facebook, texting and e-mail). Because of increasing reliance on technology, communities arising from these three generations are moving from being local to regional and ultimately, national and international.
A Trend-Based Approach for Real Estate Marketers
Traditionally, attention is given to specific generational differences as a means of anticipating, tailoring, and segmenting marketing efforts across cohorts. These conventional efforts rely heavily on leveraging the shared experiences or events of the era to communicate and deliver offerings effectively. Marketers may spend a significant amount of time playing into the differences between cohorts, and may neglect important shared commonalities in generational marketing efforts. By identifying trends that exist across generations, marketers can harness the power of both generational differences and trend-based unities to create more impact for clients.
Trends are often realized in the form of patterns; generational variances are woven together across multiple periods. Trends across and through culture tend to mask the differences between generational cohorts, promoting a vein of consistency amongst all groups. Trend analysis, unlike the more traditional marketing model, can help agents identify growing commonalities between cohorts, and in turn, recognize important opportunities to drive sales and create value for clients. Consider the following for today's real estate marketers, resulting from trends developed through the Baby Boomer, Generation X and Generation Y eras:
- Capacity and desire to purchase new and bigger homes.
Two main trends occurring between 1945 and 1990 have created significant purchase opportunities for real estate marketers: the rise of women in the labor force and the expectation of life success.
- Beginning in the 1940's, the dynamic of the "traditional" American family began to change dramatically as more and more women entered the labor force. In 1945, of the percent of women in the labor force was at 28%, by 1975 the number grew to 46.3%, and by 1990 it had risen to 57.5% (U.S. Department of Labor, Bureau of Labor Statistics 2011). In 2009, the figure had grown to 59.2%, down just slightly from its peak of 60% in 1999. As the rate of women in the labor force gained momentum across generations the earning potential and likelihood of dual-income households also rose.
- Partly based on the drive of those returning from World War II, Baby Boomers came to believe that they had the potential to accomplish anything. Additionally, as soldiers returned home from World War II, aspirations to attend college also rose. The introduction of the GI Bill and its impact on the returning veterans first resulted in the belief by the Baby Boomers that attending college was possible. Now, each subsequent generation has come to accept that education offers access to a better life, as reflected in the continually rising college enrollment rates. Since the mid 1960's, the college enrollment rate of 18-to-24-year-olds has trended up almost every year, rising from 25.5% in 1967 to 39.8% in 2008 (U.S. Census Bureau 2008).
The earning potential facilitated by the growing rate of women in the labor force coupled with the expectation of achievement and success developed through subsequent generations have afforded individuals and families the financial capacity and desire to purchase new and bigger homes - a clear opportunity for real estate agents to capitalize on developing expectations across generational cohorts.
The capacity and desire to purchase new and bigger homes results from a more positive trend in society, however some real estate opportunities emerge as a result of more unfortunate trends.
In 1940, the divorce rate (number of divorces per 1,000 married women age 15 and over) in the United States was at 14.4. Throughout the Baby Boomers Generation, Generation X and Generation Y, this rate has continued to rise, landing at 20.3 in 1975 and 20.9 in 1990 (Clarke 1995). While exploiting divorcees should never be a goal, the resulting effect on the real estate industry reveals itself, as a divorce usually requires one or both individuals to purchase a new home. Therefore, as divorce rates rise, the need for more homes also likely rises.
Across the three generations discussed in this article, the pursuit of information and entertainment have merged, and the sources of each available to consumers is continually expanding. The Boomers were one of the first generations to use television as a source of entertainment. Boomers also used television to seek information. Over subsequent generations, television was gradually supplemented with (and later often replaced by) newer technology like the Internet and cell phones as a means for both information search and entertainment.
As access to information continues to become easier and more convenient, information search has become more constant. Thousands of news channels, faster Internet speeds, wireless "hotspots" and smart phones have given consumers access to whatever information they want, whenever they want. Home buyers often desire the same constant access to information, as well. A consumer's ability (and often time his expectation) to identify a prospective home, do research on its history, neighborhood and school systems has become much more commonplace as a result of the available technology.
Providing timely, thorough and unique access to home information through Websites, blogs, phone-based applications, etc. can be a huge differentiator for a consumer seeking a real estate agent. Even if the consumer does not desire the extent of the information you are able to provide, doing your homework and having information available will prepare you to engage in prospective sales opportunities.
What It Means for You as a Real Estate Marketer
When interacting with a generational cohort that is different than your own, take time to identify both the differences and similarities of your cultural perspectives. It is also important to realize that generational cohorts are not monolithic but represent a continuum running as a trend over the years of a generation. Traditional generational studies and non-traditional trend-based studies both have value - considering commonalities and variances can help you understand your customers' reference points, establish strong connections and identify sales and marketing opportunities.
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U.S. Census Bureau (2008), School Enrollment in the United States: 2008, Retrieved November 21, 2011 from https://www.census.gov/hhes/school/index.html.
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About the Author
Charles S. Madden, PhD
The Ben H. Williams Professor of Marketing, Baylor University
Stan Madden served as chair of the board of the 50,000-member American Marketing Association from 1998-99 and is a member of the AMA Foundation Board through 2004. He also chaired the AMA nominating committee for 2000-2001.
He is a past president of the Southern Marketing Association, the largest regional marketing academic group in the United States, as well as past president of the AMA Academic Council and program chair for the American Academy of Advertising.
Madden has published more than 50 articles in scholarly journals and has served as guest editor of the Journal of Business Research.
He joined the Baylor business faculty in 1983 as marketing department chair and later served as associate dean for graduate business programs. He also has served as a visiting professor at universities in Finland, Russia and Australia.