Ah, millenials... we’re an intriguing generation to say the least. My generation has absorbed technology so fully it is a seamless part our daily lives, and we have a superior confidence in ourselves – maybe to a fault. Typically research shows we’re a generation of people that are highly educated, tech savvy, ambitious, and entitled. We grew up with cell phones, the Internet, and a explosion in media advertising. Cutting through all the noise to grab our attention – and sell us your products -- grows more difficult with each passing day.
To attract the younger consumer it takes a much different approach – one that Ford (NYSE: F ) is excelling at. I’ll show you an example of how it’s working with Ford’s Fiesta, which is attracting more millenials than any other Ford vehicle. But, that’s just the first step in Ford’s big plan. Ford is thinking much bigger and further into the future. Millenials are the key to reviving its luxury Lincoln brand. I’ll show you why that is the case, and what investors’ need to watch out for.
Millennial buying power
The millennial generation represents more purchasing power now than people realize, and it will only increase as we age. We represent nearly 80 million people with a purchasing power estimated at $170 billion. That makes us the largest generation since the baby boomers, and much larger than the 48 million Gen Xers out there. It won’t be long before we are ready to outspend any other generation, leaving those companies unable to attract our attention left in the dust. Ford appears to understand my generation pretty well, so let’s look at why Ford is already way ahead of its rivals in attracting my generation, and why it’s so important for Lincoln’s future.
Ford’s first unique marketing campaign targeting the millenials was groundbreaking in 2009. It gave consumer-agents a Fiesta, gas, insurance, cameras and any equipment needed to create unique content from their user experiences. The agents combined to tally up over a million miles in the Fiestas and create more than 50,000 pieces of original advertising content. That content, used by Ford for commercials or paper ads, generated almost 30 million views. Here is an explanation why it worked so well, according to Keith Koeppen, Ford's advertising and media manager: "Consumers -- millenials in particular -- like being a part of the brands they feel represent them. ... This demographic is accustomed to creating content about their lives, so it just makes sense to give their creativity a bigger platform with greater scale."
The 2009 advertising campaign created enough buzz through social media for over 132,000 Fiesta inquiries at dealerships. Even more impressive was that 83% of those inquiries came from consumers who had never owned a Ford vehicle! In an industry that’s known for brand loyalty, attracting that many potentially new customers is huge. On top of that, 30% of those inquiring were younger than 25. Ford’s trying to be the first seller to this new generation, and it’s got its foot in the door already. Its 2014 Fiesta campaign will look to dwarf those numbers from the earlier one, and strengthen its connection to my generation.
Enter the Lincoln line
You now have an understanding of the millenials’ current purchasing power, and the idea that we will have the most purchasing power over time. You know that Ford is attracting the young consumer better than its competitors, but why does this matter for its Lincoln line? The majority of my generation aren’t close to purchasing a luxury vehicle – yet. In a few years I’ll have the option to purchase my first luxury vehicle – if I choose to give up my beloved Mustang – and I won’t be alone.
Ford’s focus – no pun intended – will be divided in two parts. One, Ford wants to lock the millenials into its vehicles early through unique advertising. Then, as we age, Ford will do its best to step us up into a more premium vehicle – via the Lincoln line. It’s the classic good, better, best marketing ploy to retain customers and maximize profits. That will require drastic improvements to the Lincoln line to attract new customers. Right now, that option just isn’t attractive; those few in my generation that are ready to purchase a luxury vehicle from Ford will likely walk out the door and down the street to the nearest competitor. Ford needs to have a quality Lincoln line, and soon.
Ford has a lot going for it right now, and the icing on the cake would be a turnaround in its all but dead Lincoln luxury brand. If it can bring the brand back to relevance, it would be a great catalyst for Ford stock. These premium sales would be purely incremental to its Ford lineup.
The thing investors need to watch is the success of the Fiesta. It’s attracting more millennial attention than any other Ford vehicle and will be key to building brand loyalty with the generation that will soon be top spenders. If the Fiesta takes off, and Ford continues to attract more millenials, it will be proof that Ford’s future is indeed brighter than people realize.
Ford has been performing incredibly well as a company over the past few years – it's making good vehicles, is consistently profitable, recently reinstated its dividend, and has done a remarkable job paying down its debt. The stock has recently taken off, and it appears that investors have begun to notice what Ford is doing right. Does this create an incredible buying opportunity, or are there hidden risks with the stock that investors need to know about? For in-depth analysis on whether Ford is a buy right now, and why, you're invited to check out The Motley Fool's premium research report on the company, authored by one of our top equity analysts. Simply click here now to claim your copy today.