Generation X: The new driving force behind the remodeling market

For decades, baby boomers have been setting the pace in the remodeling industry, but in the next few years the last of the boomers will be leaving their remodeling prime. The good news is that Generation X is already spending at a higher rate than boomers and is just now entering key spending years.

The top ages for remodeling are when homeowners are between 35 and 45, according to research by the Joint Center for Housing Studies of Harvard University. Although boomers still lead in total spending, Generation Xers are spending more per household, reflecting their general tendency to spend more than their parents.

"The trend across all generations is that they spend more than their predecessors, but for Generation X, we're seeing that they tend to outspend at an even greater rate," says Amal Bendimerad, a research analyst at the Joint Center.

There are several positive indicators Generation X will spend on remodeling. First of all, they are much more likely to look at their home as an investment than previous generations. This view is driven largely by living through the recession and resulting stock market losses earlier this decade, Bendimerad says.

"That shaped their view of what is a safe investment," she says.

They are also defining households differently. Unlike previous generations, they aren't waiting until they are married to buy a house. Single Xers, especially women, are much more likely to buy homes than single baby boomers. That all leads to higher homeownership rates for all Generation Xers, Bendimerad says.

Finally, as the housing stock continues to age, it just makes remodeling more likely. According to Joint Center research, 31 percent of Generation Xers live in homes that are at least 45 years old, compared with 22 percent of baby boomers when they were in their 30s.

Smart remodelers are realizing they need to court this age group if they want to build their business.

Len McAdams, president of McAdams Builders in Kirkland, Wash., is a baby boomer himself but realizes the importance of reaching Generation X. It now represents about 15 percent of his business, up from basically nothing a couple of years ago.

"It has to keep growing," he says. "We're running out of times we can keep going back to the same people."

McAdams expects the importance of Generation X to grow rapidly in the next few years.

"I am convinced that our industry must find a way to sell to this group and pretty quickly," he says. "Baby boomers are feeding us so well that there's going to be a big vacant spot in the market when they stop."

Riggs Construction in Kirkwood, Mo., is already getting about 80 percent of its business from Generation X. Kirkwood, a St. Louis suburb, has become a popular choice for young families that want a sense of community in their hometown.

"They're buying the bigger, older homes in town and having us come in and do the work to bring it up to what people want today," says company Vice President Amie Riggs.

Sales Resistance

As a Generation Xer herself, Riggs has focused a lot of attention on targeting her generation for growth. But marketing to Generation X is different than the baby boomers. Both Riggs and McAdams have had the most success with face-to-face networking through activities like community service and coaching local youth sports.

"They see us out there and know we are part of the community," Riggs says.

The way we think of advertising and marketing today has been mostly shaped by what works with baby boomers because of their dominant role in consumer spending for the last 30 years, says Lauren Kolbe, president of KolbeCo Marketing Resources, a Dardenne Prairie, Mo., company with several remodeler and home builder clients, including Riggs Construction.

"For Generation Xers, there is a resistance to being sold," she says. "They've grown up in the age of cable television, and they've seen all the traditional advertising."

Xers are much less likely to be motivated by a "buy now" or limited-time offer. The biggest thing Xers are looking for in a purchase is value and quality.

"They're willing to spend, but they want to know where the money is going," Riggs says. "They want to know how their lives are going to benefit from it."

That's a sharp contrast from baby boomers, who usually "just want what they want," regardless of price, Riggs says.

This emphasis on quality leads many Generation Xers to become very brand loyal. Studies have shown that they are much more likely to find a brand and stick with it when it comes to everything from soap to cars. There's no reason to think that would change when it comes to a big investment like remodeling, Kolbe says.

"You have to reach them at a younger age to get their business," she says.

That means companies that are actively marketing to them now are going to have a leg-up on the competition when Xers are in their prime remodeling years. Xers also place more emphasis on the opinions of their peers than earlier generations, meaning getting early inroads into the market will be crucial for future referrals.

"They tend to trust each other, and that can be useful in shaping the marketing message," Kolbe says. "For Riggs, we can put Amie out there and make her the face of the franchise, and they can relate to her."

Riggs says that message can carry through to the entire relationship with the client.

"For a lot of people, they like knowing that someone young is calling them back," she says. "I think for some people it makes them more comfortable than 'talking to a dad.'"

Interestingly, that doesn't necessarily hold true for every client. At Riggs, there are four people who handle the sales. Amie and her brother Bill are in their 30s, and the company also has two salespeople, Becky and Tom, in their 50s. Amie handles all of the incoming calls and assigns the salesperson based on her initial conversation with the client.

Younger clients are often more comfortable with a younger salesperson, but McAdams has found that in many cases, younger clients would rather talk to him than one of his Generation X salespeople.

"I think sometimes they want to talk to me because they want that sense of authority I have from my experience," he says.

Information Overload

The message that marketing efforts deliver is important. For Generation Xers, that message needs to be more information-based than it has been for previous generations.

"Generation Xers want to have a remodeler help them buy rather than sell them," says David Alpert, president of Continuum Marketing Group, a Great Falls, Va., firm that works with remodelers around the country. "They want to make a selection from a series of choices, but they want the remodeler to help them make the choice more intelligently."

A good example of this is auto insurance companies' providing consumers quotes from multiple insurers. That's a response to the buying habits of Xers, Alpert says.

"We find that they do require a lot more technical detail when making the choices," McAdams says. "They don't say things like, 'You give us the best option,' and the older clientele often does."

The Web is also playing a big role in the way Generation Xers make decisions. Before they make any contact with a remodeler, they're likely to research the company and products online. That makes having an effective site very important. Everything on the site sends a message, so that language needs to be carefully crafted.

Web sites need to be less about the company and more about the services the company provides, Kolbe says. Many sites end up being about what's important to the company rather than what's important to the consumer.

"It really needs to be focused on the language of what people can get from the company," Kolbe says.

Riggs recently launched podcasts on its site. Podcasts are short recorded messages that can be played on an iPod or other portable MP3 player. Amie Riggs is recording a series of four, each focusing on a different type of project.

"We all have our iPods, so this is a good way to market to my age bracket," she says.

Even if a company has a great site, getting consumers there can be a challenge. KolbeCo works with many of its clients using aspects of search engine optimization, specifically a process by which sites use keywords to increase their likelihood of being near the top of search results on Google or other search engines. Search engine optimization can require a lot of time and effort to keep a site updated, especially in highly competitive markets. For that reason, Alpert says using pay-for-click advertising may be a more cost-effective approach for many smaller clients.

"You're going to get more bang for your buck, and it's a more straight-forward approach to getting visits," he says.

Traditional marketing is still a good way to get Generation X traffic to a Web site. Because brand is so important to Generation Xers, marketing efforts that promote the Web site and the company's brand are still the best method to stay top-of-mind for clients. So while the message has changed, the medium is not that different.

With Generation X, personal referrals remain the top way to generate business. Beyond that, direct mail is very effective with Generation X, as long as the message is properly crafted by focusing on services and quality, not a discount. Research shows that 86 percent of Generation Xers read their mail the day it arrives, and they rate 75 percent of their mail as valuable, Alpert says.

Print advertising can still work if it's properly targeted. Advertising in daily newspapers or the Yellow Pages are not very effective unless a remodeler serves a wide area. However, niche advertising can pay off, such as in local home improvement magazines. Riggs has had great success advertising in the local Kirkwood weekly paper, because it appeals to the community-focused residents of the city, she says. PR

Visit www.ProRemodeler.com for more on Generation X and remodeling, including Senior Editor Jonathan Sweet's blog about his experience remodeling his home.

Now is the time for remodelers to target Generation X