Marketing to Millennials

Ask Dan McDonald about millennials—those elusive 12- to 26-year-olds raised among text messages and Twitter—and he'll chuckle emphatically. "They're the perfect customers," says McDonald, 51, who owns seven Jersey Mike's sandwich shop franchises in Nashville. "They travel in packs, they eat like fiends, and they have tons of disposable income."

Indeed, America's 80 million millennials (and their folks) shell out roughly $200 billion annually, according to Chicago-based investment firm William Blair & Co.. Yet they're tough to reach through traditional marketing: Despite the prominence of Jersey Mike's billboards, flyers, radio spots, and newspaper ads, McDonald says he struggles to attract teens and 20-somethings.

Samantha Skey, an executive at Alloy Media + Marketing, which specializes in younger demographics, is not surprised. Weaned on cell phones, e-mail, and round-the-clock Internet, millennials are just as media-savvy as the marketers who target them. Occasionally, they'll flip for a viral marketing campaign: Last year, Folgers' (PG) bizarre "Tolerate Mornings" ad logged more than 500,000 hits on YouTube (GOOG). But more often, Skey says, they'll just "ignore messages that don't seem relevant."

A Refined Approach

Edo Interactive, a Nashville-based firm that deals with Web 2.0 technology, is trying to change the game. After spending a year studying young consumers, they developed Facecard, a prepaid credit card aimed squarely at millennials and the businesses that court them.

Launching nationally Sept. 1, Edo's gimmick works like a fiscal Facebook: After applicants create profiles on Facecard.com, they get a card in the mail that allows them to borrow, lend, or give away money to buddies electronically. For a fee, retailers can send them "prewards," small denominations of instant store credit, based on their age, location, and personal interests. Because the $2 to $3 gifts are redeemed via credit card, tracking consumer response is a cinch.

Such niche marketing is "a hot idea," says David Robertson, publisher of the Nilson Report, a newsletter that covers consumer payment systems. Unlike billboards, TV spots, and neighborhood flyers, prewards allow advertisers to reach a specific audience, in a specific location, at a specific time. It's "a better way to attract prime customers," says Jonathan Dyke, Edo's chief operating officer.

Profit Potential

During a June test run in Nashville, more than 5,000 millennials signed up for Facecard, including 16-year-old Ben Sutter. Sutter likens prewards to "free money," and he says he's more inclined to frequent outlets that offer them, such as Jersey Mike's. "I usually bring my friends, too," he adds.

The benefits work both ways. When Jersey Mike's McDonald sent prewards to 300 high school seniors, his expectations weren't high, since 18- and 19-year-olds are notoriously nonresponsive. But the gamble yielded an "overwhelming" 17% return rate, he says, which is "way above" the numbers direct mailings produce. Moreover, it cost Jersey Mike's less than $150: $2 for each redeemed preward, plus a 5% processing fee. (As of press time, Edo's final pricing plan was still being fine-tuned.)

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