Degree Of Challenge

American Demographics, May 1, 2003

Byline: SANDRA YIN

Consumers today are mercurial targets, but few groups present as daunting a challenge to marketers as college students.

The college market is notoriously tough to crack. Students doubt corporate intentions, they want to be catered to and they don't think companies know what they want. And they are poor: Their idea of a good buy is a bargain. Most students enrolled in four-year programs rely on loans and the Bank of Mom and Dad to foot the bill for tuition and basic necessities. Though many have jobs, they earn, on average, less than $5,000 a year and spend only about $173 a month on discretionary items. Despite such modest individual earnings, college students as a whole represent a multibillion dollar market: In 2002, 5.9 million full-time students in four-year institutions spent some $9.2 billion during the school year on discretionary items, up 27 percent from 1997, according to data from Student Monitor, LLC, a Ridgewood, N.J.-based market research and consulting firm that specializes in the college market.

For marketers who can reach college students, there's great potential payoff over the long term, due to the high earning power of adults who hold college degrees. In fact, companies that fail to reach undergrads before they leave college could lose out on billions of dollars in lifetime consumer spending. The allure for marketers is the opportunity to lock in relationships with the future's more affluent consumers while they're still in school, when they're open to experimenting with products and sharing their opinions with their peers. "It's a rich market in the short term and a wealthy market in the long term," says Eric Weil, managing partner of Student Monitor.

A college graduate's earning power is disproportionately large compared with that of an adult who does not have a bachelor's degree. The 49 million people who have earned a bachelor's degree bring home an average of $59,500 per year, almost twice what those with a two-year college degree (or less) earn on average ($30,200). Educational attainment is big business: Eggheads ages 25 and older earn an aggregate $2.4 trillion a year, and are apt to spend generously.

By the time those who have earned bachelor's degrees are 25 to 29 years old, they earn, on average, 53 percent more than high school grads, according to the Census Bureau. The difference in earnings peaks when the college graduate is 50 to 54 years old. At that point, those with a bachelor's degree (or higher) earn 90 percent more than those without one. And people with BAs (or higher) spend two-thirds more than consumers with less education, according to the Bureau of Labor Statistics' Consumer Expenditure Survey. College grads spend well above average on alcohol, entertainment, personal care and food away from home.

It's important to gain a foothold in this market of future big spenders while they're still young, says Derek White, executive vice president and general manager of 360 Youth, a media and marketing services company based in Cranbury, N.J. The first step is to understand college students' attitudes and purchasing behavior. The college crowd is a skeptical and mistrusting group - and no wonder, as their outlook was shaped during a time of presidential scandals, space shuttle failures and deceptive corporate accounting practices.

Companies that market to college students are reaching them when they're making many purchasing decisions for the first time, choosing everything from soap to banking services. College kids' tastes and preferences for products and services are highly contagious, and their brand loyalties are fluid. "They're still extremely malleable," says David Morrison, president of Twentysomething, Inc., a Radnor, Pa.-based strategic planning and marketing research company. Melissa Schimke, COO of The James Group, a brand strategy and marketing agency based in New York City, believes that it's the ideal time to attract a lifelong customer: "In college, when you start spending your own money, you develop associations with brands for life."

Or not. Consider the long-distance market, which has had limited penetration among students. While 69 percent of students reported using a cell phone in the prior week, up 11 percent the from previous year, only 26 percent said they used a non-cellular telephone to make long-distance calls. Telephone companies are not alone in their inability to resonate with the college crowd. Four in 10 students surveyed by Student Monitor believe that companies that try to sell them things don't understand them.

What's more, it's difficult to gain insight into the media consumption and purchase behaviors of college students because scant data exists. Nielsen and Arbitron don't offer ratings for the college market, so one can only make educated guesses about how many students a TV or radio spot reaches, says Jim O'Rourke, group media director of The Richards Group, a Dallas-based brading agency. The same applies to magazines: An advertiser has to extrapolate what four insertions in Sports Illustrated or three in Glamour might deliver.