Economic Implications Surrounding the Buying

Economic Implications Surrounding the Buying Power of Teenagers

Teenagers today in the United States have increasing purchasing power and their numbers have also grown over the past decade. The direct economic implication of this fact is that they are able to influence purchasing trends on the market, not only through their own buying behavior, but also through the influence they have on their parents' purchases and, as such, on the entire household's. As a direct consequence, teenagers are becoming more and more a compact entity that is able to determine not only trends on the market, but also other economic implications, such as supply and demand, levels of employment on different segments of the market, and volumes of import.

This paper will aim to analyze the impact that the teenagers' buying power has on the economy from two different perspectives. On one hand, the economy and segments of the market are influenced through the teenagers' own buying power and through some particular characteristics of this group of purchasers (discretionary spending etc.). On the other hand, they also influence the buying decisions that their parents make, usually for items that are consumed within the household.

It is useful to establish several characteristics of teenagers as purchasers before discussing these two perspectives. First, they have "discretionary income"

, which means that they have their own income and that this is not tied to necessary purchases around the household and can be spent more freely. A distinct category to be discussed is those of teenagers who work, and this category can be split into two subcategories.

On one hand, there are the teenagers who work part time and who do so to gain money for their leisure time. They still live with their parents and are supported by them. Because of this, the money they earn are not used for the basic household products, but are rather directed towards the fashionable products and high-end ones. On the other hand, there are also teenagers who have dropped out of school and who work in order to support themselves. These teenagers have a much smaller buying power and are not that relevant for the analysis.

Second, they "establish and affect fashion, lifestyle, and overall trends" and "spend family money as well as influence their parents' spending on both large and small household purchases"

Perhaps above all these characteristics, the most important one is the use of technology in their purchasing decisions and patterns. Technology has become an embedded part of the life of teenagers and, naturally, it is also part of the way decisions are made about things to buy. A tweet on Twitter from a friend who has just purchased something might be an incentive to do the same.

In terms of the influence teenagers have on household purchases, researchers have shown that the teenagers as a group of consumers have "and unprecedented" influence on family spending"

. According to the same study, they influence as much as "75% of grocery purchases and 59% of vacation purchases"

. There is a certain segmentation of this influence, depending on the actual category of products.

As such, parents are less likely to look to their teenage children's advice when it comes to purchasing toilet paper or cleaning items, because these are not products where the teenagers' advice is relevant. They will, however, ask their children on their opinion for everything ranging from the electronics segment of the market (what TV the household should purchase etc.) to vacations and the restaurants they should go to and even to a new car. The main reason for this is that parents see teenagers as being much better connected to the trends of the day and will want to capitalize on this and positively influence their purchasing decision.

Probably the most important impact of such a consideration is in the marketing field. Previously, a marketing campaign for a TV, for example, would have aimed towards points that parents would have considered important. This would include the price, for price sensitive consumers, and the durability, maybe also some of the performances of the model. Now, a marketing campaign for an electronic product will need to factor in the teenage element and, most importantly, the question: is it fashionable?

The reason for this includes the fact that teenagers live much more in a social world than their parents and the respective world is governed by a very strict set of rules, one of the most important ones being the fashion style. A teenager relates with another teenager, member of the same social framework (be it group of friends, school, etc.), partially through the products he or she uses. Many of these need to be the latest style and embody not necessarily a social status, but a sense of style. At the same time, many of these are products that are used in the household, such as the car that the family drives or the electronics used.

This type of approach also has an important aspect to be considered in the marketing segment: the lifecycle of the product is much shorter than for other products and for other periods of time. Because of this trend imposed by teenagers to be continuously in style, as well as by certain characteristics of a teenager that are reflected in the purchasing behavior (such as the fact, for example, that a teenager will tend to get bored faster with a certain product and, as such, lobby for a quicker change of some of the household's products), a product will reach its maturity and saturation phases much sooner. This in turn affects both production and research and development at manufacturing companies that need to keep the pace with this trend.

It is now time to expand on this framework and have an overall perspective over the entire set of economic implications that the buying power of teenagers has, not only strictly related to the household purchasing behavior. The most obvious thing is an increase in the volume of products that are part of transactions on the U.S. market, most notably on some segments of this market. In areas such as clothes and textile or electronics, the purchasing power of teenagers drives sales upward, to the degree to which it is able to significantly affect the volume of goods.