Tapping into the buying power of the selfie generation.
They’re the biggest generation in history and they have enormous buying power. Yet they lead very different lifestyles from their parents and have distinctive skills, goals and expectations. Who are the Millennials, and how are they radically transforming the consumer goods industry?
Experienced executives in the consumer goods industry could be forgiven for greeting the topic of the Millennial generation with a certain skepticism. Do today’s consumers between the ages of 18 and 34, dubbed the “Me Me Me Generation” by Time magazine, really differ from their predecessors? The 1970s were dubbed the “Me decade”, while as long ago as 1907, The Atlantic magazine complained about the “worship of the brazen calf of the Self” that was afflicting society. Yet each generation reaches maturity at its own point in time, in its own context. And the distinguishing characteristics of the current generation of prime spenders – those born between the early 1980s and the turn of the millennium – are that they are, as the marketing term goes, ‘digital natives’, who have grown up with digital technology and whose priorities and values have been shaped by the most severe economic crisis since the 1930s. There is something markedly different about Millennials, even if analysts differ as to exactly what that is.
As a result of the interplay between that economic trough and consumers’ worldly awareness – facilitated by greater access to information, commentary and communication – there can be no doubt that a new kind of consumer has been created.
Their opinions have been influenced not just by their immediate family and peers, but by a global pool of ‘infotainment’ and viral message-sharing. They may be gadget-hungry, but they aren’t necessarily consumers in the way some older, more materialistic generations were. Just look at the way this age group enjoys music, books and films – its downloads and subscriptions rather than physical purchases.
Saddled with student debt, struggling to get on the housing ladder and often living at home with their parents, they find fulfilment in different ways – through experiences, sharing and feeding the mind. They’re more likely to rent than to own, more likely to share than hire.
These are sweeping generalizations but they are identifiable qualities that brands can turn into opportunities with some personalization here and there – because, let’s not forget, this is a generation that likes to feel that a product or service has been designed, created or reconfigured to suit them.“
The Millennial generation consumes differently,” says Vera Nieuwland, Senior Project Analyst at KPMG’s Innovation Lab. “There is a big shift from acquiring traditional assets – cars and houses, for example – to consuming services as and when they need them in a trend known as the ‘collaborative economy’. The rise of services like Uber and Zipcar confirm this trend. It’s less about owning the asset than having access to the facility when you need it and in a way that suits your individual needs. Technology and a new labor market are also encouraging some of them to collaborate in start-ups.”
‘Digital connectedness’, now pervasively mobile, is a major facilitator and perpetuator of all of this, she says: “Millennials are using technology to outsource their lives: they can have instant access to services that can find them a taxi, do their laundry, post their letters, cook their dinner and pack their suitcase.”
Certainly this is a generation that likes to be served. There should be no wish not catered for, no information not forthcoming. One aspect of this trait is a trend called the ‘quantified self’ which captures and shares information about how well an individual is performing (miles run, calories burned, etc.) – albeit these tools often masquerade as health and fitness or performance improvement apps.
One of the more intriguing trends is their growing desire to shape the products they buy. This is more than a need for personalization. Millennials feel so connected to the market, and so influential in their feedback, that they can’t see any reason why brands wouldn’t heed what they are saying and respond in the form of new product releases and feature enhancements.
“Millennials are seen as having a sense of entitlement but we think this is a misunderstanding. They like to use technology to do things ‘smart’ and what’s changed is that this is now available, encouraging them to try out new things.They like things to be personalized and cool, and that can pose a challenge for those brands whose business is built on economies of scale,” notes Tom Herbert, a Business Innovation Manager at KPMG’s Innovation Lab. “Digital technology, and the rise of the Millennial, is accelerating the pace of change, and increasing the complexity of change. A brand could face changes to the way it develops products, how it markets them, the channels it uses to distribute them, and the supply chain it uses to create and deliver them.”
According to a Millennial Consumer Trend 2015 Study by Elite Daily, an online news site, 42% of Millennials are interested in helping companies to develop products and services. Social media can help foster the closer communication that might enable this. These shifts are being reflected in companies’ fortunes. More health-conscious fast food brands such as Chipotle are on the up. WholeFoods is looking to launch a chain of supermarkets to woo Millennials. Sales of children’s cereals in the US have, Euromonitor estimates, fallen 10.7% over a decade, whereas organic snack producer Hain Celestial – which explicitly targets Millennials – has become a stock market darling.
The phenomenon of the Millennial generation has been thoroughly analyzed and extensively documented, so brands can spot and adapt to the changing needs of their target audience. Channels are important. This is a generation that watches much less TV, and reads far less. Millennials (typically) like their content in bite-sized form, often recommended by respected peers, set in an interest-group-specific context, and right up to the moment. This makes them hard to reach with traditional marketing techniques. Only 1% pay heed to advertising, yet 33% consult a blog before purchasing, according to the Elite Daily study.
Of these, peer reviews have become very powerful. In recognition of their impact on Amazon’s sales, UK high-street book store chain Waterstones has for the last few years placed mini-reviews on its product shelves to help customers choose a book. Other brands have achieved a similar effect using mobile apps so customers in bricks and mortar stores can check how items compare and are rated online as they browse the aisles.
Millennials are certainly worth engaging with. Despite an apparent preference for sharing and recycling instead of ownership, they have substantial spending power – US$200 billion a year in America alone by 2017. It is a huge market too: in the US there are more 23-year-olds today (a whopping 4.7 million) than any other age, according to US Census Bureau data. By 2020, Millennials will account for one-third of the adult population in America.
Getting their attention means catching them at the right moment in the right place with the right message about the right product. As hard as that might sound, this generation likes to give feedback, so there are plenty of clues on social media about what they want, need and will spend money on. If brands respond with the right offer, word-of-mouth will carry them a long way, as happy customers’ freely given reviews are shared widely. Win the Millennials over and the prize is powerful brand ambassadors passing on the message for free.
Anyone doubting the power of social media with this generation need only look at the finding from the Elite Daily study that 62% of Millennials are more likely to become a loyal customer of a brand if it engages with them on social networks. It’s partly why brands are generally more responsive to customer service requests or complaints if approached via Facebook or Twitter. (That and the fact that bad feedback spreads frighteningly quickly online.)
Reaching this audience with something relevant and different is not easy. Preferences can appear to change overnight, and market disruptors can appear from nowhere – as in the case of ride-share service Uber – suddenly changing the way this generation thinks about and buys into a product or service.
A brand’s corporate social responsibility (CSR) agenda matters to Millennials too. Growing social awareness and peer pressure not to associate with brands who waste food/pay staff a pittance can be very powerful. In the US, fast food chain Firehouse Subs is making inroads partly because it has a rich back story: founded by firefighters, it donates some of its sales to help the emergency service. It’s vital that FMCG companies think very carefully about how their business will be perceived by Millennials.
Another challenge is how to cater for these changing preferences while keeping existing older customers happy. What’s right for the Millennials may not resonate with their parents, or older siblings, so a balance has to be struck.
One positive finding is that despite a profusion of choice, Millennials can be loyal to brands. This bond is based on something greater than convenience, so brands need to work harder to differentiate themselves – by genuinely being better and going that extra mile. They can’t afford to take loyalty for granted; if they become complacent or stop innovating, the affiliation could soon wane – especially as, with technological barriers to entry coming down – and social media spreading the word instantly – it is easier for new contenders to step into the gap.
Much of the hype relating to the Millennial generation has focused on the US, but this is a global phenomenon. The Internet is an international utility and a unifying force – disseminating similar information in Brazil, China and Africa as in the US and UK.
"The Millennial trend may be more advanced in western economies like the US,” Herbert says, “but in terms of a shift in demographics, use of technology, andattitude, it is a global phenomenon. It may just play out in different ways in different countries. In China, for example, Millennials may be just as technologically driven as in the West but, because the family is such a strong institution in Chinese society, this too will have a bearing on how these consumers behave.”
Whichever way the FMCG industry segments the Millennial generation, the important thing is that companies don’t ignore the evidence that something significant has changed. Whether or not you accept that Millennials represent a milestone in the evolution of the consumer, some common denominators do set this generation apart. “The digital age, and its economics, challenge many of the established norms in the consumer goods industry,” says Herbert, at KPMG’s Innovation Lab. “Brands and retailers, no matter how well established they may be, ignore this at their peril.”
Even if you feel your organization is already moving in the right direction in terms of business agility and customer-centricity, it is worth analyzing your entire proposition from a Millennial perspective – from product development and business models to brand values and methods of engaging consumers. Millennials can still be sold to but, more than anything, they want to be heard. If they’re not, they will look elsewhere.