There are 56 million millennials in the U.S. workforce, making the generation born between 1981 and 1996 the largest workforce demographic in the United States. And their influence is set to grow; U.S. millennials will outnumber non-millennials by 22 million by 2030, according to the U.N. Department of Economic and Social Affairs.
Eric Roth, managing director at MidOcean Partners
With millennials entering their prime earning years, retailers need to understand that there are significant differences between millennials and previous generations. Millennials have relatively little savings thanks to the tough job market they faced from 2007 to 2015, they job-hop more often than previous generations and they have an average of $42,000 in debt, according to Northwestern Mutual’s 2018 Planning & Progress Study. The same study also found they spend nearly equal amounts on discretionary items (e.g., dining out and hobbies) and paying down debt. These dynamics likely contribute to millennials marrying and having children later in life and drive them to embrace renting rather than owning. That mentality also has spawned the gig economy for clothes, cars and homes.
There’s surprising overlap when millennials and non-millennials are asked about their favorite brands, according to a Boston Consulting Group brand affinity study. For example, heritage brands like Nike and Sony were cited across the board, while more hip or chic brands like Apple and Target appeared to have an edge with millennials. While millennials share some preferences with previous generations, they also have differentiated generational traits and personalities. Millennials are the generation of instant gratification, focused on speed, ease, efficiency and conviction. They are social offline and online and are more likely to use the internet as a platform to broadcast their thoughts and experiences and contribute to user-generated content. They also tend to embrace business and government and believe they can bring about change. As a result, understanding what is important to millennials is essential to effectively market and build a brand targeting this group of consumers.
74% of Americans prioritize experiences over products, and millennials are leading that charge, according to a study conducted by Expedia and the Center for Generational Kinetics. They want brands to emotionally connect the products they sell with the self-image of their core demographic. The millennial consumer aspires to a lifestyle that is both authentic and purpose-driven. That’s why 52% of millennials feel it’s important that their values align with their favorite brands, according to a recent survey done by Euclid, a shopping analytics platform designed to track customer behavior in retail stores.
That underscores why a number of lifestyle brands appeal to millennials by embodying the values, aspirations, interests, attitudes or opinions of this group of shoppers.
Leverage lifestyle branding
Apparel retailer Outdoor Voices resonates with millennials by supporting active, female lifestyles. That enables the brand to stand for more than yoga pants. Its imagery and messaging is zealously focused on consistently conveying a lifestyle to their loyal following.
Be authentic
Brands need to remain true to their core values to effectively engage millennials.
For example, 90% of millennials said brand authenticity is important when they decide which brands they like and support, according to a recent survey from Social Media Today. That’s why hyper-connected, socially informed and knowledge-driven millennials are deeply suspicious of being “sold” a product.
They want authentic recommendations from real people for brands they can trust. The 2018-2019 Roth Capital Millennial Survey found 83% of millennials trust peer reviews and 74% believe an influencer’s repeated use of a product is more important than a single endorsement. Many successful brands rely heavily on user-generated content (UGC) to drive significant traffic, particularly because search engines prioritize fresh and relevant content, and the steady flow of UGC improves their search rankings.
For example, Patagonia built its brand following by crafting content that aligns with its mission: “To build the best product, cause no unnecessary harm, use business to inspire and implement solutions to environmental crisis.” Most notable is its Worn Wear online store for used gear that leverages the connection between clothing and memorable experiences. Consumers share stories about their favorite products and why they keep using them instead of buying something new.
Embrace a social responsibility mindset
Millennials are more cause-driven than any generation since baby boomers and gravitate to brands with a mission beyond their economic model. For example, 62% of millennials are willing to pay a premium for socially responsible brands, according to the Roth Capital Millennial Survey. Consumers increasingly want to see brands make a positive impact in line with their personal values, while helping solve societal problems.
Social responsibility can take many forms. For example, Nike’s recent social justice campaign featuring professional football player Colin Kaepernick was quite impactful: 34% of millennials said they were “more likely” to purchase Nike products. By both taking a definitive stance and injecting the brand into a hotly contested debate, Nike increased relevancy with potential customers.
Convey value
Millennials are discerning shoppers who carefully weigh price and perceived value. Understanding what the consumer wants and conveying how the product meets their needs at a particular price point is critical.
Price is the most important factor that determines whether a millennial makes a purchase. For example, 87% will search for discounts or wait for discounts when making a “significant” purchase, the majority are more likely to engage with brands on social media for promotions or coupons, and 67% will switch brands if they are offered a discount of 30% or more, according to the Roth Capital Millennial Survey and Forbes.
Millennials also demand a customer-centric experience. The value proposition can manifest itself in numerous ways by providing a community (i.e., Starbucks’ community-based program to help local causes), convenience (i.e., Amazon Prime’s offer of free two-day shipping), limited edition/exclusive merchandise/content (i.e., Kylie Cosmetics’ 20th birthday collection that sold out in less than 24 hours), luxury/aspiration (i.e., Rent the Runway’s service that lets consumers rent clothing they otherwise couldn’t afford) or innovation (i.e., Brandless’ non-branded goods that are accessible, affordable and transparent).
Millennials are also loyal to brands that make their lives easier. They want to be able to pick up or return online orders in a store, free-two day shipping and one-click shopping. For example, online furniture brand Sofamania offers free two-day shipping, generating a competitive advantage in a large-item category like furniture where delivery speed is the exception.
Offer loyalty programs
Personalized, targeted promotions and discounts drive millennial loyalty. Creating a transparent, simple loyalty program that is accessible via multiple channels is a winning strategy.
For instance, REI’s Co-op membership program provides an annual membership dividend of 10% of their total spend. The membership builds enhanced customer stickiness and increases lifetime value.
Reduce waste
While millennials value thrift, they also can be quite wasteful. They are impulse buyers and love fast fashion. According to apparel reseller thredUP, millennials only wear an item up to five times before discarding it.
They have also found ways to give unwanted clothing a second life. One in three women have browsed secondhand goods in the last year, and the market is growing 24 times faster than that of traditional apparel retail. Given millennials’ focus on value, the secondhand model works for several reasons:
- Reselling clothing enables shoppers to generate income.
- Shoppers get a good deal.
- It promotes eco-friendly practices.
- It enables shoppers to buy from brands that they otherwise could not afford.
The RealReal has been one of the most successful resale sites and benefits from one of the aforementioned points that it provides millennials with access to otherwise out-of-reach luxury brands.
Connect the dots between online and offline
Digitally native, vertically integrated brands are dead; the path forward lies in being an effective omnichannel retailer, allowing consumers to browse, shop and buy across channels. For example, 73% of all consumers shop in more than one channel, according to Harvard Business Review. And consumers who shop across multiple channels generate a 30% higher lifetime value, according to a recent International Data Corporation study.
There’s a strong need for retailers to connect the dots between their online and offline operations. After all, 88% of U.S. consumers will browse digitally before making a purchase, and nearly 50% of millennials prefer to do research online but buy in a store when making “significant” purchases, according to the Roth Capital Millennial Survey. Moreover, 85% of millennials use their phones for in-store assistance with a purchase. Consumers often use their smartphones to enhance their shopping experience, read reviews, research products, compare prices, find discounts and use loyalty cards. The in-store experience is an important component of the purchase decision and many digitally native brands are catching on.
Take a multifaceted marketing approach
Brands must capture millennials’ attention quickly and efficiently, which requires flexibility.
It is critical for brands to engage with millennials across multiple platforms, albeit on their terms and at the right time.
That isn’t easy. After all, social media is increasingly fragmented; consumers engage on Snapchat, Instagram, LinkedIn, Facebook and a number of other platforms. That presents challenges because social media remains the narrative of millennials’ life, both personally and professionally.
Across every platform, digital clarity and consistency is essential. That’s one reason why Instagram, which offers a simple, uncluttered environment, is such an effective marketing tool. It’s also why UGC is so effective at capturing millennials’ attention on social media by appealing to the shopper’s “self-image.”
Conclusion
Millennials have different purchasing patterns than previous generations due to the rapidly changing retail environment. Merchants that understand the millennial mindset can differentiate themselves and build long-term, sticky relationships. Creating a cross-media and cross-channel brand presence is critical. Marketers’ holistic approach must be aware of the following:
- Customer attribution is hard. The proliferation of digital marketing channels and shrinking consumer mind share (i.e., less social media) increase the complexity of decision-making about where to spend marketing dollars based on attribution.
- Focus matters. Not all millennials are the same. Retailers need to have the confidence to ignore the many and target the few to drive increased loyalty and lifetime value.
- Ecommerce can’t be transactional or clinical. Retailers should focus on experiences and engagement throughout the marketing funnel.
- Accessible luxury. Retailers can find success making the consumer feel like she is getting more than she paid for.
- Holistic appeal to a lifestyle. Retailers should look for ways to be a relevant cog in a larger wheel of millennials’ lives.
- Technology-enabled. Millennials have an affinity for technology. Retailers should look for ways to weave technology throughout all of their marketing efforts.
Brands cannot check every box, but assessing their strengths and weaknesses can shed light on opportunities to reach this generation of consumers with ample buying power that’s not likely to fade anytime soon.
Lindsay Picard, an associate at MidOcean Partners, also contributed to this article.
Eric Roth is a managing director at MidOcean Partners, a New York-based investment firm, who focuses on the consumer segment. He has nearly two decades of experience in the consumer space, most recently as a managing director and head of the consumer retail group at Lazard Middle Market.
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