As the Holiday season approaches, some brands are counting on the boom in sales to make their year, and Millennials, aka Gen Y, are a juicy target. This market segment is now larger than the Baby Boomer generation in sheer numbers, and their spending power has nearly quadrupled since 2012 (The CEB: Iconcoculture “Inside the Millennial Mind, July 2013 & Cassandra summer/fall Report 2012).
The total spending power of this group is a whole lot more than their older counterparts, whose habits in turn are increasingly influenced by Gen Y. In a 2013 Accenture study (Seamless Retail for Millennial Consumers: Getting it Right), it was estimated that Gen Y spending will account for 30% of all U.S. retail sales in 2020.
But alas, Gen Y suffers from an image problem, with many perceiving the segment as possessing some not-so-appealing stereotypical behaviors, making them a challenge for retailers to court. To those perceptions, I offer a counterpoint.
Myth 1 – Entitled and Broke
Responsible & uncompromising
Gen Y’ers are the “me generation,” loafing on their parents’ couch, or so says Joel Stein in his Time article The Me Me Me Generation, where he takes them to task for not rising to the occasion.
More likely, Millennials are passionate and uncompromising about personal fulfillment, while at the same time proactively managing personal debt. They are saving and investing at higher rates than the elder generations, and giving back to communities and causes at higher rates than Gen X and Boomers.
Myth 2 – Price sensitive
Prefer local business, altruism and experiences
A 2014 study by Deloitte shows more than 63% of Millennials donate to charity. In focus groups I conducted for a client looking to attract and retain Gen Y employees (November 2013), the groups confirmed this notion and noted that they also prefer to purchase goods from smaller, local community businesses, or from businesses that might not be local, but are committed to performing good works within the community.
If a Millennial thinks there is a higher, altruistic benefit, community support, or a great experience, then price is no option. Tom’s shoes cost a lot more compared to private label versions at discount stores, and while Warby Parker glasses are less than some eyewear stores, they definitely cost more than drugstore readers, yet both brands benefit from strong penetration into the Millennial segment. This segment spends more with brands like these because it combines two strongly valued considerations – altruism in a cool shopping experience.
Consume differently in the “share economy”
Millennials grew up in the digital age and share nearly everything – photos, videos, music, and more with friends and the larger social community. As such, their expectations of renting what’s needed for a short period versus purchasing an expensive item is a “no-brainer.” Companies like AirBnB, Uber and Rent the Runway have been among the first to fully capitalize on this behavior.
Myth 3 – Apathetic
Value-driven – passion, happiness, diversity, sharing & discovery
The values of Millennials are different from those of their Boomer parents, and one example is the value of producing work with meaning. Millennials value happiness, passion, diversity, sharing and discovery. Conversely their boomer parents tend to value justice, practicality, security, family and duty.
In a 2013 study by Keenan-Flagler Business School at UNC, 30% of Millennials said they would take a lower paying job that was meaningful over a high paying one.
Developing Gen Y strategies
While Millennials are a complicated segment, all is not lost; there are ways to reach this elusive, but potentially lucrative, generation at retail.
- Acknowledge the bad economy and how it’s affecting their wallets, and perhaps even dare to celebrate it. Millennials are more likely to sacrifice when it comes to private label store brands for products like wine, or staples like pasta. On The Radio is a fun, interactive way that introduces unique and cost effective Trader Joe’s branded products with visually stimulating experiences via an interactive graphic of an old-time radio.
- Message broad, ever-evolving lifestyle values like discovery and success. Old Navy scores big with Millennials through its combination of low prices, humorous TV ads, and social media campaigns like this ad for $19 jeans with Amy Poehler.
- Provide participative social network platforms and programs that highlight experiences over product specifications. Millennials are very likely to look for iinformation and talk about brands online, so make this behavior work for your brand. GoPro does this very well on its Facebook site by having customers upload personal photos and videos. Each day the staff at GoPro picks one and posts it as the “video of the day” for others to view and comment on.
Millennials buy, they just buy differently. Some argue Gen Y behaviors are a life stage, and as this group grows older they will fall into line with the buying patterns of older generations. I disagree, as Millennials are changing the way we all shop regardless of generation.
I am a boomer and my children are Millennials who have taught me ways to optimize my spending. For example, I now can’t live without retail apps like Target’s Cartwheel, where I now move through stores more efficiently and optimize my savings. When purchasing expensive items, I check reviews online and ask my friends and family via Facebook before making decisions, and if my shopping experience is less than my expectation, I’ll find another place to get what I need by checking again with friends and family online. And lastly, I’m dipping my toes in the share economy for a big business trip by considering AirBnB instead of a hotel chain.
The difference in expression of values and definitions of happiness, satisfaction, and ultimate success is what Millennials bring to the table. The key for retailers and brands is to make communicating with Millennials a holistic benefit of product and service to live it, be it and truly breathe it. The message has to ooze from every pore, every communication and every aspect of each touch-point. Millennial seek truth – so your brand must deliver.
Connect with Christina on Twitter @ckstahler, and join the #retail conversation @RetailNext and www.facebook.com/retailnext.