Today's young adult shoppers don't have nearly the economic clout of their baby boomer parents, yet they are being watched as the harbingers of what's to come.
Millennials, generally defined as those born from 1980 to 2000, differ from other generations in their awareness and desire of convenient, ready-made meals available at grocery stores. But they also appreciate organics and crave the brands they grew up on, providing a dichotomy for retailers to grapple with as they determine how and what to market to them. Do millennials warrant separate marketing messages?
"Brands need to take a step back and ask, how does my product fit into the millennial set? Do I need to be targeting millennials at all? For some companies, it's not a good fit," says Jerra Nalley, senior account manager at Collective Bias in Bentonville, Ark.
Others, however, are eyeing the sheer number of young adults–86 million–who are the offspring of baby boomers and currently represent 27 percent of the U.S. population, according to a Barron's report in April.
Boston Consulting Group estimates the 18-to-34 age group controls $1.3 trillion in consumer spending, and the figure is expected to rise as more millennials obtain higher-paying positions. Research from Edelman Digital suggests just 47 percent of 16- to 24-year-olds were employed in 2011, the smallest number since 1948, when the government began recording employment data. But the unemployment rate for young adults has been falling as the job market improves, spurring new optimism.
"Baby boomers are retiring. We're entering a stage of time where this is a group of folks who are going to have the bulk of the spending power," says Omri Dahan, chief revenue officer at Marqeta in Emeryville, Calif. Millennials make purchase decisions using the same criteria as other generations–price, quality, loyalty programs and convenience, he says.
But some experts point out young adults are more skeptical of advertising campaigns with a corporate tone than other generations have been. "They can see what is authentic and what isn't. If you're going to talk to them, talk to them intelligently [and] understand that they know more than we knew when we were young," says Bob Shaw, founding partner of Concentric Marketing in Charlotte, N.C.
Paycheck to paycheck
With expensive tastes but meager paychecks, millennials are less loyal to brands and retail banners than other generations, says Chris Studach, creative director at King Retail Solutions. Instead, they're likely to shop around and go to the retailer offering the best value. "They're in that life stage where it's often paycheck to paycheck," Studach says.
But what holds true for one millennial doesn't always apply to another. The millennial cohort is so large that some experts recommend dividing it into smaller groups, based partly on how they were impacted by the market crash of 2008. "The standard dogma of the millennials is that they're kind of lazy, expect to be catered to...expect everything to be handed to them and that they're very independent and rebellious," Shaw says.
But millennials who are 27 and younger are more pragmatic, he says. "There's been a lot of negative cues and difficulty because their peers aren't living the high life." Many of them embrace the brands they grew up with and are tied into their parents' choices. To reach this sector, "You really have to earn your stripes by saying something interesting and not just pushing your brands," Shaw says.
Kraft Foods Group used the edgy tagline, "Get your chef together," in its new digital campaign for its meal-starter line, Kraft Recipe Makers. Videos demonstrating how to use the product are featured on a website dedicated to the campaign. The product, which comes in varieties such as verde chicken enchilada, Asian fish taco and Tex-Mex chicken fajita, caters to millennials' desire to create restaurant-style entrees easily in their own kitchens. Each kit comes with two cooking sauces and a recipe, with more recipes available online.
"Another thing that's happening, there is a lot less scratch cooking going on than 10, 20 or 30 years ago. It's more about assembly," Studach says. "People are pressed for time, and people haven't been taught how to scratch cook."
Millennials' penchant for all things digital has spurred retailers and CPGs to rethink their marketing strategies, and many are using Facebook pages, Twitter campaigns and mobile apps to communicate with them, with hopes of snagging them for the long term. "They're looking for that quality and meaningful content that's relevant to them," says Nalley.
Companies can gauge whether millennials are currently engaged with their brands by surfing popular social network platforms, such as Instagram, Twitter and Facebook, and searching for the brand. "Advocates will pop up," Nalley says. Use the opportunity to start a two-way conversation with the advocates by asking what they would think about a particular marketing message.
Millennials' reliance on instant communication also has contributed to a desire for more information about the products they purchase. More than any other cohort, they're likely to pull out their smartphones in store aisles to find out where a product is from and whether other people liked it. "They're trusting the recommendation of their friends and family. They're trusting them rather than an ad," Nalley says.
Word of Mouth
Because word of mouth is so important to millennials, brands should work to make their messages interesting enough that people will want to talk about them. "You've got to be a good storyteller. You've got to have something to say," Shaw says. "This is the generation that grew up with time-shifting technology. If they don't want to see your message, they know how to get away from it. So you better be interesting."
Feline Pine launched a campaign for a kitty litter brand that played up the cat's quirkiness and featured a blog written by cats. "It caught hold at the grassroots level among millennials," pushing up the brand's Facebook fan base, Shaw says. Concentric also has sampled food products from food trucks and distributed coupons for retail purchases.
Dublin, Ohio-based UQ Marketing connects brands with college students by using student influencers to be brand ambassadors. "We have to find a student who truly is a fan of our client's brand...That's really the secret sauce," says Leah Bell, founder of UQ Marketing. It increased awareness of Hoist rapid hydration beverage through a sampling program that asked students to submit videos about the product for a chance at a prize. The campaign drew 2,300 unique impressions.
To promote 7-Eleven slurpees, UQ distributed several hundred samples an hour in a mobile truck campaign at a new student festival and a Homecoming celebration event on a college campus. "Millennials are really unique. It's the first time they are making some of these purchasing decisions on their own without the help of Mom and Dad. Some of those brand preferences you establish in college live on with you for the rest of your life. If you make them a fan early, then their customer lifetime value increases," Bell says.
While millennials might be cynical about corporate advertising, they're not shy about wearing apparel adorned with company logos. A college student wearing a Red Bull T-shirt can serve as a walking billboard.
Millennials also use social networking to contact companies with questions or comments about products or service. The best way for retailers and CPGs to respond to millennials is via the same platform the millennials use to communicate. "If they tweeted, respond on Twitter. Use the customer's preferred method," Nalley says.
While many retailers have introduced apps to help consumers locate products and offer them promotions, they could be doing more, says Giovanni De Meo, vice president of global marketing and analytics for Interactions, a subsidiary of Daymon Worldwide. For example, Target's app offers personalized discount offers, but it doesn't provide value beyond the savings, he says.
"Millennials are really looking for value from retailers that results in more time flexibility, better pricing and an improved experience," De Meo says, "and retailers should be trying to find ways to provide this value before shoppers ask for it."