Multi-Faceted, But Not Beyond Understanding
Retailers need to tune into the 18-to-30 crowd that comprises almost a third of all Americans – a bigger population segment than Baby Boomers. The Millennial generation numbered 79 million in 2011, with an outlook to stay at 78 million by 2030. Meanwhile, Baby Boomers will be retracting from their current 76 million to 56 million by 2030. This enormous segment of the population tends to make more transactions, but spend less per transaction. They have discretionary income and are willing to spend it… but the question is how, and where? The answers can be contradictory.
At MasterCard, we have seen data pointing to some varied behaviors within the Millennials category, as well as how they like to shop and how they’ve started to change the nature of shopping itself. Not surprisingly, a comfort level with technology has a lot to do with their ease in navigating the multichannel retail landscape – after all, they’re the ones who’ve made social media into the retail marketing tool it currently is. MasterCard has data from 80 billion anonymous credit card transactions to help better understand the needs of the Millennial consumer segment.
Data has shown that this is a crowd that spends three times more at department stores and on beauty products than the general population. Think that’s a big spread? They spend six times more on movies, music and videos, and 16 times more at bars and nightclubs. If this were the whole picture, retailers could begin forming strategies now to last them a decade in answering to this new customer base. But there are many kinds of Millennials, each with its own special flavor and its own unique market segment. And the retail environment keeps channel-surfing – largely because they’re holding the remote.
More Categories of Millennials Than Major U.S. Auto Manufacturers
Retailers need to take into account the many subgroups within the Millennials category. Marketing to a 19-year-old is different on many levels than marketing to a 30-year-old – yet both are considered Millennials. The 30-year-old customer, while Facebook and email friendly, requires a different tech touch than the 19-year-old, who has already moved away from email to the more condensed platforms of texting and Instagram. Of course, there are also different life cycle and life stage needs – the 19-year-old can’t drink legally in most states, but otherwise there’s little limit to what she or he can buy. The 30-year-old may be entering the phase of parenthood and/or home ownership. These are radically different markets.
What our analysis shows about Millennials is that there’s a 10% old-school, anti-tech subgroup who eschew Facebook in preference to meeting in person. On the same end of that spectrum are the 16% anti-Millennials, who are busy taking care of their business and family. Another 10% like to live “clean and green,” while an additional 13% identify as gadget-guru Millennials. The biggest subgroups are perhaps the easiest and clearest to market to: the 22% identified as Millennial Moms, who love to work out, travel and pamper their babies, and the 29% of “socially conscious” Millennials who strive to make the world a better place. Retailers can drive far more relevant marketing campaigns by combining transaction data with a retailer’s in-house customer file – thus reaching the appropriate sub-groups of a demographic that is very diverse, yet is still classified as one category. Adding in strategic transaction-based models has driven excellent results with these complex consumers – we’ve observed a 300% lift in response to email campaigns and 200% more in real time offers than in control groups. Given the breadth of the Millennial definition, better segmentation of this customer base has led to a more successful way for retailers to understand and communicate with their customers.
How Millennials Shop, and How They’ve Changed Shopping
Other than their youth, swaths of Millennials seem to have certain identifiers in common, starting with a much more profound respect for the planet than their forbears’. Sustainability and greening concepts – seen in value chain issues like ethical sourcing, animal rights, and fair trade – are great selling points to this savvy generation, that has grown up in an era of organics and transparency in labeling, manufacturing, and sourcing. It’s not unusual for a 20-year-old guy to know more the sugar and GMO content of what’s in the refrigerator than his mom. Companies like Lululemon have made a profitable practice of leading with not only full transparency about their sourcing, but messaging that can only be termed “save the planet, one customer at a time.”
Of course, like all consumers today, Millennials want to be treated as individuals – their desires understood and presented in a personally curated way. They have written the e-book on how social media can be used either to make a brand instantly “hot” or to completely knock the stuffing out it – they’ve figured out how to be your worst enemy or your best ally. Millennials display the kind of social media openness that makes them a dream for marketers. But beware the retailer who crosses the line into what a Millennial feels is “snooping” or “stalkery” (a favorite Millennial term) – for example, texting or emailing a special offer on something the young shopper may have just lingered over for a minute in your store. The instant they feel Big Brother (or maybe Big Brand) is watching them, they’ll trounce you on Twitter faster than you can say “Awkward!”
“Social CRM” and Connecting Social Media and Spending Data
One question that has many retailers scratching their heads is, “How does social media connect to omnichannel merchandising?” They need to find intersections between “hard,” objective spending data and the softer science of social media. Retailers can look at advanced buyer segments – that is, purchase clusters that fit into categories like age or income – and they can take an anonymized version of their own database and sync up the data to flag the Millennials. The term “Social CRM” – CRM for customer relations management – has also started to gain currency. Essentially, this is two-way, customer-driven conversation on social media sites. For the retailer, logging and storing these online conversations, appending them to a CRM file and analyzing their purchase behaviors creates a powerful combination that puts the Millennial consumer in the crosshairs, giving the retailer a clearer view into future demand.
A retailer can get closer to gaining Millennial brand loyalty by encouraging online posts, then saving and using that feedback. Marketing efforts also need to aim for finding Millennials’ voice by using the right spokespeople, offering the right products – showing that you “get” them. If you compare categories that have classically seen more baby boomer purchases, data can help you see subtle changes as Millennials move in – which categories, where they cross over, and so on. This can be a valuable tool in merchandising – figuring out what stock will sell in which store. There’s even a case to be made, through data, that products made for Millennials are being bought by older shoppers – there’s a hipness factor. By understanding which products and experiences are most likely to be purchased by Millennials, the smart merchant can find new ways to blur the lines between product and experience – through in-store promotions, connoisseurship apps,and the like.
There’s More Change to Come
The Millennial consumer is here to stay, and is quickly becoming the nation’s biggest spender. You can use data to understand their needs at the beginning, through searches refined by geography, demographics and retailers’ own databases. Then you can connect the data with social media, using a little imagination and keeping your eyes open to Millennials’ social and tech patterns. And finally, you can use data to assess the outcome. Millennials are redefining retail and spending patterns. Don’t fight it! Use their social conscience and learning processes – and learn from them to create value.