Home in on millennials
Millennials are predicted to spend $56 billion on consumer packaged goods (CPG) during the course of the next 10 years, so its no wonder retailers are recognizing the need to identify and understand their wants and needs and how best to reach them.
According to data collected by Chicago-based market research firm Information Resources Inc. (IRI), 53 percent of millennials are purchasing more private label products nowadays than in the past. Along those lines, approximately 50 percent of millennials plan to purchase more private label products in the coming year, versus 39 percent of the total population.
Thats a significant distinction that clearly indicates the importance of catering to the 50-million-strong millennial generation. Simply put, millennials shopping behaviors will define the future of the CPG industry, and store brands have an enormous opportunity to capitalize on this markets growing purchasing power.
The millennial generation exhibits certain traits that distinguish it from any of its predecessors. Understanding those exact characteristics is key for CPG retailers, manufacturers and product marketers to unlock the potential purchasing power of this large and unique subset of the American population.
Millennials are cash-strapped
With adulthood comes the pressure of balancing a career, a household and a budget, so it should come as no surprise that financial stability is top of mind for millennials when making shopping decisions. Still digging its way out of prolonged economic turmoil, the millennial generation has adopted an exceptionally conservative approach to daily finances. In this regard, store brands lower prices are especially effective in courting these shoppers.
In fact, data from IRIs September Times & Trends report, "How America Eats," reveals that millennial shoppers are struggling more than other shoppers amidst todays challenging economic landscape. In quarter-two 2013, 29 percent of millennials indicated that they were having difficulty affording their typical grocery purchases, versus 21 percent of the population as a whole.
In other words, millennials are price-driven deal-seekers who have adopted frugal shopping habits to keep their budgets balanced. As such, they are more likely to give up their favorite CPG brands to save money.
Millennials also overindex in every factor that is related to price. (See Figure 1, p. 40.) Therein exists a great opportunity for more cost-effective private label brands to attract these shoppers. For instance, IRIs 2013 "Brand & Retailer Loyalty Survey" found that when considering brand affordability, 52 percent of millennials rate "its a store brand" as important, as opposed to only 44 percent of the total population.
Strategy: Communicate value. Given this frugal frame of mind, private label marketers should develop messages around the notion of value and affordability to convert millennial shoppers into buyers. Consider expanding private label offerings across multiple tiers (i.e., value, mid-range, premium). Promotional programs can also encourage trial and thus drive purchase behavior.
Millennials want to have fun
What do millennials value in their shopping experience, exactly? Although convenience, selection and price all rank high among millennial shoppers, its important to note that millennials are more likely than the average shopper to consider whether a store is fun to shop when assessing their shopping experience.
Strategy: Make shopping engaging. Despite financial hardship, millennials are not sacrificing enjoyment. They are looking for fun and engaging ways to splurge without spending a lot, and they are primed to "try before they buy." As such, consider setting up interactive kiosks, informational touch-screen stands and in-store sampling to engage millennials and drive trial.
Millennials are health-conscious
Millennial shoppers express a variety of health-related concerns (particularly stress management and weight), and these concerns most certainly affect their CPG purchase decisions. According to IRIs 2012 "Consumer Snacking Study," 84 percent of millennials are trying to eat more healthfully, and these efforts will shape how millennials view and consume CPG products.
Strategy: Develop educational programs around well-being. Intimately understanding millennials healthy shopping habits will allow CPG marketers to develop educational and marketing programs to further promote millennials wellness-related goals. Developing quick ready-to-eat meals that are both healthful and convenient is one easy way to attract these on-the-go health-conscious shoppers.
Millennials are always connected
Perhaps the most distinguishing quality of the millennial generation is its affinity for new technology. According to the University of Michigans Institute for Social Research, 80 to 90 percent of millennials use social media, and 80 percent sleep with their cell phones next to them.
Millennials dramatically overindex against the general population when it comes to being influenced by digital information when making brand decisions. (See Figure 2, this page.) Whats more, once a brand has won over millennials, they are likely to use digital word of mouth to spread the word.
Strategy: Go digital. All traditional marketing efforts to millennials must be supplemented digitally, through targeted campaigns to reach smartphones and social media platforms to become part of their constant conversation.
Over time, millennials will advance their careers and have more money at their disposal. Building brand loyalty among this group now means these 50 million shoppers will be more likely to stick with your brand in the long run. Now thats an investment worth making.
Susan Viamari is editor of IRIs Times & Trends, a monthly research report that provides insights and predictive analytics around trends that are shaping the CPG and retail industries. She serves a crucial role in developing, implementing and communicating IRIs thought leadership research.