Two diverse generations
Getting the right message to the right shopper at the right time is the key to commercial success. It’s easy to say, but it is very difficult to do. The U.S. population has become wonderfully diverse. Only 78 percent of the population is Caucasian — the lowest number in history. Minority populations are growing rapidly, as are multi-race populations, and are the most prevalent among younger Americans. This diversity certainly keeps America interesting, but it also adds complexity to the already difficult task of developing targeted marketing programs. To get it right, marketers must have a keen understanding of how these very diverse consumer groups — which also vary in age, income and education, to name a few — live, shop and consume.
For years, consumer packaged goods (CPG) marketers invested their time, energy and money into delivering effective products and messages to baby boomers — once the largest and most powerful consumer segment ever to have existed. There is no question that baby boomers left an indelible mark on the CPG industry. And, with spending power of more than $3 trillion, there is no question that this generation is still vitally important to CPG marketers.
Now, though, a new day has dawned. Enter the nation’s youngest shopping cohorts — millennials and Generation Z. These cohorts are huge: Each is bigger than the baby boomer generation, and their members are exciting and diverse. These are individuals, and they thrive on expressing their individuality.
These cohorts are enormously important to CPG marketers. According to IRI’s recent MillenniaLink segmentation, millennials spend close to $290 billion on packaged goods each year. Technomic, Chicago, estimates that Generation Z, the nation’s youngest shoppers, already wields spending power of $44 billion. Their spending power will grow sharply in the years to come. All the while, they will be developing lifestyles, shopping habits and loyalties that will last their lifetime.
Clearly, millennials and Generation Z are must-win consumer segments, so CPG marketers must dial in now to earn a spot in the basket. Here’s a snapshot that serves as a good starting point.
Conservative spenders
Many millennials came of age during the Great Recession. Jobs were scarce; credit was tough to come by; financial insecurity prevailed. Therefore, millennials have often been compared to the “Greatest Generation,” which grew up during the Great Depression and has had lifelong tendencies toward frugality. Of course, Generation Z consumers are younger than millennials, but these shoppers have also been affected by challenging economic conditions. Both groups tends to exhibit conservative shopping attitudes and behaviors. They want a good deal, but they also love convenience. So, finding a “simple” good deal is key — a perfect opportunity for well-priced private label solutions.
Younger shoppers also favor lower-priced channels. For instance, millennials spend a disproportionate share of their CPG dollars in the mass merchandise channel, where they have the convenience of one-stop shopping and the benefit of generally lower prices. Lower-income millennials and Generation Z consumers also spend more heavily in alternative channels such as dollar stores, where they can make their money go further.
Nonetheless, both millennials and Generation Z have demonstrated a willingness to pay more for products that key in on their predilections. At a high level, this includes excitement, immediacy and convenience. But understanding the intricacies of these groups will bring to light other high-gain opportunities as well. IRI’s MillenniaLink segmentation reveals differing attitudes and behaviors toward a broad spectrum of lifestyles, technology, finances, health and wellness and shopping.
Conscious Naturalists focus their spending on eco-friendly and USA-made products, while cause-related messages resonate with New Traditionalists. Free Spirits value “the coolness factor” and will spend more on products that reinforce their trend-setting status. Meanwhile, other segments such as Struggling Wanderers are really struggling financially. They don’t see things improving in the near future, so they are hunkered down for the long haul and less likely to spend unnecessarily. Private label marketers, of course, swim in all of these pools. Product assortments range from pure value — lowest-cost alternatives within a category — to high-end and ultra-premium solutions that provide added, often unique, bells and whistles that stand out from other offerings.
Really homing in on high-gain opportunities requires connecting with millennials and Generation Z at a near-individual level. But the sheer volume of information in front of consumers at any given time or place requires a holistic understanding of how information is consumed and how that translates to buying behaviors, product impressions and overall consumerism.
Technology, friends, convenience
Both millennials and Generation Z are quite technologically savvy. Generation Z is the very first generation to grow up with technology from the day each of its members was born. For them, technology is not new — it’s a given. And, while the spectrum of digital savviness and responsiveness to digital messaging varies more across millennial segments, this group is generally much more tech-savvy than those who came before it, too.
Technology is a huge enabler of socialization for younger shoppers. In turn, social connections have significant influences on how millennials and Generation Z think and behave. These groups are much more readily influenced by digital communications than their predecessors. Their social spheres are sizable, and they are made up of people from around the world who share common life stages, interests, values, etc. Social networks are phenomenal tools for brand ambassadorship, the sharing of product usage ideas and more.
Likewise, the comfort that millennials and Generation Z display with technology is hastening their adoption of online shopping. Millennials already over-index in e-commerce CPG spending, and they show a more consistent engagement with all things digital. And as new models such as click-and-collect and same day/next day shipping pick up steam, momentum will likely grow — after all, millennials and Generation Z desire instant gratification.
This ties very well with the demand that just may resonate most clearly with today’s youngest shoppers — convenience. The ability to grab and go has made options such as foodservice very appealing to millennials and Generation Z, who live on-the-go lifestyles. Nearly 40 percent of consumers age 18 to 34 are constantly on the lookout for new foods that can easily be eaten on the go, according to IRI’s 2016 New Product Survey, compared to just 11 percent among consumers over the age of 55. On the go often translates into “fill me up without slowing me down.” As a result, younger shoppers are looking for protein in areas where protein was not even a consideration a few years ago — 22 percent of 18- to 34-year-olds look for new beverages that offer protein, compared to just 7 percent among those over age 55.
Serving the country’s millennial and Generation Z shoppers will require a shift in mindset. These generations are very different from those that came before them, and they demand that their differences be understood and delivered against.
Private label marketers have some powerful brand stories to tell. The good news is that many of their stories tie well with the mindset of this important wave of shoppers. Invest to understand the unique beliefs and behaviors of this group; sharpen your brand story. Earn the loyalty of the next generations by delivering against those core values of excitement, quality and innovation.