If you were given a choice right now, which would you spend money on: a Tiffany & Co. sterling silver bracelet, or a three-day trip to the Bahamas?
This new shift in spending is most evident on social media platforms, where consumers, especially Millennials, post status updates and pictures of, you guessed it, experiences.
From their recent vacation to the Alps, brunch with friends at the famous coffee shop downtown, to snap shots of the pizza delivery guy carrying a bouquet of roses: buyers are getting less concerned with expensive merchandise and opting for more priceless moments.
When did it all begin exactly? Is it just Millennials? What can businesses do to keep up?
Millennial Buying Habits Exposed
Millennials, people born between the 1980s to the early 2000s, make up one of the largest portions of the consumer market today. Unlike previous generations, they are tech-savvy yet socially conscious.
Not only do they value great products and services, they also look into a business’ ethical standards. This complex behavior is further complicated by what digital marketers think are the best metrics to use when gauging brand success.
But in general, Millennial spending habits can be summed up in three ways:
1. Product Experts
More than any other generation, Millennials have the habit of scrutinizing the products they want. They will investigate every detail: from the acquisition of raw ingredients, down to the charity organizations that businesses support. Let’s take coffee as an example.
Coffee trader and sales manager for Olam Specialty Coffee, Mark Inman, mentioned the way Millennials prefer their coffee nowadays as a reflection of their consumer behavior. Gone are large-capacity batch brewing. These 20 and 30-something’s now opt for exclusive “high-quality brewed coffee made especially for the customer and sold by the individual cup”.
This means they care more about the product than other generations and they want to know how it contributes not only to their quality of life, but also to the world in general.
2. On and Offline
Contrary to popular belief, Millennials do not prefer online shopping to brick-and-mortar stores. In a study done by Accenture, they found that this generation still wants the traditional experience of visiting shops and touching items.
But here’s the catch: 68 percent of Millennials demand an integrated experience both on and offline. They want the ability to seamlessly switch from home computer, to smartphone, to brick-and-mortar store with little to no stress.
Millennials are not spending vast amounts of time online just to watch cat videos. A good chunk of that is also spent sharing and listening to each other’s purchases. In fact, 25 percent of Millennials post shopping content, about four times more than an average user. This type of content usually gets 18 percent more clicks, proof of how hugely influential Millennials can be. This is one of the reasons why brands hire them to promote products online.
Millennial consumer spending in general, can be summed up as: a need to acquire good, high-quality products that can improve their quality of living, while at the same time, spark change.
Today, it’s not enough to have the best product. Business owners need to tie an unforgettable experience around their goods if they want to remain relevant, particularly for Millennials. But when did this shift begin?
The Shift From Goods to Experience
Sales from physical shops (like department stores) have been declining for years – but recently, researchers saw a huge dip, even from popular industries such as the appliance and electronics sectors. In 2015, the Commerce Department saw that most customers, millennials in particular, are buying more experiences and less goods. These young consumers are spending hard-earned money on eating at nice restaurants, vacations with friends, or gym memberships.
One theory is the influence of several scientific studies that show it’s experiences, not objects, that bring in happiness. Add countless content such as blog posts that spur such themes and you get consumers who will think twice before buying a sterling silver bracelet (even if they want it).
Even tourists are typically not spending on items. Rather, money is spent on real estate, healthcare, mobile apps, beauty and wellness, or automobiles.
This shift in purchasing, especially by Millennials, has hurt many retail businesses such as Macy’s and Kohl’s. Even if they move some of their services online, they still need to contend with already established shopping websites, like Amazon.
Professor of retailing at Harvard Business School, Rajiv Lal, says that even if the economy picks up, it still doesn’t look like a happy ending for retailers. He states, “…if they don’t see anything in stores they fancy, they’ll seek out experiences…”
Still, this doesn’t mean that the future of goods is bleak. People are still buying things, just in a different way. By adapting to the dynamic world of retail, businesses can still capture the attention of Millennials.
Creating Experiences Around Your Merchandise
We now live in a world saturated with all kinds of products and services you can imagine.
Think of peanut butter for instance, and you’ll immediately be swamped with hundreds of brands (and that’s not counting small local manufacturers). Born into progressing economies and growing up with digitalization, millennials understand that it’s OK not to settle for what’s available. You can push businesses to personalize: to create something just for you.
Here’s where experiences play a crucial role.
Coffee as a product for example, is no longer merely a dark drink you consume with breakfast, it’s now a way for people to gather and unwind. Same goes for gadgets. It’s not just a mobile phone, it’s also a platform that helps you kill time, find the best restaurants in town, and call up a friend. Peanut butter becomes more than just smooth or chunky, it’s a sweet part of your childhood.
Yes, begin with a great product, but don’t end there.
1. Identify opportunities or moments that involve your product.
In 2010, popular tissue brand Kleenex launched a “Softness Worth Sharing” campaign. Instead of simply handing out free samples, they turned this old-fashioned marketing strategy into a national sharing bonanza. Soon, people were sending loved ones Kleenex soft tissue packs both on and offline. This simple tweak to a traditional promotional tactic helped them increase their market share by 1.7 points.
The secret to their success? Kleenex timed their campaign well by tying it with the cold and flu season.
2. Become visible both on and offline.
Starbucks is one of the leading global brands that have successfully integrated on and offline marketing strategies. Visit their Facebook or Twitter pages and you’ll see fans excited about their next promotion. Starbucks cards create long-term repeat customers thanks to its easy accessibility and user-friendliness.
There’s the Starbucks app, which lets you pre-order your drink, helping you skip long lines. Not to mention that most of their baristas always have a smile on their face when they hand you your drink.
Never underestimate tiny details. Even if you operate a small local business, ensuring that you provide a positive presence both on and offline will give your Millennial customers something to look forward to on their next visit.
3. Think long-term through excellent customer service.
The world may view Millennials as a generation lacking in loyalty, but surprisingly, they are very loyal customers. So much so that they drive the success of many popular brands today (i.e. Apple Inc., Google, Facebook, Domino’s, Ford, etc.).
But how did these companies bag the trust of discerning Millennials for life? Editor and writer, Thomas Oppong, discusses in an article how customer education and building relationships both help to build a loyal customer.
Show them what makes your product tick, make people feel that assistance is still available even after the purchase, and go back to them with new deals and offers. It’s okay to make a mistake, but Millennials want to know that you’re willing to make up for it.
It’s not easy to understand the ever-changing Millennial spending patterns. But one thing doesn’t change: consumers, whether Millennial or not, want to feel valued for their business.
Companies that are able to meet this demand not only gain a loyal following, they remain afloat despite hard times. And this, is perhaps the greatest triumph in today’s trying retail industry.