Is millennial loyalty about personalisation, and how can retailers encourage more loyalty from millennials?

 

 

 

An array of terminology has developed to describe the behaviour of people born in different decades. People born between the years 1981 and 1996 are widely referred to as “millennials”, or Generation Y. This generation has carved out a reputation for being frequent social media users, having a high level of tech experience and reliance and having relatively low levels of brand loyalty by comparison to older generations. Research published by Forbes suggests that “millennials are not brand loyalists. In fact, only 7% of millennials identify themselves as brand loyalists…”. 

 

Those born between the mid-1990s and the mid-2000s are widely referred to as Generation Z, and are particularly known to be very tech savvy. Again, this generation is known to use social media very frequently and display lower levels of allegiance to any one brand. Those born between the 1960s and the early 1980s are widely referred to as generation X or baby boomers. Baby boomers is a term that refers to the surge in new births that were registered after the end of WW2. Known as having the highest levels of brand loyalty by comparison to other generations, this group is not known for its social media use and generally has lower levels of reliance on tech and innovation. 

 

Given the vast differences between the behaviour and preferences of each group, retailers typically tailor marketing campaigns around the known preferences and dispositions of each group. A tech product, for example may require a different marketing angle to appeal to the younger generations where customer spending on tech products is known to be higher than average. 

 

 

 

Millennials have very distinct spending habits and have been found to spend money very differently compared to different generations. Millennial spending has been found to be heavily influenced by a number of factors including lower levels of home ownership compared to previous generations, delays in getting married and having children again compared to older generations and rising student loan costs. In particular, the spending habits of millennials doesn’t focus a lot of securing future financial security, so it is not surprising that retailers want to do as much as possible to entice spending from this cohort of people.

 

Millennials have been found to be “bigger spenders” compared to their older generation counterparts. One study, for example focused on how much a millennial was willing to spend on coffee, and suggests that 60% of millennials surveyed were willing to pay more than $4 USD for a coffee, compared to only 40% of so called Generations Xers and Baby Boomers. Similarly, millennials are known to eat out a lot more and be willing to spend larger amounts of cash when eating out. 79% of millennials stated that they would spend cash on eating out at a popular restaurant, compared to 66% of Generation Xers and 56% of baby boomers. 

 

Given how tech savvy millennials are known to be, it is not surprising that spending on electronics, tech and gadgets is higher within this cohort.  Research suggests that 76% of millennials would spend cash on a new gadget and 69% stated that they regularly buy clothes they don’t need. Most experts agree that tech has fundamentally changed the way people shop and communicate and one survey has shown that nearly 90% of millennials are using 2-3 devices per day. Furthermore, it was found that approximately 50% of millennials were active on social media and that their social media use influenced their buying decisions. 

 

Researchers have also noted a trend among millennials towards competiveness with their peers when shopping. A study on this topic suggests that 75% of millennials were prone to competing with their peers in terms of purchasing tech gadgets, clothing, cars and phones. More than 50% of millennials stated that they regularly used credit cards to buy necessities like food and monthly bills. 

 

Millennials were also found to be more likely to use the services of professionals in making a financial plan for their future, were found to be more likely to check and monitor their financial accounts and were more knowledgeable about financial fees and charges. 

 

 

 

Different brand recognition and brand loyalty habits, perceptions, norms and preferences are also evident across the different generations and research studies comparing tendencies towards brand loyalty highlight that the connection between brand loyalty and millennials is highly complex, constantly evolving and an area that is ripe for further research. For example, research has suggested that whereas 29% of millennials usually purchase from the same brand, 35% of Generation Xers displayed similar loyalty to brands. On the other hand other studies have suggested that of all the generations, millennials were the generation that demonstrated the most loyalty to their favourite brands. One study of millennials’ spending habits suggested that this loyalty to favourite brands was exhibited by 50.5% of the millennials surveyed. Just what factors lead to identification of favourite brands among millennials is less clear but price, convenience and quality are known to be decisive factors when any consumer selects a brand to remain loyal to. 

 

Social media has also been found to be a major determinant of consumer loyalty preferences. 43.5% of the millennials surveyed in one study stated that they used social media to make recommendations about products and services they used to family and friends. When asked about what brands were preferred, millennials again had a unique approach to exhibiting preference for one brand over another, with 47% of millennials surveyed stating that they had one preferred brand for each product category.  

 

Research into how millennials engage with advertising messages suggests that 89% of millennials trust recommendations made by family and friends, more than they trust recommendations made by a given brand. Furthermore, 98% of millennials stated that they were more likely to engage with a product or service advertised on a friend’s Facebook post, as opposed to a post placed by a brand. As a result some retailers are investing heavily in making millennials “brand advocates” through referral programs. 

 

A 2017 survey found that Generation Z and millennials respond best to loyalty programmes, possibly as a result of the fact that these generations are more tech savvy. The researchers who conducted the survey suggested, as a result that loyalty can be improved by making loyalty programmes more relevant to these generations, by for example offering a wide range of activities that enable the user to earn loyalty rewards. Some suggested activities include playing games and writing reviews. 

 

 

 

Brand loyalty is very important to retailers because once a customer becomes loyal to a particular brand, they will be likely to make higher value purchases and display more trust in interacting with a brand. They may even recommend the brand to their friends and family – providing a free and welcome boost to the retailer’s profit margin. So, how is such loyalty inspired?

 

 

The internet is awash with fake news and research has shown that consumers are becoming much more sensitive to the question of whether a recommendation about a given product is authentic. Some research has even suggested that levels of consumer trust in products and services sold online is lower than the trust placed in messages relayed by governments. This is perhaps fuelled by the many controversies involving brands found to have been purchasing “fake reviews” and fake followers. Since Generation Z and millennials are the most tech savvy generations, and as such are exposed to the internet and social media the most, perceived authenticity is all the more important to these groups as they frequently seek to differentiate between fake and authentic information.  

 

 

Today’s consumers value convenience, and retailers looking to increase brand loyalty should try to understand what convenience is and how to make their customers’ experiences more convenient. Factors that affect perceptions of convenience among consumers include the number of delivery options available and whether a retailer guarantees a seamless customer experience across their various sales platforms. Customers, for example will want to know whether they can purchase an item online, and then return it in-store. Some retailers don’t allow this due to so-called “silo” based logistics and operations management. 

 

Price strategy also influences perceptions of levels of convenience. Customers don’t want to visit a website, only to find, time and time again that competitors have lower priced items on sale. A customer wants to be able to trust that a given brand will ascribe a fair price to an item, and retailers found to be continuously selling over-priced items will quickly alienate large swathes of customers. 

 

 

With tech and social media use so high within the millennial generation, it makes sense that increasing millennial loyalty can be achieved with measures delivered through these platforms. Many high profile retailers, cognisant of how difficult it is to engage customers to write reviews, seek to engage their customers by offering incentives in exchange for the creation of genuine reviews of products. This, in turn helps to build trust, as tech and social media savvy customers often use reviews and ratings as a way to judge whether to buy a product. 

 

 

Research suggests that more than 71% of millennials and Generation Z consumers are willing to provide personal information in exchange for a more personalised service. 

 

There are many ways for retailers to offer a personal service. One is to create a unique retailer app, which will work in-store or remotely to provide a convenient and seamless experience for the customer. These kinds of apps are particularly popular with tech savvy millennials. The personal service offered by an app allows the customer to receive information that is completely relevant to their needs and their consumer preferences. Many high profile retailers like Walmart, Walgreens and Starbucks tailor offers and promotions based on the personal information provided by the customer. As such, the retailer apps allow customers to filter out irrelevant marketing messages. 

 

Forbes recently revealed that one of the most popular retailer apps were those created by Walgreens and CVS Caremark. These apps allow customers to manage prescriptions, shopping lists and make orders that can be collected. The apps also enhance the user’s experience of visiting a store, allowing customers to browse deals and offers that apply to them. The apps also offer scanner features, and reminders can be set up to shop for various items. 

 

 

App features like store locators, store plans including shop display plans, coupon redemption facilities and product scanners are all incredibly popular with users and many retailers have also included them in their unique customer apps. 

 

In terms of advertising, personalisation is also very helpful for the retailer. Creating a personal approach to advertising requires some additional research and retailers needs to ensure that they target the marketing effectively. This is particularly true, given that customers – especially those using their phones, have more power than ever to “block” advertisements, by using spam filters, spam settings and ad blockers for example. People receiving more relevant marketing messages are less likely to install these measures.  

 

 

As we have seen, loyalty and incentive schemes are effective ways to increase brand loyalty within the millennials cohort. However, retailers should always beware of a “one size fits all” approach to advertising. Sometimes this works, but there is no guarantee. This is why conducting focused research on what a given’s brand’s customers actually want is a surefire way to gain their loyalty and trust. Retailers should ask themselves what features their customers want the most and will derive the most benefit from. Existing programs and apps should be continuously evaluated in terms of their relevance and efficacy, so that retailers can continuously improve their offerings to customers.  

 

 

Several research studies have confirmed that mobile phone use is particularly high among millennial shoppers, with some studies suggesting that a third of millennials spend 5 hours every day on their mobile phones and half of millennials spend 4 hours. How millennials use their mobile phone is also worth considering. Research has suggested that when millennials shop in a store 75% of them use the phone to conduct research on products, reviews and ratings. Retailers should be aware, therefore that their websites may not be accessed if they are not mobile optimised. Equally, failures in mobile optimisation and associated bugs will affect millennials more. 

 

Retailers should also be aware that since mobile use is so high in this cohort, it is be beneficial to deliver engagement, promotional and loyalty using this medium. 

 

 

Traditional mechanisms of delivering marketing messages are not always the best way to communicate with millennials, whose high levels of exposure to tech and social media has contributed to this cohort harbouring higher than average levels of mistrust in some types of marketing messages. 

 

Referral programmes are a good way to circumvent these “trust” motivated problems. If a retailer can get the family or friend of an existing customer to recommend or refer a new product or service, this can deliver a great boost to profit margins. Some retailers are therefore offering incentives to encourage more referrals and recommendations of their products and services. Usually this takes the form of a “win-win” scenario, for example both referrer and referee get receive discounts or rewards when a newly referred customer registers or makes a new purchase. 

 

 

 

Winning loyalty from millennials is a complex exercise. Research has shown that, for tech savvy millennials and Generation Z shoppers the best way to deliver messages is through the mediums that millennials use the most, like mobiles and social media. However, that said, retailers also need to be aware of potential pitfalls like rising levels of millennial mistrust in sponsored social media advertising. 

 

Focusing on delivering convenience by increasing the number and type of delivery options available is also an effective strategy that will increase loyalty among millennial customers, if deployed correctly. It has also been shown that millennials prefer a personal approach to shopping, so targeted advertising and the development of personalised retailer apps are also great ways to boost brand loyalty in millennials.