Millennial mindset defining new market
There’s nothing “general” about the emerging market segments, according to Larry Levin, EVP business development.
“General is vanilla. And we are so far from vanilla — I think we need to start to consider how we talk about our market in a different way,” Levin said during his presentation at Drug Store News’ New General Market Leadership Forum. “It is the ultimate melting pot.”
At the center of change is the consumer, who is more in control than ever before. “That is where the conversation starts and where the conversation continues to evolve,” Levin added. To comprehend what makes a new product work and what doesn’t, Levin said marketers need to understand who the new consumer is.
The millennial mindset
The catalysts for change are shoppers with a “millennial mindset” — not just those born between 1980 to 2000, but those who are influenced by that group — and the mushrooming ranks of multicultural consumers. Levin drilled down the population shifts that must be considered. In the next five years, only 10% of the increase of the 309 million U.S. households will be from expansion of the Caucasian population. More than half of the growth will be from Hispanics and 16% from African-Americans. Not to be overlooked, Levin added, is the Asian-American segment, which will expand 16% over the next decade. “That’s four times the size of the [current] population. Let’s not forget other cultures,” he added.
Consideration also must be given to life stages. The peak spending group, ages 35 to 54 years, are driving revenues but soon will be supplanted by millennials. Those younger consumers account for 17% of total CPG spending, but that will soar to 30% in the next five years. Don’t forget about boomers, however, because they have special needs, too.
Millennials are much more multicultural than other segments — about 40% identify as African-American, Asian or Hispanic or a blended ethnicity, and that’s set to expand. Millennials crave a healthier lifestyle, too, and products with that positioning resonate with them. They are willing to pay for those attributes too, and that’s one reason these shoppers aren’t “wedded” to the multinational brands that boomers grew up with, Levin explained.
Some major brands will struggle to be relevant with millennials, Levin noted. Coke is an example that didn’t hit on all cylinders at first, but is gaining traction by reinventing itself with such strategies as the personalization of bottles. “Millennials should really be spelled M-E, Me-llennials,” Levin joked. “It really is all about ‘me culture’ for them. Think about the Coke can or Starbucks.”
Millennials like attributes that play into them, which is why smaller brands play an important role. Millennials also like brands with good value, and they don’t just trust advertising, preferring instead to seek reviews and endorsements on Yelp, Facebook, Mashable or Twitter. More than half look online for the buzz on products or retailers they want to shop.
“Millennials are going to use your social media to tell you whether we like you or not,” Levin explained. “You have to be cognizant of the kinds of reviews you are getting because that can make or break a product when it comes to the marketplace.” He used the example of Noosa Yoghurt, a new product in the United States from Australia. “If anyone came to the website to complain about the product, they received a personal note and a coupon to try again,” Levin said.
Value remains important to this audience. “Value for the money doesn’t mean cheap. Value for the money means make my life better,” Levin noted, citing such examples as anti-age creams yielding a way to capture the fountain of youth or K-Cups delivering a barista-style brew at home.
Reaching the New General Market
With an understanding of “who” the market is, the focus shifts to the impact of social media on the path to purchase and how to leverage those tools. Levin pointed out that beauty and health care are the top categories where consumers engage in “pretailing,” defined as digital research before a shopping trip. The challenge is to take the data and use it efficiently in the communicative touchpoints with consumers to convert to purchases.
Personal care is the top sought-after category for “preshopping.” That means the message must be perfect. Levin used the example of the interactive Just for Men website, where men can look at colors to find the right match before visiting the store. Pretailing encompasses boomers, too, Levin noted. Even 70% of boomers plan to use digital prior to shopping.
More proof that millennials are a different breed from the rest of the U.S. population includes the number of store visits, which is down across the board but more so for the younger consumers. “They grew up in a point-and-click environment,” Levin noted. They don’t mind paying more online because they feel they saved time.
And digital is here to say. Sixty percent of households own a smartphone, and 84% can’t go a day without being tethered to it. Research showed 82% use a phone to assist in shopping and compare prices online before visiting the store. They want all the knowledge they need to maximize the shopping experience.
Some retailers have adopted quickly Levin said, noting how Kroger, Safeway and CVS have focused messages linked to loyalty programs, and Walmart is gaining attention with traceable transactions that help “drive trips down aisle.” Millennials are starting to drift toward Walmart. “That’s a big opportunity and a big threat,” Levin explained. He presented statistics showing Walmart is stealing beauty dollars from the drug channel. The sought-after New General Market also seems to gravitate toward diverse, regionally focused brands and retailers, such as Fiesta, Pic ‘n Save or Food 4 Less.
With more people of all ages using smartphones during the shopping trip, there’s expanding use of geo fencing and in-store beacons. “That’s a good opportunity to drive that final moment of truth,” Levin said. Seventy-five percent said they plan to continue to use digital devices prior to shopping, and 8% actually use digital devices during the trip.
For charts from this report, click here.