The Millennial generation not only represents the consumer market of the future, but it is also transforming the way in which companies must market their products both online and offline in order to be successful, according to a report by the Boston Consulting Group (BCG).
The report, entitled 'The Reciprocity Principle', argues that US Millennials - the generation of people now 18-34 years old - engage with brands far more extensively and personally than do older generations, and they expect their values to be reflected in the brands they purchase.
Because Millennials are heavy users of social media and mobile devices, the impact of their brand choices and feedback is greatly amplified and accelerated. BCG's global research suggests that the findings about Millennials and their impact on marketing reflect similar trends among Millennials in other developed countries.
"The conventional linear and rational approach to marketing has been a process in which companies defined their brands and pushed brand and marketing messages at consumers. But this doesn't work well with Millennials," said Christine Barton, a BCG partner and the lead author of the report. "Millennials want and expect a two-way, reciprocal relationship with companies and their brands. As a result, modern marketing has become an ecosystem driven by interactions among marketers, customers, and potential customers, who help define brands and influence their success."
The report was based on surveys involving nearly 4,000 US consumers, covering behaviour, values, brand engagement, marketing tactics, and other areas. US Millennials already account for an estimated US$1.3 trillion in direct annual spending, of which at least US$430 billion is estimated to be discretionary, non-essential spending. These estimates do not include substantial Millennial-influenced spending, such as by parents and grandparents. And this sum will grow dramatically as more Millennials reach peak earning and buying power. By 2030, the projected 78 million Millennials in the US will outnumber the projected 56 million baby boomers (aged 50-69).
Millennials are driving a transformation of consumer marketing across five elements: reach, relevance, reputation, relation, and referral. Several findings from the BCG surveys illustrate these points:
Millennials engage much more extensively with brands through social media and mobile devices than do older generations. Over half (52%) of Millennials said they use social media to "like" a brand - compared with 33% of boomers surveyed - while 39% post product reviews. Twice as many Millennials as boomers check prices, look up product information, or search for promotions on their mobile devices while in a store.
The purchasing decisions of US Millennials are influenced by more people - and different types of people - than are the choices of older generations. Less than half of Millennials said that they trust expert advisors such as doctors or financial advisors, for example, compared with 61% of non-Millennials. Instead, Millennials reported that they are most influenced by family, friends, and strangers. Millennials were also twice as likely as Generation X (ages 35-49) to say that they were influenced by celebrities and four times more likely than boomers.
Millennials identify with brands more personally. Half (50%) of US Millennials aged 18-24 and 38% of those aged 25-34 agreed that brands "say something about who I am, my values, and where I fit in". Almost half (48%) of young Millennials reported that they "try to use brands of companies that are active in supporting social causes".
To cultivate a relationship with Millennials and sustain brand loyalty, companies must establish a dialogue with them individually and in small groups. Nearly twice as many Millennials as boomers cited "availability 24/7" as the most important thing that brands can do to engage them.
Engaging with Millennials is also important because they are more eager than other generations to share their opinions with friends and on social networks. More than half of US Millennials said that they are willing to share their brand preferences on social media, for example, compared with 31% of baby boomers. More than half also said that people seek them out for their knowledge and opinions of brands, compared with only 35% of boomers.
With all of this in mind, the report urges companies to make marketing to Millennials a strategic priority and master reciprocal marketing. "This is important not only because Millennials represent the market of the future over the medium term in developed economies," said Barton. "It is also critical because Millennials are the vanguard of large-scale changes in marketing behaviour and media habits among older consumers and future consumers."
The report also suggested several actions that companies should take if they haven't done so already. First, they should set clear, measurable goals for marketing to Millennials. Companies must also transform their organisations by breaking down silos that separate different marketing and media functions, building the new capabilities required to compete in a reciprocal ecosystem, and devoting greater investment to more innovative media and tools that can measure short- and long-term returns from marketing.
The report advises that companies reach out to Millennials wherever they are with a cross-media, cross-channel, cross-device brand presence. Brands should reinforce their authentic reputations and brand soul with the relevant values, personality traits, and communications. They should relate to Millennials by moving from push communications to two-way, open dialogue. And they should cultivate referrals among Millennial customers and employees.
"The imperative to engage and win over the Millennial generation represents an entirely new set of challenges and tactics for marketers in developed economies," concluded BCG partner, Lara Koslow. "This generation is ushering in the end of consumer marketing as companies have long known it."