The New 'It' Consumer
By Melissa Kress
Millennials are replacing their Baby Boomer parents as the power generation
Brad Morris, senior manager of customer advisory services for Coca-Cola Refreshments, was walking through a large grocery store about a year and half ago when he spotted a young mother under 30 years old with her toddler and made two notable observations.
First, she was carrying a Coca-Cola product that was not yet available at the store and was most likely purchased from a convenience store. Secondly, as he tells it, Morris saw the young mother pick up a box of cereal, snap a picture of it on her smartphone — possibly reading the bar code or accessing nutritional information — and then place it back on the shelf.
Morris had just witnessed the new "It" consumer: the Millennial.
"The woman was shopping for soft drinks and cereal, but much differently than I did at her age," he explained, noting that this anecdote illustrates several essential behaviors that are important to retailers wanting to appeal to Millennials.
"The shopper used multiple channels to meet her needs and employed technology during the process that enabled her not only to have an interactive experience with the brand, [but also] it delivered an entirely new level of information that influenced her purchasing decision," he said.
It's not surprising that this particular shopper proved different than Morris. According to Amy Valenzuela, senior shopper insights manager at Coca-Cola Refreshments, the Millennial shopper looks at the world through a different lens than shoppers from previous generations. Each generation has its own cultural and socio-economic influences, and the shopping behavior includes an overlay of technology that has always been part of their lives, she said.
The years defining the Millennial generation vary depending on the source, but most agree the term applies to anyone born throughout the mid-1980s and 1990s. Today, Millennials generally fall between 16 and 30 years old and are the children of Baby Boomers.
They are just as important to retailers today as their parents were to retailers 30 years ago.
"Millennials are extremely important because their spending power is growing as their demographic bulge increases," said David Garfield, managing director and head of the Consumer Products Practice at consulting firm AlixPartners LLP. "It will continue to increase for a number of years and in the not too distant future, they are going to be wielding more of a collective wallet."
This fact has not gone unnoticed by the convenience store industry.
"When you look at the Millennial group, they are a very influential group of consumers," said David Miller, chief marketing officer for West Des Moines, Iowa-based Kum & Go LC, a rapidly growing chain of 400-plus convenience stores. "They have discretionary income and I think for a convenience store like Kum & Go, we fit perfectly into their lifestyle needs. They have been key to our success and continued growth."
Englefield Oil Co., the Heath, Ohio-based parent of Duchess Shoppes, also sees its future in Millennial shoppers. "They are a big part of our c-store business now and will become the majority of our consumer base over the next several years," explained Ashley Englefield, marketing manager for the chain of more than 100 c-stores. "It is important that we get to know this generation as a consumer and get a better understanding of their buying habits now. It will give Duchess Shoppes a head start to a long-term customer relationship with them."
BABY BOOMERS' BABIES
The sheer number of Millennials, where they are in their household formation, and their earning and spending patterns will inevitably have a large impact on retail purchases in general, according to Garfield, who was involved in the study.
"Historically, the grocery channel was a pretty stable channel for food purchases; it has grown up and evolved in past years to focus on and serve Baby Boomers," he noted. "As the baton is passed over time, as Millennials become more influential on a relative basis as far as food purchases are concerned, the grocery channel and all packaged good channels — c-stores included — have to adapt."
That is not to say the sky is falling down on grocery retailers. Rather, retailers are facing demands from this growing demographic, and both retailers and food producers need to adapt to the evolution and growth of Millennials to avoid troubling times ahead.
Just because they are related, retailers should not make the mistake of thinking Millennial consumers are anything like their older counterparts, Garfield cautioned, because they are very different. For example, Millennials care even more about price and value, and they place a greater emphasis on convenience. They are also more adventuresome when it comes to trying new and different products or flavors — regardless of the retail channel.
Value for Millennials is not defined strictly by price, as Coca-Cola Refreshments' Valenzuela pointed out. "More than other generations, Millennials seek value from retailers and brands. This goes far beyond price," she said. "For example, they might want to know what the company or manufacturer does to help their community and protect the environment, or whether they provide scholarships."
This attribute factors well into the convenience channel, which is known for its community service efforts. Kum & Go, which won the Convenience Store News Grand Spirit Award for Community Outreach in 2011, recognizes that community service is very important to this generation.
"I think the older generations kind of lump Millennials with Gen X and slackers and think they are narcissistic and only think of themselves. But that's not true," Miller said. "In fact, they are a very caring group. They care about the future, they care about the environment and they care about what dollars they spend with companies that reflect those values. We have to respect that and I think with Kum & Go, that aligns perfectly with our core values."
Millennials also care more about "healthy for you foods," according to AlixPartners' Garfield. "Interestingly, Boomers care about healthier foods as well, but a little differently," he said. "Millennials care about the providence, source and make-up of the food products, while Boomers care more about the nutritional additives and the ways in which food products address the effects of aging and maintaining their lifestyle."
Englefield agrees, and in addition to grocery items, energy products and foodservice programs, the c-store operator is seeing a push for healthy and/or organic items across all categories.
Specifically, 27 percent of Millennials said they purchase everyday essentials from c-stores vs. 13 percent of Boomers. "That's not a little difference; that's a giant difference," Garfield said.
An even bigger opportunity for convenience stores lies in fresh foods. In the AlixPartners study, 2 percent of Baby Boomers said they buy fresh food products at c-stores compared to 7 percent of Millennials. While both percentages are small, the difference between the two is not.
"The fresh food products category is a newer category with a lot of exciting growth prospects," said Garfield. "Even though the percentages are small, [that] difference of three times the number for Millennials is still significant."
Additionally, the study revealed a significant difference between the two generations in the importance of convenience. The number of Millennials who said convenience is extremely important to them was roughly 30 percent higher than the percentage of Baby Boomers who said so.
"Millennials place a greater emphasis on convenience whether it is for everyday essentials, fresh purchases or in the ranking of the drivers for their food product purchases overall when making shopping and purchasing decisions," Garfield explained.
"Millennials are more willing to move from one retail channel to another if that channel offers them the product and purchase criteria they are looking for," Garfield said. As for building loyalty with this demographic that is so quick to shop around, he acknowledged that "it is actually harder and there is no silver bullet or perfect mousetrap."
There is hope, though. Convenience store operators can attract Millennials by focusing on two key areas: the group's shopping criteria and the store's product assortment.
While Baby Boomers and Millennials both care about finding the item they are looking for, Millennials also care about their perception of how convenient it is, how much value they are receiving and the overall shopping experience.
"Any food retailer that can authentically demonstrate or deliver freshness, value and health benefits is going to attract Millennial consumers," Garfield pointed out. "If they can also offer an interesting variety, they will be that much more attractive. It's not just the number of SKUs you carry, but giving the consumer the opportunity to test something that is exciting to them."
Recognizing the needs and preferences of Millennial shoppers is something some convenience stores already do well. Kum & Go strives to deliver on its brand promise to attract and retain these shoppers, while Duchess Shoppes builds brand loyalty the tried-and-true way.
"We build brand loyalty with this group as we do with any other group: quality locations, great service and offering the products they desire at a competitive price," Englefield said.
Just because Millennials like to shop around, that does not make them disloyal.
"For us at Kum & Go, it is delivering against our brand promise and making sure we always offer the things and attributes that are most important to Millennials," Miller explained. "Yes, they can retail surf, but by doing those things and doing them consistently over time, they may go out and try other things (and you may see it as those customers not being loyal), but it is simply them making sure where they are shopping today is the best intersection of the right products at the right value."
Value can mean convenience, location and ease of trip, he added. "Those all add up to the equation that Millennials are looking for that meets their lifestyle needs," he continued. "If you do all those things, you do them well and consistently over time, I think you will find that Millennials — or any customers — are going to stay with you for the long haul."
GET YOUR TECH ON
"We are seeing a huge shift [among] consumers that is driving them toward technology," Englefield said. "It is important to us to stay on top of the latest trends, but also [to] be smart in deciding how we best serve our customers with this type of marketing."
Social media and digital marketing rank high in terms of the most-effective avenues to reach Millennials. For example, search Facebook for any convenience store — chain or independent owned — the odds are that you will find a Facebook page for them.
Social and digital media are always going to be an important facet in talking to Millennials, but at the same time, there are a lot of different customer segments that are using social and digital media, Miller explained. It has become more pervasive and more commonplace.
"Millennials will over-index using smartphones to do research, to retail surf, to do a lot of things," he said. "Creating stickiness in the social media context; engaging them through those two main social media pillars Facebook and Twitter; and talking to them in a way that lets them know we get them are ways to create loyalty."
One mistake a business can make is underestimating the importance of social media with this group of consumers — or the power Millennials wield through it. They have grown up with information at their fingertips — literally. As expected, gathering and sharing that information through technology plays a big role in their lives.
"This generation is very influenced by smartphone apps, mobile ads and online ads, as well as blogs and online reviews," said Morris of Coca-Cola Refreshments. "Social media enables consumers to share information with their friends, which can extend a brand's or retailer's reach quickly and inexpensively. Millennials are likely to share their experiences not only with friends, but also with friends of friends."
In a way, today's social media is akin to the classic shampoo commercial — she told two friends who told two friends and so on. Retailers and foodservice operators need to leverage the lessons learned from social media and start a dialogue now, Morris advised.
"If you earn their loyalty today, you may be able to earn many others' tomorrow," he said. "Embracing social media and technology allows even a small business to reach far more people more efficiently than with traditional advertising."
"Retailers are faced with the power of 'and.' You cannot forget your other shoppers, and you need to add a level of marketing to appeal to Millennials," he said. "Technology is evolving so quickly, it is difficult to determine where to focus your efforts. At the same time, if you wait for something to evolve, competitors may gain an advantage by leaping on new methods of communication."
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