How Millennials Are Changing the Face of Marketing Forever

By 2030, Millennials will likely outnumber baby boomers 78 million to 56 million—and they are forming lifelong shopping preferences and habits now.

The Reciprocity Principle
JANUARY 15, 2014
Companies: you should already be ready. Success in marketing to U.S. Millennials—the generation of people now 18 to 34 years old—will be critical to companies across product and service categories. One reason, of course, is that Millennials represent the consumer market of the future. U.S. Millennials already account for an estimated $1.3 trillion in direct annual spending. This sum will grow dramatically, for only now are the first Millennials reaching peak buying power. In the U.S., by 2030, Millennials will likely outnumber baby boomers 78 million to 56 million—and they are forming lifelong shopping preferences and habits now.

It is perhaps more important that this generation is transforming consumer marketing itself. Millennials are distinguished from older generations by their spending habits, brand preferences, values, personalities, and general outlook on life. Furthermore, they engage with brands far more extensively, personally, and emotionally—and in entirely different ways—than have other generations.

Millennials expect a two-way, mutual relationship with companies and their brands. We call this the reciprocity principle. Through the feedback they express both offline and online, Millennials influence the purchases of other customers and potential customers. They also help define the brand itself. The Internet, social media, and mobile devices greatly amplify Millennials’ opinions and accelerate their impact. Companies can expect that a positive brand experience will prompt Millennials to take favorable public action on behalf of their brand. A bad—or even just disappointing—experience can turn a Millennial into a vocal critic who will spread the negative word through social media, reviews, and blogs. And that criticism can go viral.

In marketing, as in pop culture, Millennials are leading indicators of large-scale changes in future consumer behavior. They are influencing and accelerating shifts in consumer attitudes, spending habits, and brand perceptions and preferences among Gen-Xers and even baby boomers. As a result, this generational transition is ushering in the end of consumer marketing as we have long known it.

The conventional, linear framework that most companies have used to manage brand engagement no longer holds. Executives and marketers must embrace the new reality: marketing is an ecosystem of multidirectional engagement rather than a process that is controlled and pushed by the company.

Millennials are also leading indicators of the new “status currency”—the status and values that consumers wish to project through their purchasing decisions and their brand affiliations. One way a company can connect with this new status currency is by convincing Millennials that they are “doing good” when they purchase its brands. Companies need to demonstrate through their values, heritage, and meaningful actions that they help those in need, are socially responsible, are good environmental stewards, protect personal data, or are transparent and sincere.

If they have not already begun to do so, companies must make marketing to Millennials a top strategic priority and begin to master the art of two-way reciprocal marketing. Companies are already finding that pushing consistent, prepackaged brand messages to the masses through traditional media is not as effective and cost efficient as it once was—certainly not with Millennials, nor increasingly with Gen-Xers and boomers.

Executives and marketers will need a comprehensive, intimate view of Millennials across channels and media. Companies must place a high priority on transforming their marketing functions by breaking down organizational silos and building the capabilities and partnerships needed to succeed in the new reciprocal-marketing ecosystem. To start, companies and marketing organizations need to set and communicate clear and measurable Millennial goals. They should reach out to Millennials, wherever they are, with a cross-media, cross-channel, and cross-device brand presence. Brands should reinforce their authentic reputations with the right brand values, personalities, and communications. They should relate to Millennials by moving from push communications to two-way, open dialogue. And they should cultivate Millennial referral among customers as well as Millennial employees.

The Reciprocity Principle

The conventional framework that most companies have used to approach marketing is often depicted as a funnel, with the company at one end and the customer who has made a purchase at the other. A company starts by defining the positioning, benefits, and personality of its brand. It then pushes that image down to consumers in an attempt to build awareness and, eventually, customer loyalty.

This simple description of a linear relationship between investment in brand awareness and marketing outcomes may have been valid in the past, but this framework is outdated. Instead of being a process that is led and pushed by companies, modern marketing is an ecosystem that is influenced by some factors that a company can control and some that are beyond its control. It is a system in which marketers, customers, and potential customers perpetually exchange experiences, reactions, emotions, and buzz.

A more effective marketing approach will be driven by the reciprocity principle. For the purposes of this report, we describe five key elements of this principle: reach, relevance, reputation, relation, and referral. Like any other ecosystem, the new marketing environment is dynamic, and its boundaries are fluid. Millennials are influencing each of these elements in profound ways.

  • Reach. Millennials are digital natives. They are more technologically savvy than other generations, and they use portable devices more extensively to access the Internet while physically visiting stores. Companies must use the full array of available media, as well as mobile devices, to reach these consumers and build brand awareness as cost-effectively as possible. In addition to using traditional marketing vehicles that are trusted by Millennials, such as public relations and endorsements, companies should increase their investments and capabilities in digital marketing, social media, advocacy, and cause marketing.
  • Relevance. Millennials, whose values differ from those of older generations, are distributed among a wide range of life’s stages: while some have started families, for example, others still live with their parents. Yet others are first-time independents. Their brand choices, moreover, are influenced by more and different kinds of people. Companies must be aware of all this to make their brands relevant and appealing.
  • Reputation. Because Millennials identify more personally and emotionally with brands, it is especially important that brands strive to maintain genuine reputations that reinforce the traits, personalities, values, and causes that Millennials hope that they project about themselves.
  • Relation. Companies must maintain a two-way dialogue with Millennial consumers. They must listen to them, incorporate their feedback and input, and quickly respond to them and their concerns in a personal and straightforward manner.
  • Referral. To build brand loyalty and persuade Millennials to be positive advocates of their brands, companies must build an ongoing relationship through individual and online community communications, social media, and advocacy programs.
Implications for Marketers

Companies targeting the Millennial generation should align their strategies, initiatives, and investments around the reciprocity principle. To make well-informed investment and business decisions and position the company to target consumer segments, executives and marketers need an integrated, comprehensive view of consumers across channels and in terms of their lifetime value as customers.

If they haven’t already begun to do so, companies must transform their marketing organizations in at least three ways. First, there should be fewer organizational silos separating such functions as digital marketing, private-brand organizations, public relations, analytics, and pricing. Second, they must build the new organizational capabilities and partnerships required to succeed in a reciprocal ecosystem. Third, companies should shift marketing investment from traditional media to more innovative media and tools that can measure short- and longer-term returns from marketing.

We suggest the following tactics.

Set and communicate clear, measurable goals. Few companies outside sectors in which Millennials are currently core customers—for example, quick-service restaurants and apparel—devote sufficient strategic attention and investment to this generation. Nor do they have sufficient methods for measuring progress. One way to encourage accountability is to publicize Millennial objectives within the company—and potentially among investors and customers—and report on how well those objectives are being met. Companies should adopt an annual Millennial marketing plan that is based on an integrated, holistic approach that brings together planning, media mix, campaigns, and tactics into a single view to achieve the company’s overarching objectives for this segment. Programs should be reviewed at least annually to assess whether they are effectively and efficiently achieving such marketing and enterprise objectives as acquisition of Millennial customers, share of Millennial spending, customer retention, advocacy, employee diversity, and improved brand image or fame.

Reach Millennials with a cross-media, cross-channel brand presence. Most companies still devote too much of their planning and budget mix to traditional media—television, newspapers, radio, and catalogs—and not enough to more innovative media. To engage with Millennials where they are, a brand must be present across the full range of media, through offline and online channels, and on mobile devices.

Companies need to know which media, channels, and devices work best at conveying promotions, messaging, and brand personality to Millennial targets, and they should use each to its unique advantages. In addition, most companies haven’t yet fully developed the capabilities they need to offer relevant content through online, e-mail, or mobile devices at the right time. Nor have they mastered the ability to monitor customer uptake, understand return on marketing investment, or scale up online and mobile platforms.

Make sure marketing communications are relevant. To reach Millennial consumers, companies must make sure that their marketing communications are optimistic and positive in tone. They should also visually portray the generation as broadly diverse and inclusive. Companies targeting Millennials in certain sectors should not ignore the marketing value of testimonials from celebrities and partnerships with Millennials’ favorite or aspirational brands.

Our research found that Millennials perceive themselves as particularly in tune with what they consider to be authentic and real. Millennials tell us that the most common mistakes of non-Millennial creative agencies and executives are marketing campaigns that come across as fake, overly forced, condescending, or off key. Therefore, marketing language, brand personalities, company-supported causes, and endorsements need to be credible. They should be based on what the brand has stood for historically, how the product and experience deliver on that promise, and the actions the brand has taken.

Reinforce reputation in Millennial channels. A company can connect with the new status currency by demonstrating to Millennials that its brand’s soul is aligned with their values and that customers are doing good by purchasing that brand. Companies should show that they help those in need, are good environmental stewards, are socially responsible, respect personal data, or are transparent. Companies can act meaningfully by creating nonprofit partnerships that promote the causes they support, adopting new codes of corporate conduct, and improving their hiring, people management, sourcing, and manufacturing practices.

Relate to Millennial constituents. Companies need to invest in nontraditional marketing initiatives and organizational capabilities that allow them to build relationships with Millennials. The goal should be to cultivate more of a one-on-one or small-community connection with customers and potential customers. Such initiatives might include events, recognition, referral programs, testimonials from influencers, customer advisory panels, social media, online community marketing, public relations, customer-relationship-management programs, and e-mail campaigns.

A company’s own Millennial employees can be valuable in helping it relate better to Millennial consumers. Few companies fully leverage these human assets. Such staff can prove powerful brand advocates or even more powerful critics. Millennial employees can be effectively engaged in numerous ways. Like Millennial customers, they can serve on a Millennial advisory board or help develop products, services, and marketing strategies through so-called crowdsourcing. Millennial employees can also serve as a company’s face and voice in retail channels and social media. Companies should place top Millennial talent in the right management and leadership roles today, particularly in online channels and in marketing and product functions. Human resources departments should incorporate Millennial-marketing lessons into their core processes—and share Millennial-employee lessons with marketers.

Cultivate Millennial referral. Although companies cannot control whether and how consumers advocate for their products, they can cultivate and measure relationships with consumers who are most likely to influence their target market. They can also influence brand conversations. An effective plan requires an online and offline referral-marketing program that allows customers to interact with the brand and each other and to deepen each customer’s relationship with the company. Another key is to proactively address criticism on social media with contriteness and candor. Companies should reflect what they know about Millennials in their customer-service strategy and in the tactics they use for addressing complaints and questions, such as the availability of service representatives, response times, and online or video chat.

Finally, companies need an advocacy plan for identifying consumers in each community or network who exert especially strong influence over Millennial customers or potential customers. We call these influencers the critical 2 percent because they account for a tiny share of a Millennial community but have disproportionate sway, opening doors to the rest of that community. Once the company has identified these influencers, it should invest to acquire an in-depth understanding of this 2 percent and develop strong relationships with them. Few companies employ insightful metrics that track the performance of their referral and advocacy initiatives effectively. We recommend tracking the number of interactions with all Millennial customers, customer recommendations, and advocates that generate content. Companies should also measure the quality and sentiment of interactions with their Millennial customers and the critical 2 percent over time.


The imperative to engage and win over the Millennial generation represents an entirely new set of challenges for U.S. marketers. This is especially true for long-established companies that are accustomed to pushing consistent, polished messages from the top but have little experience maintaining true two-way relationships with customers. Companies that are able to master the reciprocity principle will have a competitive advantage not only when it comes to attracting and retaining the valuable Millennial generation. They will also be more successful at appealing to customers across other generations who are rapidly changing the way they interact with brands.

Acknowledgments

This report would not have been possible without the efforts of our BCG Millennial Panel: Antonio Alvarez, Lindsey Barnes, Matthew Innamorati, Delvin Kelly, Jeffrey Shaddix, Bensey Schnip, Amy Snyder, and especially Brian Bunyard, Hannah Davis, Christopher Harlan, and Angela Zhang. Furthermore, the authors want to thank Marguerite Fitzgerald, Richard Hutchinson, Tom Lutz, Kim Plough, Bettina Schönenberger, and Miki Tsusaka for their invaluable leadership and support. The authors are also grateful to Carrie Perzanowski, Dave Fondiller, and Lexie Corriveau for their guidance on marketing and interaction with the media; Pete Engardio for his writing leadership; and Katherine Andrews, Gary Callahan, Angela DiBattista, Elyse Friedman, Kirsten Leshko, and Sara Strassenreiter for their editorial and production help.

~ Curated by The Marketing Curator and Pass The Idea (www.pass-the-idea.com)

Source: https://www.bcgperspectives.com

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