Millennials make up an increasingly significant piece of the global spending pie. A study from the Dartmouth Center for Marketing Research estimated that Millennials born between 1980 and 2000 possessed a spending power of $2.45 trillion worldwide in 2015. As the younger portion of the generation begins to control more money and become more financially independent, that number is expected to rise, and businesses want to be there when it does.
The Changing Face of Interactions
A fluid technological landscape has changed the way we shop, the way we bank, the way we interact with businesses. It isn’t a phenomenon exclusive to Millennials, but Millennials are the ones embracing this new age at a higher and faster rate.
It comes as no surprise that mobile is the direction retailers need to go to reach Millennials. With 89 percent of Millennial shoppers connecting to the internet from their smartphones, it’s the fastest and easiest way merchants can get their foot in the figurative door in a world filled with distractions.
Social media also plays a serious role in the changing tide of consumer spending among young adults. Traditional marketing is losing out to social media as the place Millennials are learning about new products or services. Facebook leads the way for those looking to find out more about and connect with a company, but Twitter and Pinterest, among others, are also major factors. In fact, 55 percent of respondents to a Blackhawk Engagement Solutions survey reported that social media is their “go-to” source for shopping news and information. Television, the study shows, ranked sixth.
But beyond simply shopping around, the Dartmouth report stated that another main reason Millennials “Like” or “Follow” a particular brand or retailer or product is to show support.
Social media has the ability to evoke an emotional response from users in ways other forms of media and marketing cannot. Television or print advertising can never make someone feel as connected to a brand as social media can. After all, here are thousands of other people who feel the same way I do, bound by our love of Brand A … united we stand!
What’s nice for companies is that this kind of loyalty can convert to sales rather easily.
Tapping into Tech
It’s not just one and done if Millennials like a brand. An Edelman study showed that 80 percent of these young Americans say they “keep coming back” to show their loyalty. But they’re not opposed to a perk here and there, and they’re quick to sign up for a loyalty program.
More than 75 percent of Millennials participate in some form of loyalty or rewards program. Some of the key reasons for joining include members-only sales and events, charitable contributions and coupons. Loyalty programs have shown to deepen the connection between customer and company, with 68 percent of Millennials saying they change when and where they buy something to maximize their benefits.
But this number comes with a caveat. Truth is, Millennials can also be a little finicky. Loyalty programs can compel them to reveal some personal information for a more targeted marketing approach, but 49 percent have terminated their participation after they felt like they were receiving communications not relevant to them.
Keeping up with the technology is also a key aspect for companies to keep in mind with regard to their loyalty programs. As mentioned earlier, Millennials want to be able to do just about everything on their smartphones, and they certainly don’t want to keep attaching mini cards to their key chains. A loyalty program that has a smartphone app makes a measurable difference in retention. And, if that app also allows for mobile payments, that’s an added bonus with a sizeable gap between Millennials and Baby Boomers. A COLLOQUY survey revealed that 42 percent of Millennials are willing to continue participation simply because of a mobile payment option, while just 15 percent of Baby Boomers said the same thing.
Thad Peterson, Senior Analyst at Aite Group, says, “Millennials may well represent a ‘perfect storm’ for loyalty programs:
- Their extensive interactions on social media provide opportunities for relationships and communications that cannot be replicated through any other channel
- They share preferences and activity with others, broadening the potential reach of a merchant
- And, they’re maturing into productive adulthood where spending increases dramatically
Earning Their Loyalty
It all comes down to reaching Millennials on their terms and being able to deliver. Social commerce has taken center stage, and interacting with Millennials on a more personal level and providing incentives to engage is critical for companies to develop and nurture customers for long-term loyalty. However, it’s one thing to offer mobile apps, mobile payment options and personalized communications, but if merchants can’t protect a user’s information and sensitive financial data, that will spell trouble for loyalty much faster than a seemingly irrelevant marketing email.
Merchants can’t expect loyalty to be generated with a single interaction. It’s a collection of experiences and events and even partner systems that ensure Millennials are getting exactly what they want. Put all the pieces together and merchants can create strong, grassroots advocates that will help the brand for many years to come.
“The key for merchants or banks is to focus more on solutions that are less invasive to the consumer, but still keep security a priority,” Verifi Senior Vice President of Business Development Rick Lynch said. “It’s about providing a faster, lower-cost result, and a better experience for all parties in the supply chain (consumer, merchant, member bank).”
For a closer look at how Millennials’ spending power and their brand loyalty, check out our white paper “The Millennial Consumer: What Every Merchant Should Know About This Influential Buying Generation.”
Photo by Ambro/FreeDigitalPhotos.net
Matthew Katz is CEO of Verifi, Inc.