Contributors: Anna Talcott, Jasmine Alanis, Samantha White, Justine Purdy, Jeremiah Estanislao
To remain competitive in today’s market, businesses must attract the buying power of the millennial generation. However, this buying power must extend beyond one time purchases. A firm needs to establish a purchase consistency from its consumers to ensure a loyal base. Once a consumer has established a connection to a brand they are less likely to participate in brand switching. This will assist the brand in saving money, due to the fact that it is far less costly to keep the interest of previous customers than it is to recruit the interest of new ones. The issue facing firms attempting to engage Millennials in brand loyalty is that the generation has demonstrated a decrease in brand loyalty behaviors. This change in behavior has proved to be costly to businesses. When a firm is unable to retain its consumers, it must allocate additional costs and resources to attract new customers. A firm must approach millennials differently than previous generations. It must first recognize what is important to millennials because research has shown this cohort is more likely to engage in brand loyalty when a company reflects their opinions and ideals. Millennials are looking for brands that are forward thinking, use technology, offer incentives for repeat shoppers and display sustainable and/or charitable practices. Millennials also tend to listen to the advice and opinions of their peers, increasing the important of a good word of mouth reputation and accessibility on social media networks. They expect more from a business than simply a place that exist to make money, they must do more. Millennials have also grown to expect a more personalized shopping experience, which, when used effectively by a company, should increase the likelihood of a good advertised to specific person actually being purchased.
In a business context, loyalty is a means for cost efficiency. Retaining and building a relationship with a consumer is more prudent compared to the costs and expenses associated with acquiring a new client. A loyal consumer not only conserves a firm’s finances but has been shown to improve profits. According to research conducted by Frederick Reichheld of Bain & Company, “a 5% increase in customer retention produces more than a 25% increase in profits,” (Reichheld, 2014). Why does loyalty lead to a rise in earnings? The reason lies in a consumer’s purchasing behavior with preferred brands. A loyal buyer is more likely to select the various product lines of his or her favorite brands at higher frequencies, is more willing to generate positive word of mouth reviews that generate brand advertising for a firm, and will continue to purchase from brands despite price fluctuations (Babijtchouk, Dames, Gehan, Sleezer, & Smith, 2018).
With the strong purchasing power of generation Y is the potential for an increase in brand loyalties, resulting in long-term revenues. However, this generation has been characterized as being notoriously disloyal and resistant to traditional marketing tactics. Those in the millennial generation cohort have grown up in a media saturated and brand-conscious environment compared to other generations, leading them to respond and seek more organic styled marketing messages from various platforms and sources (Belch & Belch, 2018). This has caused many firms to struggle in finding new ways to retain and attract individuals within this demographic.
Marketers must approach generation Y differently than previous generations who have been recognized as being extremely brand loyal ie. generation X and the baby boomers, begging the question of how to encourage and increase brand loyalty to millennial consumers. As well as how do millennial consumers distinguish between brands and does this vary between age and gender? Finally, what are the factors contributing to the basis of millennial loyalty, and what marketing efforts can help to build a relationship, as well as emotional responses, with this generation especially in terms of how to incorporate technological platforms for means of communication? These questions assists our group in developing a deeper understanding of the purchasing behaviors and attitudes of millennial consumers towards brand influence.
Brand loyalty is defined as consumers’ willingness and desire to consistently repurchase products and services from a preferred brand driven by the development of positive feelings they have come to associate with the firm (Lazarevic, 2012). Those who exhibit brand loyalty are less likely to engage in brand switching in the presence of competing options (Babijtchouk, Dames, Gehan, Sleezer, & Smith, 2018). In Violet Lazarevic’s academic journal, “Encouraging brand loyalty in fickle generation Y consumers,” she defines the two critical components that create loyalty: attitudinal and behavioral. These components are important for marketers when understanding the factors that contribute to building loyalty amongst consumers. Attitudinal loyalty is rooted in emotion and is concerned with the psychological process a consumer goes through when making a purchase. It contributes to the willingness to pay higher prices and a consumer is not likely to purchase from an alternative brand if the product they seek is unavailable (Lazarevic, 2012). The attitudinal component has led a consumer to create a dispositional commitment with a certain unique value associated with a particular brand whereas the behavioral component simply refers to the physical action of repeated purchases of a brand (Chaudhuri & Holbrook, 2001). The development of a relationship with a brand through attitudinal loyalty leads to the behavioral aspect of repurchases. According to Lazarevic, attitudinal loyalty is the more influential component driving loyalty related behaviors and ensures the continuation of loyalty over a period of time. This is important given the findings revealing that feelings of loyalty in millenial consumers were strongly correlated with repurchase intentions (Lazarevic, 2012).
The ability to retain existing consumers is more cost efficient than obtaining new ones further fueling the desirability of a firm to obtain brand loyalty. There are various benefits with brand influence including a competitive edge that is not impacted by price cutting from other firms, an increase in long-term profits as a result of a decrease in the costs per customer due to consistent and maintained relationships with the loyal base, and a creation of barriers to new entrants. Loyal long-term users have also been shown to spend more with a firm (Lazarevic, 2012).
When dealing with the millennial cohort marketers need to adjust and rethink their strategies to capture this perceived disloyal segment. In the academic article titled, “The Millennials: Insights to Brand Behavior for Brand Management Strategies” the authors look into the perceptions and attitudes of generation Y consumers towards brand loyalty. The authors state that between the ages of 15 and 25 consumers develop their brand preferences. These young consumers are often opinion leaders amongst their peers, making them integral actors in the marketplace. What is contributing to the decline of loyalty within this cohort is the mass exposure to different products and services. Millennial consumers have become conditioned to expect a multitude of choices, resulting in patterns of divided loyalty. To further explain the motivations behind the purchasing behaviors of generation Y consumers, the authors presented a study that used a Consumer Styles Inventory (CSI) technique that examined the relationships between status consumption and gen Y consumers. Status consumption is defined as “…consumers’ behaviors of seeking to purchase goods and services for the status they confer, regardless of that consumer’s objective income or social class(Juneja, 2018).” The study concluded that there is indeed a connection between status consumption and millennial consumers, meaning product selection is seen as a form of self expression. (Babijtchouk, Dames, Gehan, Sleezer, & Smith, 2018)
Millennials are attracted to firms whose brand images align with their own self-images and have values that are relatable to this target segment. Studies suggest that branding efforts must portray images of class, style, sustainability, success, and wealth, which are important elements to millennial consumers (Lazarevic, 2012). Studies have also shown millennials are more driven in purchasing products that support a specific cause such as environment or ethical driven brands. They experience less dissonance from these types of purchases and seek brands devoted to making a difference. According to a global corporate sustainability report published in 2015 by Nielsen, “66% of global consumers say they are willing to pay more for sustainable brands- up 55% from 2014,” (McCaskill, 2015). It also found that “73% of Global Millennials are willing to pay extra for sustainable offerings-up from 50% in 2014,” (McCaskill, 2015). These percentages show a congruency that develops between a brand and consumer, when a firm matches the values and ideals of its main consumer base.
Degrees of loyalty also varies between gender and income levels. Data has suggested women tend to be more brand loyal compared to men and are more responsive to loyalty behaviors. Those with higher incomes have also been shown to be more store loyal than those of low income. However this can due to available discretionary incomes available to both groups. Consumers with higher income are able to select brand name products with higher prices than those who do not have as much disposable income leading them to purchase goods on the basis of price and not quality (Babijtchouk, Dames, Gehan, Sleezer, & Smith, 2018).
Generational Theory and Millennial Consumers
When understanding the characteristics that define the different generations it is important to consider the information presented by generational theory. Behind this theory is the idea that different generational cohorts cultivate similar beliefs and attitudes as a result of shared life experiences. The beliefs, attitudes, views, and expectations vary from one generation to the next creating distinct characteristics. These characteristics are heavily influenced by the societal climate and popular culture of the decades. Individuals of the different cohorts are especially susceptible to their external environments during their formative years. Although generational theory has been criticized for looking amongst similarities of different cohorts too broadly compared to other theories such as life span theory, that focuses more on the specific qualities and traits of the different age cohorts, it is still a useful tool for marketers. Rather than contending with the various ways of understanding groups, it is best to appreciate the ways in which they assists in grasping how social context contributes in creating some homogeneous traits found among generations. In order to create familiarity as personal appeals within marketing communications, it is essential to utilize generational cohorts. As a result, marketers are more likely to target products and promotions more effectively (Lazarevic, 2012).
There are many things that affect the way that millenials feel and behave in comparison with other generations. “With rise of the selfie culture and the blogosphere, Millennials care more about appearances than previous generations and have ample information at their fingertips. This translates to shoppers who seek out brands that are socially responsible, fit in with trends, and aren’t overpriced” (Lonergan, 2016). With a life of constant access to information with the use of electronics millennials expect more from brands in the area of technology. This also affect how much of an emotional investment millennials have in both the business and non-business aspect of a company. This is not implying that they care more about sustainability and the environment then there generational predecessor, although this may be true, it simply demonstrates the effect of having an excess of information due to technology. Millennials care about brands that are unique, socially responsible and have the ability to personalize.
In the early days of business, marketing could only be accomplished through word of mouth or physicals advertisements such as signs, fliers and billboards, that could only be seen in person at or close to the physical location of the business. As time passed, technology and marketing theories advanced with it, which allowed marketers to reach current and potential customers with ease.
In 1876, Alexander Graham Bell invented the telephone. His invention would give users the ability to directly and instantaneously communicate with other people down street, in other cities and eventually around the country and world. There was no need to wait days or weeks for someone to communicate through letters, people could communicate about whatever they wanted, whenever they wanted. It was not until close to one hundred years later did businesses fully see or utilize the business applications of the telephone. In the early 1970s, business began the widespread use of telephones for telemarketing. They figured out that due to the advances in telephones, it would be more efficient and economical to utilize phones to communicate with current and potential customers.
In 1901, Guglielmo Marconi first demonstrated and marketed his invention, the radio. On December 12th, 1901, Marconi and his group scientist were able to transmit a signal from Poldhu, Cornwall in England to Newfoundland. This was known as the “Transatlantic Signal.” He proved that signals/information could be transmitted and picked up without having to be hardwired together. In 1920, KDKA, a radio station in Pittsburgh, PA, made the first commercial radio broadcast. Two years later, in 1922, AT&T aired the first radio advertisement, which promoted their phone service. Along with broadcasting music, radio stations began airing various ads from sponsors or companies who paid for airtime.
In 1927, Philo Taylor Farnsworth successfully demonstrated the first television. On July 1st, 1941 the first television advertisement aired in the United States on WNBT, which is now WNBC. The advertisement was for the Bulova Watch Company. Thanks to the invention of the television, businesses could not only inform potential customers about their products and services through audio, they could visually demonstrate or show what they were offering. The combination of audio and visuals made marketing easier and more effective.
Although the invention of the telephone, radio, and television offered new opportunities for businesses to reach consumers, it was not until the creation and prevalence of the internet, world wide web, and social media when businesses were truly able to establish relationships with their customers. Previous methods of reaching consumers were effective to an extent, however they all faced a common downfall: communication would only be one way, meaning that businesses would do all the “talking” and consumers would do all the “listening.” This one-way communication made consumers feel like businesses only saw them as sources of revenue.
The creation of the World Wide Web in 1990 and the rise of social media in the mid-2000’s would change how businesses interact with consumers. Businesses could easily have two-way communication with potential customers. They are able to establish actual relationships with their customers, and this more personal interaction leads to greater chance of business and loyalty (Epsilon, 2018). Customers, especially younger consumers, like to be recognized as individuals, not just an insignificant member of a large mass of people which a business may be trying to push their products or services onto. A business that offers a more personal experience will communicate and send information to a customer regularly, regarding products or services that may fit the customer’s interests. Doing this will send a message to customers that a business does care about their interests and not just promoting products or services. Along with related product recommendations, many businesses also communicate with customers and ask them about their opinions on the products or service they purchased, and what they thought of their interaction with the business.
Social media has also made it even easier for business to interact and form relationships with current and potential customers. It also gives businesses and brands the opportunity to informally communicate with customers and to showcase other aspects of the organization. This display of wanting to converse with customer and listening to what they have to say, shows that a company is interested in more than just making a sale (Ahmed, Q.M, Raziq, Ahmed, S., 2018). For example, Canon (the camera company) is very active on social media, especially Instagram. Like any other business, Canon sometimes promotes their products. However, they more frequently showcase the work of their users, ranging from amateurs to professional photographers. Along with featuring the work of their customers, Canon very frequently responds to comments and questions left on their social media, often answering questions then and there or directing people to a better source of information. Canon could have easily filled their page with product promotions and only focused on making sales, but instead they have chosen to essentially establish a community of people who use Canon products. This establishment of a community makes consumers feel like they are doing something greater than just buying a product. It makes them feel like they are joining a community, and this feeling of community will eventually lead to loyalty to the brand.
Past means of communication and marketing were mostly one way, consumers played a passive role of having information and sales pitches thrown at them. Now, businesses and consumers are able to partake in two-way communication in which both parties can be heard. The innovations in technology have made it extremely easy for businesses to establish relationships and build brand loyalty within their customer base and attract new customers. The World Wide Web and various social media platforms allow businesses to practically conduct instantaneous communication with customers in mass or a one-on-one basis. The more personal, one-on-one interactions are especially good at establishing a good relationship with customers. Customers feel as if companies care about their individual needs, and not solely caring about making sales. By utilizing technology, businesses are able to be more personal with their customers and establish brand loyalty.
Millennials make up one of the most powerful buying groups in today’s consumer market accounting for $170 billion purchases each year (Murdough, 2018). The generation’s purchasing power will soon exceed that of every other generation but the aspects that influence their purchasing decision is one brands and businesses are actively trying to figure out (Murdough, 2018). With more than half of millennials claiming to remain loyal to brands they purchase, there are many reasons as to why that is.
There are two characteristics that most millennials tend to be associated with, being tech savvy and financially cautious. With social media, as one of the main mediums millennials are exposed to new products and brands, it is only part of the strategy that leads them to the action of purchasing or form a loyal relationship. Millennials tend to look for value and purpose in a brand or product as well as seek personal recommendation among friends, family and online views before a purchasing decision is made (Murdough, 2018). Millennials prefer brands who offer a unique experience, value for their money and great customer service (Lexington Law, 2018). Seeking value or purpose could be due to 3 out of 4 millennials preferring to buy an experience over something desirable, living out a more minimalist lifestyle (Lexington Law, 2018). Millennials tend to weigh the integrity of a business model against their own set of values, making brands that align with social causes are attractive for the generation (Murdough, 2018). Companies such as Yoobi school supplies and Toms Shoes donate supplies or shoes when one of their products are purchased, which gives purpose and justification spending just a little more money for Millennials (Murdough, 2018). It goes for the opposite as well, if a company gives off an unsettling feeling or for instance utilizing sweatshops in the production of their products, they are less likely to attract business from the generation (Murdough, 2018).
A following reason as to why Millennials are more fiscally cautious during the purchasing decision process may be that the generation is heavily burdened with debt from student loans, credit cards and more. Statistics show that 63% of millennials have more than $10,000 in student loan debt pushing them to be more selective (Padilla, 2017). It is notable for a business to understand that this does not hinder Millennials from buying anything it simply drives the type of products and brands they spend time, money and loyalty in; as it is projected by 2020 that they will spend $1.4 trillion shopping each year (Donnelly; Scaff, 2018).
As the purchasing decision process becomes more intricate for Millennials, personal recommendation from a credible or loyal source is sought after. This could be a peer, relative or maybe even an influencer such as a Youtubers. Reviews from these mediums carry a large weight in a decision and is quite powerful (Murdough, 2018). As Millennials become the largest demographic to use social media it is quite important for a business to have an online presence as 40% of Millennials refer to online reviews and testimonials before purchasing a product (Lexington Law, 2018). Most millennials have a desire to obtain social currency, information that is shared by people every day, a person’s economic value that refers to the pull or influence that a consumer has among his or her peers which is arguably essential for a business’s marketing (Klein,2018). Millennials have a desire to share their daily life and opinions via social networks, from where they are eating, shopping and to what brands they are using. People naturally talk about products, brands and service’s engaging in more than 16 word of mouth episodes daily, where suggestions and insights may be shared such as restaurants, sales and so forth (Contagious). It is found to be that 67% of Millennials believe they have a responsibility to share feedback with a brand about their experience which drives word of mouth, one of the most effective marketing efforts (Lexington Law, 2018).
Loyalty Reward Programs
Loyalty programs are so much more than the old loyalty cards that gave out a free coffee, ice-cream, or discount on a future purchase, and they are far more successful at customer acquisition and retention. Loyalty programs create a deeper relationship between the consumer and brand. Even though loyalty programs are costly for brands, it is important to note that, “younger consumers spend 37% more with brands when they are a loyalty program member” (“Gen Z and Millennial Consumers are Changing Loyalty…”, 2018). Lazarevic makes the argument that loyalty programs also “…increase switching costs for consumers because they add to the benefits offered to the consumer” (as cited in Liu, 2007, p.56). Consumers become as invested in their own loyalty to a brand as the brand is invested in the consumer’s loyalty. Loyalty programs have the ability to make consumers feel as though it is not a financially good decision to buy a product cheaper somewhere else, if they accrue loyalty points and rewards at another business. That is exactly how the top-ranking loyalty programs found success, such as: “Hilton Honors, Sephora Beauty Insider, Mountain Equipment Co-Op, SCENE, McDonalds McCafé Rewards, Nestlé Baby Program, Carrot Rewards and Amazon Prime” (“Gen Z and Millennial Consumers are Changing Loyalty…”, 2018).
Although marketers find millennials to be the least loyal generation, a key factor from this disloyalty stems from brands not knowing what the younger generation wants. With that said, brands have found great success in millennial loyalty through loyalty reward programs. Older generations have greater qualms with privacy concerns, while younger consumers have the highest acceptance and approval for data collection and behavior tracking. Millennial consumers want personalization and curated content. “A growing number of members (81%) say they are open to having various details of their activity and behavior watched, monitored, and tracked in order to receive access to personalized rewards or engagements” (“Gen Z and Millennial Consumers are Changing Loyalty…”, 2018). Millennials are also willing to pay the fees associated with loyalty programs in order to receive product recommendations, curated content, and other benefits; “willingness to pay for enhanced benefits is significantly higher among Gen Z (36%) and Younger Millennials (37%)” (“Gen Z and Millennial Consumers are Changing Loyalty…”, 2018).
Brands see greater customer retention from younger consumers through loyalty programs, but satisfaction with loyalty programs is significantly lower when compared to Boomers; 30% for millennials vs. 49% for Boomers(“Gen Z and Millennial Consumers are Changing Loyalty…”, 2018). “In a study released by Bond Brand Loyalty, a leading global customer engagement agency, consumers say they spend more, advocate for, and remain loyal to brands with loyalty programs that offer innovative personalized experiences in addition to points and discounts” (“Gen Z and Millennial Consumers are Changing Loyalty…”, 2018). This study found that younger consumers are more willing to try loyalty programs and stick with them, as long as the brand seems to be shifting towards rewarding members through experiences beyond points.
“Although more and more companies now have loyalty programs (they are growing at 9% a year), the number of customers who actively participate in them continues to hover at only about 50%, suggesting that there is still something missing in most programs” (Huang, Rothschild, & Wilkie, 2018). It is essential for companies and brands to offer loyalty programs, but they must also be successful at achieving and maintaining customer satisfaction. Brands should pay close attention in their efforts to raising customer satisfaction, as this study found “consumers who participate in top-quartile loyalty programs are 80% more likely to choose the brand over competitors and twice as likely to recommend the brand to others” (Huang et al., 2018).
Brands know that millennials make up the largest group within loyalty programs, and since their satisfaction averages just 30%, there is a great growth opportunity for brands. Knowing what millennial consumers want out of a brand’s loyalty program is the key to running a successful loyalty program. According to the article, “Why Customer Experience Is Key for Loyalty Programs,” the authors have concluded on four principles that make up a good loyalty program: “(1) Tailor your program’s benefits to the “head” and the “heart”; (2) Speak to all parts of the loyalty funnel; (3) Offer customers rewards today and tomorrow; (4) Make it easy to understand and use” (Huang et al., 2018).
By tailoring a program’s benefits to the “head” and the “heart,” programs need to offer a mix of monetary rewards, unexpected gifts, and special recognition to make the customer feel significant and valued for their loyalty (Huang et al., 2018). A great example for this would be Sephora’s Beauty Insider program. “Sephora’s Beauty Insider program is able to speaks to customers’ emotional benefits by offering exclusive perks like supplier-funded product sample giveaways and chats with makeup enthusiasts. At the same time, it also appeals to customers’ rational benefits with clearly defined loyalty tiers that encourage customers to want to reach the next status level” (Huang et al., 2018).
The second principle, “speak to all parts of the loyalty funnel,” drives the point that, “…all customers fall into one of four points along a loyalty funnel: program awareness, membership, active engagement, and changed behavior” (Huang et al., 2018). Successful loyalty programs need consumers to move from an awareness of the company and its products toward a change in purchasing behavior. Many companies are finding difficulties in getting consumers to actively use the loyalty program, not acquiring consumers to their loyalty program. Arguable, the most effective company at getting consumers through each funnel point is Amazon Prime. They have “created an ecosystem that engages customers along every level of the funnel” (Huang et al., 2018). Prime receives their highest customer acquisition through free trials and clear communication of benefits to convert 60% of customers to participate, compared to an average of about 50% participation for other retailers (Huang et al., 2018). “Of these members, roughly 80% are actively using their Prime membership (versus 60% for retailers), and 80% of those active users increase the amount they spend at Amazon.com” (Huang et al., 2018). Amazon is able to continue its momentum with new memberships by delivering personalized benefits and rewards.
With the third principle of offering customers rewards ‘today and tomorrow,’ this means that consumers are interested in the accumulation of points for a big reward as well as the ability to spend points sooner for a smaller perk (Huang et al., 2018). Younger consumers do not want to choose, they want both options and successful loyalty reward programs have found a way to deliver short-term and long-term rewards. “This is especially critical in sectors where products or services are more expensive and may be purchased less frequently, such as airlines and hotels” (Huang et al., 2018). A company that is successful at balancing satisfactory instant gratification and long-term rewards is Southwest Airlines. “[They] offer the short-term benefit of free priority boarding, the longer-term reward of free flights, and the additional value add of a free companion pass that members can earn when they fly” (Huang et al., 2018).
The last principle may seem obvious, but it should not be overlooked. Younger consumers do not have the patience for reward programs that they do not understand, so companies need to be transparent and direct. “Companies need to strike a balance by keeping loyalty programs relevant to their customers’ needs while also accessible and easy to use” (Huang et al., 2018). A company that is favored among millennial consumers for its loyalty program is from the retailer REI. “[Their] payback model allows customers to earn money back with each purchase — shown clearly on the receipt —[and] is a feature that helps the program earn high marks from customers and builds affinity for the brand” (Huang et al., 2018).
Lazarevic (2012) makes the argument that loyalty programs appeal to the younger generation because it makes these consumers feel like they belong to a group, and especially with Generation Y, these consumers are missing this sense of belonging more than older generations. “Members of Gen Y/ Millennials react very well to hospitality and being made to feel special and appreciated; Millennials exhibit loyalty but expect companies to work hard for it” (Graywood, 2018). Brands seeking to increase their influence should note that paid loyalty programs and tiers are associated with higher member spending, higher advocacy, and long-term brand loyalty. Paid loyalty programs drive sales, have higher program engagement, and reduced returns. For example, Amazon Prime has an “estimated $9B per year revenue stream that offers its roughly 90 million members access to benefits that increase use, like free two-day shipping and free same-day deliveries. Prime members shop 2X more often and spend 2X more than non-Prime members” (“Gen Z and Millennial Consumers are Changing Loyalty…”, 2018). Personalized marketing and discounts are more likely to catch the attention of millennials than generic, traditional broadcasts. And, the good news is that, at 13 percent, millennials are more likely than older generations (Generation X equate to 10%) to interact with their rewards program daily” (Graywood, 2018).
Personalized Data Collection/ Marketing
Personalized marketing is defined by Emarsys.com as “ the implementation of a strategy by which companies deliver individualized content to recipients through data collection, analysis, and the use of automation technology.” Personalized data collection is the collection of data of a consumer, then using that information to learn about a person’s purchasing behavior and making recommendations for products. Businesses that do not collect and analyze customers’ browsing and purchasing history usually have to rely on mass product and service recommendations, and hope something will fit a customer’s interests. Businesses that actively track and analyze this information are able to present customers a streamlined list of product and service recommendations, that have a greater chance of being purchased. Not only is it used to recommend products, but personalized data collection can enhance customer interaction with a business. Businesses can send post-purchase surveys regarding products or service and the company as a whole. This shows customers that a business cares about what customers think of them. Some measures that businesses could be taken that might increase customers’ openness to behavior and purchase tracking are letting customers know they are being tracked and providing them with rewards. For example, Chick-Fil-A offers an app that allows users to build up points that can be exchanged for food. Typically, a combination of the two methods yields more favorable outcomes (repeat business, greater satisfaction, and loyalty).
Many large organizations that have to interact and market to large customers bases typically utilize personalized data collection, such as: Netflix and Amazon. The main difference between the two is that Netflix is making recommendations for products for a service you have already purchased and Amazon is making recommendations for products that you might be interested in purchasing. In 2006, Amazon launched a subsidiary called Amazon Web Services (AWS). AWS is a service that provides computing services, storage, infrastructure, data collections, and web hosting through a cloud based platform (Smart Data Collective). Originally this service was exclusive to Amazon as they used it to run their online business, but in the mid 2000s they figured out it would be profitable to broaden the service and offer it to the public and to businesses. Though most people are interested in the ability of AWS to store seemingly endless amounts of information and host websites with ease, its ability to compute and collect data can be argued as its most crucial feature. AWS can collect data about a consumer’s purchase history, product browsing history, global product trends and popularity, and behaviors of consumers who buy similar products (Smart Data Collective). This data is then processed, and trends are identified, and then recommendations for products or services are made. Amazon used the data they collected for themselves to figure out what and where people want products. This was used to create Amazon Home Services and Amazon Fresh, which have increased Amazon’s revenue. These new subsidiaries allowed Amazon to broaden the products and service they can offer to consumers. By doing this, customers are more likely to conduct repeat business, because of the ease of only having to go to one company for their needs.
Ethical Transparency and CSR Efforts
Over the years the definition for ethical transparency has shifted from just yielding a profit for shareholders to helping local causes as well as a respect for our earth’s natural environment, partially due to the influence of Millennial opinion. According to an article in the Sunday Business post, “customers are more willing to pay for an ethical brand [that] assessed the inputs its products require against respect for workers rights or well being of the planet” (1). Millennials are looking for a company that supports its workers and the environment, in other words, a company that they themselves would be excited to work for would be a company they would be more willing monetarily support. This idea of companies being leaders has become so widely accepted that “81 percent of millennials expect companies to make a public commitment to good corporate citizenship” (Russell, 2016), thus what used to put companies over the top in the minds of consumers is now simply what is expected of companies, villainizing those company who are unwilling or unable to conform to these new standards. A specific management tool mention in the Sunday Business post article is Mark, a tool that “gives third party endorsement, but also crucially provides them with an inventory, gap analysis and roadmap for their future sustainable journey” as well as eventually once a company using mark is certified it can “gain corporate responsibility and sustainability credentials” (Russell, 2016). Kirstine Lonergan cites one of the main explanations of the popularity of ethical transparency in millennial purchasing culture as being an effect of social media and internet culture. “Millenials care more about appearances than previous generations and have ample information at their fingertips. This translates to shoppers [millennials] who seek out brands that are social responsible” (Lonergan 1). Since millennials have constant access to opinion shaping information “they are seeking companies that have a CSR (corporate social responsibility) program” and “9 out of ten consumers in this group [millennials] would switch to a brand that presented an ethical standpoint to them” (Lonergan 2). A commitment to sustainability helps both strengthen millennial brand loyalty as well as general growth. In the span of a year “sales of consumer goods from brands with a demonstrated commitment to sustainability have grown more than 4% globally, while those without grew less than 1%” (PR Newswire 1). Being sustainable with good CSR can also be its own kind of advertising thanks to millennials social media habits. Millennials tend to “amplify social and environmental messages” and are “willing to voice opinions to a company about its CSR efforts” as well as “tell friends and family about CSR efforts” (PR Newswire 1) creating viral CSR efforts on social media (ie Ugly fruit food and beverage company).
Integrated Marketing Communications:
In an ever changing market the ability of a company to be adaptable, flexible, and responsive is critical. Communications with the millennial cohort must go beyond traditional advertising and to successfully build a congruency between brand loyalty and consumer consumption, integrated marketing communications (IMC) must be implemented within a firm. Integrated marketing communications refers to, “a strategic business process used to develop, execute, evaluate coordinated, measurable, persuasive brand communications program over time with consumers, customers, prospects, employees, associates, and other targeted relevant external and internal audiences. The goal is both generate short-term financial returns and build long-term brand and shareholder value” (Belch & Belch, 2018). At the core, IMC creates synergy amongst an organization and presents a unified image to both internal and external audiences. It enables a firm to communicate a consistent message across various platforms while contributing to the development of a relationship between a consumer and brand. Marketing communications need to be unique to capture the attention of generation Y. This means a brand must convey what it stands for and how it is relevant to the identity of millennials in order to create brand awareness that can be filtered through mass amounts of clutter in the marketplace (Lazarevic, 2012).
Generation Y consumers are information seekers given their ability to have access to data with the introduction of the Internet. Through the Internet, this demographic has been able to engage and communicate with a brand in an interactive level that was not possible in previous generations. This has led the cohort to become heavily influenced by the medium. With the constant sharing and viewing of various brands on technological platforms, consumers can identity inconsistencies in marketing communications when a firm is not implementing an IMC program. The presence of inconsistencies then creates an image that contradicts a brand’s identity, leading millennial consumers to view the firm as inauthentic and will cause them to lose interest in furthering a loyal relationship (Lazarevic, 2012).
Underlying the success of a brand is consistency and connectivity. Through the utilization of IMC, a firm can achieve a unified image amongst its product lines. Drawing the attention of millennial consumers comes down to broadcasting communications across both traditional and nontraditional media. A firm needs to provide its consumers with various points of interaction. Generation Y as a whole enjoys the collaboration and sharing of information regarding brands. As Lazarevic states, “they are more connected than previous generations and post comments about brands on Facebook, blog about brands and share viral brand messages” (Lazarevic, 2012). This connectivity between consumers further emphasizes the importance of having consistency across a firm’s marketing communications.
Lastly, integrated marketing communications is an important tool in developing and sustaining brand identity and equity (Belch & Belch, 2018). Generation Y prefers to consume information visually and IMC can serve as a tool to assist marketers in generating visual messages that appeal to this cohort. It also portrays brands in favorable and unique positions that further the development and sustainability of brand equity. Most importantly, IMC is a form of persuasion that leads consumers to develop, “high perceptions of product and brand quality (Lazarevic, 2012).”
With the growing importance of social media in a shopper’s purchase process, companies are evolving and increasing their marketing effort around celebrity endorsers and influencers across all platforms. Research shows that consumers show greater recall of products that have been endorsed by celebrities- regardless the level of likeness they have for them(Guided Selling Blog, 2016). The human brain actually recognizes celebrities similarly to how it recognizes people we actually know (Guided Selling Blog, 2016). If consumers happen to be fans, they place higher value on products that celebrities are endorsing- it is as if they are receiving personal recommendation from a valued friend(Guided Selling Blog,2016). There are great benefits for a company to have celebrities endorsing their products such as brand awareness, trust and familiarity which aide heavily in the purchase decision-making process (Guided Selling Blog,2016). Subconsciously, people believe that purchasing a product that’s promoted by a celebrity they admire, will allow them to emulate the celebrity’s desired traits or attract similar people into their lives(Guided Selling Blog,2016).Further amplifying the desire for millennial consumers to use products that portray their self images.
In a media saturated environment where consumers are exposed to multiple brands at once, celebrities have a stopping power that can stand out against the clutter. However, there are also risks that are associated with the use of endorsers. These include overshadowing the product, overexposure, and negative publicity (Belch & Belch, 2018). A celebrity can draw attention to a product, but he or she may overshadow the product or brand. From an advertisement the consumer may only remember the face they saw in the ad and not the actual brand. A firm must also be selective with who they choose to be the face of the company and that this person matches their brand identity. If an endorser is in multiple different brand campaigns, consumers may become skeptical of the trustworthiness of the brands. Lastly, if the celebrity is caught up in a scandal this can have a negative impact on a brand and advertiser (Belch & Belch, 2018).
- Loyalty Reward Programs
- Integrated Marketing Communications (IMC)
- Personalized Data Collection
- Ethical Transparency (Sustainability)/ CSR (community)
- Celebrity Endorsers
With the evolution in the marketplace, it is crucial for marketers to be flexible and adaptable to changes. Brands that wish to increase their influence over millenials and build loyalty have a multitude of options, such as the ones we discussed earlier, but we recommend that firms and brands, of all sizes, focus their marketing efforts towards loyalty reward programs in order to build consumer loyalty with millennials and generation Y.
With loyalty reward programs, brands can tailor their rewards to fit the needs and wants of millennial consumers, and as stated earlier, loyalty reward programs allow consumers feel like they belong to a group. Our recommendation also stems from the financial benefits associated with companies that have the most successful loyalty reward programs. Amazon Prime members shop twice as much and spend twice as much than customers who are not members of their program (“Gen Z and Millennial Consumers are Changing Loyalty…”, 2018). And the fact that studies have found “younger consumers spend 37% more with brands when they are a loyalty program member” (“Gen Z and Millennial Consumers are Changing Loyalty…”, 2018). Loyalty reward programs offer personalized marketing that are successful in catching attention of millennials compared to generic and traditional broadcasts.
Ideally, larger and more prominent brands should try to incorporate all the options we listed above, but we are aware that not every aspect from our options is ideal for brands on much smaller scales. That is another reason why we ranked loyalty rewards programs as #1; we think that any brand of any scale or capacity could implement a loyalty rewards program. With integrated marketing communications (IMC) and personalized data collection, both options are more suitable for larger brands with greater resources, although their efforts can be done on a smaller scale, we think they are less of a priority in comparison to loyalty reward programs.
Full transparency is lucrative in a time where consumers are active participants and information seeking. Firms should shift towards having full transparency with their audiences, as it should build loyalty and positive feelings towards the brand. This is especially true if the brand wants to attract millenials, as they are the largest group to change their shopping behavior to support ethical transparency, corporate social responsibility, and brands that are more in line with their morals and beliefs. Even though transparency is ranked as a priority for these consumers, we placed it as #4 in our rankings, because this is just one aspect that younger consumers look for when making purchasing decisions.
With the last option, celebrity endorsers, are a good way to build a relationship between consumers and a brand because they help to relate similarities between the purchaser and the product. However, there is a great risk and financial backing that comes with partnering with an endorser, and the potential negative association if the celebrity is caught in a scandal. There is also the risk of overexposures of celebrities with different products. If a consumer is exposed to various advertisements with the same endorser, for example Kim Kardashian, consumers may lose trust in a brand because they no longer see the brand as authentic. Instead of endorsers being the sole means of brand awareness they can be an additional element of the IMC program as another medium to relate and communicate to millennials.
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