Alliance Data’s 2018 “Rules of NextGen Loyalty” study validates an emerging trend happening with today’s younger consumers: Not only are they financially conscious, they’re also heavily influenced by cost when it comes to purchasing decisions. These new findings build on our 2017 study, “The Generational Perspective,” which looked at all generations, and found that Millennials, as compared to Gen X, Baby Boomers, and the Silent Generation, were most likely to prioritize their budgets when making purchasing decisions. Initially, we thought this was due to life stage, but our recent study proved there is a bigger underlying cause and effect that is shifting how younger consumers shop.
Obviously, price is a factor with all consumers. It’s even more important to today’s younger consumers, but not for the reasons you might think. Our loyalty study further reinforced that today’s younger consumers are feeling a financial strain and may be struggling to balance price and quality, which is influencing their views on brand loyalty. The data also revealed that these consumers are focused on coupons, discounting, and rewards. In fact, 66% say they’ll seek out a discount or coupon prior to purchase. Even with the financial challenges they face heightening their focus on price, loyalty is not lost.
The difference a decade makes
These two Alliance Data studies have shown that younger consumers are price conscious. Digging deeper, a more challenging financial picture comes into focus. Purchasing influencers over the last 10 years have been driving younger consumers to a deeper evaluation of price and value, forcing concessions on what, where, and how they spend. It’s changing their spending habits, brand relationships, and views on brand loyalty.
Flash back 10 years and the U.S. was in the throes of an economic recession. While older consumers have largely recovered, the effects have lingered for younger consumers. Starting out in life now means younger consumers must consider every purchase decision before it’s made. Personal income has increased only nominally for this age group, while fixed expenses continue to soar. Rent and healthcare costs also have steadily increased over the last 10 years. Combine this with education and tuition costs, as well as student loans, and you can see why it might be difficult for younger consumers to build equity or buy a home. Not to mention, Baby Boomers are working longer and retiring later, making it much harder to climb the corporate ladder.
The collective impact of younger consumers’ financial situations means greater importance is placed on their wallet, which comes as no surprise, given 45% of younger consumers say they never have enough money to buy what they want. Data from our recent Loyalty Study also shows that in the last 12 months, only 5% of younger consumers have achieved financial independence, just 5% have purchased a home, and only three percent have paid off school loans. Even with the financial considerations younger consumers must make, it doesn’t mean they have stopped shopping or consuming products and services.
In fact, data shows that younger consumers are actively applying for credit and using it to get the products they want and need. With so much for younger consumers to consider, it is even more important for brands to intimately understand the consumer-brand relationship and, more importantly, what this means for driving brand loyalty.
Loyalty looks different
Dealing with inflated costs in almost every aspect of life, younger consumers are likely faced with daily choices when it comes to buying what they need, let alone what they want. For some, splurging on extras might require stretching their budgets with coupons, discounts, and rewards.
For the younger consumer, making concessions and questioning when price outweighs quality are part of the daily routine. In some instances, it means placing priority on price over brand or product. Even so, loyalty is not lost. It may just look a little different for the younger consumer.
In this day and age, brands face greater scrutiny and have far fewer opportunities to “get it right.” Younger consumers don’t seem to be splurging as often but, when they do, they want and expect more from brands. Great service and an ideal experience are expected across all channels. When brands fail to live up to expectations, these consumers will take action and make sure their peers know about it.
While today’s younger consumers are increasingly unforgiving, it’s not because they’re “all about me.” Their economic challenges are as much a part of their everyday life as the avocado toast they have come to love — and these challenges are shaping spending habits and influencing brand interactions.
Our research revealed that 76% of younger consumers only give brands two to three chances before they stop shopping them. And once gone, they don’t typically come back. One in three younger consumers said nothing could be done when asked what a brand could do to win them back.
So how do brands build loyalty when price has the potential to outweigh quality or brand interactions? Now more than ever brands need to fully focus on the customer. That’s why it’s essential for brands to gain an intimate understanding of today’s younger consumers and the economic situations they’re facing. Brands must also show these consumers that they’re getting the basics right and addressing functional needs. With the foundation of loyalty in place, brands can concentrate on exceeding expectations and meeting needs — from both an experiential and situational perspective. By addressing the fundamentals as well as the overall experience, brands will have gone a long way in winning the hearts and wallets of today’s younger consumers.
Article was originally published in Chain Store Age.