Shopping isn’t easy. Whether you’re in the market for a new phone or a pair of socks, finding a high-quality product at a low price takes time and planning. And especially in today’s challenging economic climate, many consumers are under pressure to shop smarter and save money.
But there’s one demographic of consumers who are becoming increasingly savvy shoppers: the Millennial Generation, known also as Generation Y, which is composed of people between the age of 18 and 30.
This group possesses unique characteristics, driven by the economy and their use of technology, which makes Millennials natural bargain-hunters and thoughtful customers, marketing experts say. And their behavior is pushing companies to change the way they do business.
“This is a generation of researchers,” said Carol Phillips, an expert in Millennial marketing and president of the Michigan consulting firm Brand Amplitude. ”These guys grow up with a lot less emphasis on learning material and a greater emphasis on how to find the right material. It’s about knowing how to shift and curate to find the good stuff and they are taking that approach to shopping.”
Phillips, who is also an adjunct professor of marketing at the University of Notre Dame Mendoza College of Business, stressed that the amount of time Millennials are willing to spend researching a product sets them apart from older generations.
“We’ve always had treasure hunters but these guys have taken it to a new level,” said Phillips. While others may take time to research the best deal on major purchases like a TV, “this generation does it for lipstick.”
According to a 2010 study by public relations firm Edelman and its research arm StrategyOne, 42 percent of Millennials consult four or more sources when deciding what product or service to buy.
That is certainly the case for Stephen Cho, a graduate student at the University of Chicago Booth School of Business.
“For me, I like more data,” said Cho, who seeks advice from as many sources as possible before making a purchase. “I’d rather have more data points than less.”
When Cho bought a computer recently, he began by scouring the Internet and reading news articles, technology blogs and posts by computer experts. He sent out Facebook posts to solicit advice from friends and family. And he read lots of customer reviews online. Ultimately, he settled on a Mac by Apple Inc.
Like Cho, more and more Millennials are relying on online peer reviews to make purchasing decisions.
A January 2012 study “Talking to Strangers: Millennials Trust People Over Brands” compiled by Millennial experts at the Center for Generational Kinetics, Bazaarvoice and Kelton Research, found that 84 percent of young people rely on user-generated content to make decisions about what products to buy.
Even more striking is the fact that 51 percent of Millennial survey participants said online opinions have a greater impact on their purchasing decisions than recommendations from friends and families. This goes against traditional thinking that young people seek advice primarily from people they know well, according to Jason Ryan Dorsey, chief strategy officer at the Center for Generational Kinetics.
“There is this view among us that people you don’t know will have a more unbiased opinion. We think these people are more honest,” said Dorsey, who is a member of Generation Y. He added that friends and family continue to be very influential sources for young people.
“It’s powerful,” said Dorsey. “We’re seeing that the young person standing inside the Best Buy store, they won’t turn to the left and right to ask the person next to them or the sales assistant…instead, they will look up customer reviews and comments on their phone and use that to make an in-store decision.”
For Lopa Patel, a recent college graduate who works as a graduate housing program assistant at Northwestern University, it’s important to consult friends and read reviews before making a decision on when and where to buy a product.
“Not everyone in my family or social circle has expertise in what I’m buying so that’s why I like to look at reviews,” Patel said. “I want to hear from other people who might be less or more harsh.”
Patel says that finding the best price is important but the bottom line is getting a quality product. When she was recently shopping for walking shoes for a European vacation, she first asked friends what brands they thought would last and then consulted online reviews to learn more about size and comfort.
“It’s about good value. I’m willing to spend more money on something if I know from other people that it will last a long time,” said Patel. “I am interested to know about reliability, especially if it’s a product I’m not familiar with.”
Patel ultimately decided on a pair of Minnetonka moccasins, which she ordered online from Nordstrom Inc. but she had them shipped to a store so she could try them on in-person and not have to worry about the hassle of returning.
Not surprisingly, much of what drives Generation Y’s bargain hunting is the challenging economic climate in which they’ve come of age.
“The economic experience over the last few years has forced us into a corner where we have to look for deals,” said Dorsey. “It’s a natural extension of our interaction with technology. We’re looking for options first and then for deals.”
Carol Phillips explained that social networks like Foursquare and Facebook Places, where users get discounts by “checking in,” have turned shopping into a game for Millennials. “The fun of [bargain hunting] is that you got it for next to nothing,” Phillips said. “It’s about the super deal.”
For brands looking to attract new business connecting with Millennials is a lucrative homerun. There are roughly 77 million Millennials in the U.S. and they spend about $600 billion annually, according to a 2011 survey by Aimia Inc. and Harris Interactive.
But in order to reach younger customers, some companies are trying new tactics and experimenting with different types of reward programs and discounts that appear to be Millennial-friendly.
Earlier this month American Express Co. announced a partnership with Twitter Inc., offering customers the chance to sync their credit cards with Twitter to get discounts. When customers tweet using specific hash tags they receive savings from merchants including Best Buy, McDonald’s, Whole Foods Market and Zappos.com.
"Every day, millions of people use Twitter to get special offers from the brands and retailers they care about," said Adam Bain, Twitter's president of global revenue. "Now, American Express is making it even easier for people to act on those offers.”
And as Millennial consumers mature, industry experts anticipate that retailers will continue to adapt their marketing strategies accordingly.
“We are about to have a whole lot more influence,” Dorsey says, adding that two of the biggest misconceptions about Millennials include the idea that they don’t have any money and that they have already established their loyalties to brands.
“People need to get over the idea that we are all unemployed, living with our parents and wearing flip-flops,” said Dorsey. “It’s worth it to invest in us now.”