Millennials aren’t so vain that they think a pitch is about them. Marketers often generalise consumer profiles, an approach that can be overly myopic. There are ways to avoid taking a stereotypical view of consumers and deploying a more nuanced approach.
EVERY day, most Americans wake up to coffee. According to a 2017 National Coffee Association report, most Americans drink coffee regularly, together fuelling a US$13 billion national industry.1 The report goes on to suggest that more millennials favour gourmet coffee, specifically espresso-based beverages—a variant also preferred by many Generation Z adults—and that baby boomers are significantly more partial
to instant and decaf coffee than other generations.2 Generation X, in contrast, seems to be wavering slightly in its commitment to coffee, with many lured away by alternative caffeinated beverages and health drinks.3
Some baby boomers reading this may be thinking, “Wait, I drink espresso and gourmet coffee all the time.” Conversely, if you are a millennial, you may eschew espresso and consume vast quantities of alternative caffeinated beverages.
This example from the coffee category suggests a bigger point: Not all commonly held beliefs about generations are true and clinging to stereotypical beliefs about each age group can limit profitability and growth. Today, all generations are exposed to the same disruptive forces of globalisation, innovation, technology and the social media revolution, causing a melding of attitudes and behaviours. Thus, it’s typically important for consumer-marketing organisations to take a more nuanced approach to profiling their target consumers by delving deeper into consumer attitudes and shopping behaviour. This can help capture income from consumer segments that may go unrecognised and untargeted based solely on generational marketing.
In this report, we present a refined approach to understanding consumers according to a segmentation method that relies not merely on age, but also on individuals’ expressed attitudes towards shopping and their self-reported actions.
Many consumer products organisations are investing significant marketing and innovation dollars in millennials,4 and Generation Z is also emerging as a significant target.5 Much has been written about the attitudes, behaviour and preferences of these generations. However, a heightened marketing focus on millennials shouldn’t blind companies to the potential appeal of older generations, often with greater spending power. From a marketing perspective, stereotyping generations vis-à-vis broadly held attitudes on innovation, wellness, convenience, technology and marketing tactics can lead to missed opportunities arising from a deeper and more comprehensive view of consumers. These could result in less productive outcomes and inefficient use of marketing resources.
In particular, it would be wise to note the equally formidable size and greater buying power of baby boomers (23.5 per cent of the US population in 2016) and Generation X (20.3 per cent) compared to millennials (24.7 per cent) and Generation Z (21.5 per cent).6 Given their high buying power and despite their shrinking size, older generations will likely continue to exercise enormous influence in the market as their needs and circumstances evolve. A Deloitte study, The future of wealth in the United States,7 asserts that baby boomers will continue to be the wealthiest generation in the United States until at least 2030. It also purports that Generation X will see the highest increase in the share of national wealth through the forecast period—from under 14 per cent in 2015 to 31 per cent by 2030.
This report summarises findings from a web-based US consumer survey conducted by the Deloitte Center for Industry Insights in April 2018. The survey polled 3,000 adults aged 18 to 70 in the United States, who were the primary shoppers or the significant influencers of consumer products purchases in their households. The overall demographic composition of the respondents, based on age, gender, income and geographic dispersion, was mapped to the numbers published by the US Census Bureau to ensure a representative view of the average US consumer.
The survey was designed to capture consumers’ shopping behaviour, channel preferences and attitudes towards innovation, brand, convenience, health and wellness, and technology relating to purchasing consumer products.
Segmentation by attitudes may not only help break down stereotypes, but could also show commonalities across segments that do not warrant any differentiation from a marketing point of view. It can present a fresh and nuanced approach to companies in addressing strategic questions such as:
Our analysis of consumer responses revealed four distinct segments: Aspirationalists, Responsible Go-Getters, Pragmatists and Discerning Achievers. These segments are described in more detail in the infographic and figures 1 and 2.
The segments are derived by applying advanced statistical analysis (cluster analysis) to 75 attitude statements addressing consumers’ shopping behaviour, channel preferences and attitudes towards innovation, brand, convenience, health and wellness, and technology relating to purchasing consumer products. Interestingly, the segments we identified cut across generations, indicating that attitudes are not hardwired by generations. Consequently, even though each segment may be dominated by one or two age groups, we see presence of consumers across all age groups by virtue of similarity in their behaviour.
That said, the segmentation presented in this report is meant to be illustrative rather than definitive. Organisations may want to consider developing their own approach to segmenting customers according to relevant attitudes and behaviours to develop an in-depth understanding of their consumers.
Segment summaries emphasise each segment’s predominant characteristics. Figure 3 describes a few noteworthy attitudinal commonalities across segments.
In the light of how media can often portray different generations in stereotypical ways, we have identified eight commonly held myths in four key areas where consumer products companies may want to reconsider their marketing strategies, given our survey results and learnings from cross-generational segmentation. These common myths are organised around key themes of shopping behaviour, brand loyalty, brand engagement and brand growth.
Generation Z does not shop online the majority of the time. In fact, the mix of in-shop and online shopping sways in favour of shopping in physical stores for all age groups, including Generation Z, most of whom, as per survey results, report shopping in a physical shop for food and beverages (68 per cent of the time), household care products (58 per cent) and personal care items (51 per cent). The only category where they predominantly favour online channels is apparel and footwear. This may be especially unexpected from this generation that was born and brought up in the digital era.
Our nuanced consumer segmentation revealed that it is Aspirationalists who have the greatest propensity to shop online for consumer products. While this segment tends to comprise younger people, survey results showed that it also includes a sizable 28 per cent of like-minded older consumers. Aspirationalists then present a potentially more profitable target for online shopping than simply Generation Z consumers.
Simple generational analysis might suggest that Generation Z and millennials should be the primary targets for health-oriented products and innovations in this area would likely target them. The attitudinal consumer segmentation gives a slightly different account: Our survey results reveal that while Aspirationalists, a relatively young segment, tend to lead the way in actively avoiding products with preservatives, artificial sweeteners and other chemicals, they are very closely followed in their overall concern for health by Discerning Achievers, many of whom are significantly older.
Even as our survey results show that eight in 10 Aspirationalists actively seek organic products for consumption, Discerning Achievers lead other segments in perceiving themselves as health-conscious, ingredient-sensitive and “homemade”-ingredients-driven. They also give more importance to nutritional content and spend more on food and drink items than other segments, possibly because of their interest in healthy food options. These insights demonstrate that Discerning Achievers are playing a large role in driving the health-oriented food market.
Regardless of segment and income, our survey results found that consumers rate value as an important consideration, putting it immediately after quality and price. Indeed, consumers with moderate-to-high annual income consistently perceive themselves as being more price-conscious, deal-seeking and frugal than those earning less than US$50,000 annually.
With that perspective, our segmentation approach underlines how the concept of value can apply differently to each group of consumers. For instance, in the case of the affluent Discerning Achievers, who can and do spend more on consumer products, value typically lies in quality. For Pragmatists, value is generally all about low price.
Study results reveal that interest in brands is alive and well—over 85 per cent of the Aspirationalists, who tend to be younger than the other segments, believe the brands they buy say a lot about who they are, while 87 per cent report purchasing name brands. In key areas of health foods, nutrition and grooming products, we found that Aspirationalists—despite earning the lowest—prefer well-known name brands over shop brands, likely because they are averse to taking risks with these products. Ironically, it’s the Discerning Achievers and Pragmatists who were found to be less interested in brands, having grown to accept shop brands, except often in the case of apparel and footwear.
Just as “brands” seem alive and well, so too are traditional media channels of TV and Print. Our study results reveal that more Aspirationalists (83 per cent) enjoy watching advertisements on TV than Pragmatists (18 per cent) and Discerning Achievers (12 per cent). Further, when questioned about use of traditional advertisements and promotions, most Aspirationalists (89 per cent) and Responsible Go-Getters (69 per cent) claimed in the survey that newspaper and TV make them aware of products they want to buy. Remarkably, they have a similar attitude towards online and retail shop advertisements and promotions.
This seems to dispel another closely related commonly held notion that social media is the only way to reach younger generations. Despite the rapid rise and predominance of social media, survey results found that traditional media remains a popular channel to engage with younger consumers.
Our study results indicate that most consumers, age aside, have exposure to a minimum of one social media platform at least once in the day. Every day, over seven in 10 consumers in each segment engage on Facebook, while YouTube is the second most popular social-media destination. Discerning Achievers are found to be very involved with social media; they typically use it differently than younger segments.
With the cross-generational influence of social media established, let us see how social media is leveraged for engagement. Consumer segmentation points the way here: Aspirationalists and Responsible Go-Getters were found to use social media to both research product information and post feedback. They also often engage with brands on a deeper level by staying connected through online communities. Discerning Achievers and Pragmatists generally do not generate content on social media, but use social media to read reviews and product ratings before purchasing new products.
Though most of the Aspirationalists claim they do not have much time to bother with coupons or promotions, our survey results revealed that more than seven in 10 consumers across segments enjoy exploring how much money they can save by using coupons or loyalty cards. In our survey result, this proportion is, in fact, considerably higher for Aspirationalists and Responsible Go-Getters, the two segments predominantly composed of younger consumers.
Older Discerning Achievers with higher buying power potentially have the ability to drive brand growth in the immediate future. Thus, while younger Aspirationalists and Responsible Go-Getters may be more interested in innovation, it does not mean that the other segments are not worth targeting. In fact, in terms of interest in emerging technologies in general, Discerning Achievers were found to closely follow Aspirationalists and Responsible Go-Getters. Specifically, they exhibit a considerably high level of interest in innovations such as customised products and smart packaging. Thus, based on their behaviour and higher income levels, Discerning Achievers should be considered a viable target for innovation and brand growth.
Furthermore, Discerning Achievers typically assign high importance to quality across consumer products categories. This is often reflected in their shop choices as well. They tend to shop more than others in speciality food stores and a considerable proportion purchases apparel and footwear from boutique stores. Even in the luxury marketplace, as pointed out in the Deloitte study Global Powers of Luxury Goods 2017, the young are merely shaping the landscape and it’s ultimately the older, more affluent consumers that stand out with their greater spending impact.9
Marketing organisations can avoid the pitfalls of stereotypical marketing strategies by identifying the dominant segments that drive business results. Contrary to general belief, these segments are not merely defined by generation. The four attitude-based, cross-generational consumer segments we introduce in this report represent a more nuanced approach to profiling consumers. Analysis of eight pervasive myths appears to reveal not only untapped potential segments, but also glaring commonalities across cross-generational segments.
The new segments have potential implications for brand growth and companies can modify their marketing strategies accordingly to maximise results. This approach could potentially serve as an important enabler in meeting profitability goals and maintaining loyalty among dominant consumer segments. It potentially makes the case for expanding into new segments to foster innovation-driven income and brand growth, and achieving sales and income from consumer segments one wouldn’t approach based solely on generational marketing. Study results reveal that when deciding on a marketing strategy, there is scope for prioritisation, even among the attitudinal segments.
Responsible Go-Getters, primarily comprising millennials and Generation X, are the most valuable segment for consumer products companies. They generally exhibit attitudes that are considered balanced and responsible, be it general enthusiasm, purchasing behaviour, or awareness and usage of technology. They are an appealing target for marketing organisations, given Responsible Go-Getters’ above-average buying power and interest in seeking value. They are more likely to be brand loyal if they see value. Figure 4 illustrates the sheer size of the Responsible Go-Getter segment that amplifies the amount they spend on consumer products every year—it’s the highest by an impressive margin.
This insight might come as a surprise after the discussion on the attitudes and behaviours of the relatively younger Aspirationalists and the spending power of older Discerning Achievers. Study results indicate that it tends to be millennials with Aspirationalist attitudes that have garnered media and marketing attention. Marketing organisations are potentially missing a larger opportunity with millennials who are a part of the Responsible Go-Getters segment.
Discerning Achievers, dominated by baby boomers and Generation X, are a strong secondary target. On average, they are the most affluent group, spending the most on consumer products. Even though they are a smaller segment than Responsible Go-Getters, their buying power, coupled with their high expectations regarding quality and ability to actually purchase innovative products, suggests that they are a highly attractive target for marketing organisations.
The perception that baby boomers are not interested in innovation, technology, etc., is likely due to baby boomers who are Pragmatists and not due to those who are the more progressive Discerning Achievers, the untapped segment.
Our survey results indicate that the other two segments, Pragmatists and Aspirationalists, are close in terms of their average-to-low spend on consumer products, rendering them more challenging prospects for marketing organisations. What tends to separate Pragmatists from Aspirationalists is the reason for lower spend vis-à-vis age. Pragmatists, comprising primarily Generation X consumers, have felt the brunt of the economic downturn of 2009 during their prime earning years. Aspirationalists, comprising Generation Z adults, are in the early phase of their careers.
For now, due to the difference in their sizes, Pragmatists seem to have a slight edge in terms of marketing potential. As for the future, Aspirationalists could lead the way on innovation and technology, keeping growth prospects alive for consumer products companies, assuming their buying power catches up with their aspirations.
By developing a more refined approach to understanding consumers, marketing organisations can initiate more inclusive brand growth, likely driving profitability. Marketing strategies based on attitudes and shopping behaviour will likely be more appealing to consumers. Attitudinal segmentation can result in a more thoughtful targeting and can help develop unique innovative products that are more effective with customers. Consumer products marketing organisations would likely benefit by testing how the findings and implications of this study resonate with their brands and strategies by developing their own proprietary segmentation schemes. One place to begin is by considering questions related to understanding a brand’s current buyer segmentation and then defining potential target consumers in terms of both age cohorts and consumer attitudes.
No matter how complex your business questions, we have the capabilities and experience to deliver the answers you need to move forward. As the world’s largest consulting firm, we can help you take decisive action and achieve sustainable results.