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Society has a long-standing tradition of each generation thinking the other generations are foolish. The Greatest Generation thought that the long hair and wild music of The Beatles was surely a sign of the coming apocalypse. Baby Boomers and Gen X pointed to Justin Beiber’s popularity as a clear indication that young people had lost their ever-loving minds (perhaps forgetting that they too had teen idols). While different generations might not agree on music or fashion, there is consensus on one key motivator influencing purchase decisions: cost.
Yes Marketing recently released a study of 1,000 consumers that examines the unique habits, attitudes and preferences of 4 generations – Centennials, Millennials, Generation X, and Baby Boomers. According to the survey, three of the four generations ranked price as the most important motivator for brand loyalty. And price came in nearly tied with quality for the other. What is causing this thriftiness and how can brands succeed in an environment of cross-generational penny-pinching? Read on to learn how each generation got to be this price conscious and how smart brands are reacting.
Centennials (consumers under the age of 21) were the only generation to list price as their second most important motivator after quality (55% vs 57%, respectively). The older members of Generation Z remember the turmoil caused by The Great Recession – a sharp economic downturn that lasted from late 2007 to the beginning of 2010 - which impacted their attitudes and behaviors on spending and saving. Price consciousness prevails with this group, but to a slightly lesser degree than the other generations.
Generation Y (22 to 37 years old) is known as being extremely frugal and it is no wonder. They watched as their parents’ savings were decimated during The Great Recession. They entered the workforce burdened with student loans and often couldn’t find full-time employment or had to take lower-paying jobs for which they were overqualified. Many Millennials have been forced to live with their parents well after entering the workforce and more than 40% say they still receive financial help from their parents. They are waiting longer than previous generations to have kids, get married and buy homes. In fact, Millennials are such spend-thrifts that some are comparing them to their grandparents’ generation which was deeply influenced by The Great Depression.
Members of Generation X (ages 38 to 52) have experienced multiple recessions since entering the work force. From the “Dot-bomb” era to the Great Recession - which hit right as many Gen X-ers were reaching their best earning potential - significant dips in the economy have turned much of this generation into deal-seekers. According to Yes Marketing’s survey, 55% of Generation X listed price as a top driver of brand loyalty and 85% listed price as the driver of their most recent purchase.
The Great Recession was also rough for Baby Boomers (ages 53-71), many of whom lost much of their savings. With the recovery, some have seen their savings creep back up, but for many, getting burned so close to (or in the middle of) retirement has greatly impacted their spending habits. Baby Boomers are also more likely than other generations to have their adult children living with them or relying on them for financial assistance. In addition, many Baby Boomers are now retired and living on fixed income. With all of these factors driving value-seeking behaviors, it should come as no surprise that Boomers led the rest in the number of consumers who responded that price was the biggest driver of brand loyalty (62%).
Cross-generational price consciousness has led to some big changes for brands. An increased focus on cost has contributed to growth among value brands and affordable luxury brands. Cost consciousness is also the driver behind the growth of online retail and some of the difficulties brick and mortar retailers are experiencing. When asked about why they shop at Amazon all generations responded with price as the number one factor (an average of 74% across all generations).
One of the benefits for marketers is that this deal-hunting behavior is keeping their customers engaged. Yes Marketing’s consumer survey found that while many consumers had created marketing-only inboxes, those who set up these separate email accounts actually checked marketing emails more frequently. In addition, an increased focus on comparison shopping, coupon cutting (both physical and digital with the help of apps) has led to increased excitement about brand interactions in channels outside of email.
Brands that are able to appeal to cost-conscious customers will be rewarded in this era of heightened consumer thriftiness, so how are smart brands connecting with deal hunters and value-conscious consumers?
Promotions and discounts
Brands that influence deal-seekers have become smart about leveraging data to learn the habits of their customers and offer the right promotions on the right products and at the right time. For example, an online retailer may ping a customer when an item they have viewed is discounted or the retailer may offer a discount on an abandoned shopping cart item. The key for brands is to offer a well-timed promotion that each consumer will find uniquely appealing and doing so in the correct channel.
Loyalty programs and in-store credit card programs.
Loyalty programs that focus on discounts and rewards and in-store credit card programs that allow customers to save money on their purchases have been a key tool for brands to influence price conscious consumers.
Comparison-shopping has become the norm and businesses have beefed up their own mobile apps for delivering the very best deals. Target’s Cartwheel app is an example of a brand app that is laser-focused on appealing to cost-conscious consumers.
Private label brands
Companies have appealed to deal hunters through product strategies like expansion of private label offerings. For example, we currently see Amazon expanding their private label offering to everything from vitamin supplements to food and fashion in order to serve up good buys to their customers.
While the Great Recession is well behind us, it was a deep and enduring economic event that left an indelible mark on the psyche of the majority of buyers across multiple generations. With Millennials, Generation X, and Baby Boomers identifying price as the most important factor for brand loyalty and Centennials indicating that price and quality are nearly equally important in purchasing decisions, the price-conscious consumer is the new reality for brands. Those that focus their efforts on providing value, the right product assortments, and smart, data-driven promotions that are easy for customers to take advantage of, will succeed.
Download the full Yes Marketing report here: A Marketer’s Guide to Reach Each Consumer Generation