The Customer Power of Millennials
Millennials want intimacy and collaboration with the companies that serve them. In this digital age, customer power has never been stronger.
Halfway through the second decade of the 21st Century, the Millennial generation is being sought after by companies to help develop products and services attuned to the rapidly changing consumer trends of the digital age.
This could be the era of ultimate consumer power. Companies are becoming more intimate with their customers, asking them not just for feedback on existing products and services, but to be involved in developing new ones. For example, GE is embedding customer intimacy and collaboration into its product development cycle.
Beth Comstock, GE’s marketing supremo, is encouraging her executives to become ‘explorers’. Her staff members are increasingly embedded with customers to test their satisfaction with existing products and their appetite for new technologies. The same marketing intelligence is now applied in R&D and product development to ensure that new technologies are not merely sophisticated and reliable, but also relevant.
In addition, customers are increasingly being asked to collaborate with companies to determine whether a product will make it to market. Senior executives from businesses as diverse as industrial products and services, consumer goods and telecoms, have identified that customer power is reshaping their markets as the digital revolution has paved the way for customer power to be stronger than ever. That power reflects the ease with which products, prices and services can be compared instantly in a virtual marketplace. Business leaders, fighting for every customer in a world of cut-throat competition, have begun to pledge ever greater levels of satisfaction. Within a few years, millennials will become the purchasing managers, financial controllers and CEOs determining what to order for their businesses.
In a survey conducted by Forbes earlier this year, more than 40 percent of millennials said they were interested in helping companies develop future products and services. “In our society, companies usually create products and hope that their target market will consume them,” the magazine reported, “when it comes to millennials, they want to be more involved with how products get created. Companies that enable them to be part of the product development process will be more successful.”
This trend is particularly evident in the automotive industry, where nearly all products are identical, with the exception of differing degrees of speed, passenger capacity, design and fuel efficiency. In early 2000, Chrysler asked children to design automobiles using video game technology, reckoning that their preferences could influence future designs of Jeeps, Dodge Rams and other Chrysler models. In an industry of long product cycles, where vehicle platforms last a decade or more, today’s video gamer on Grand Theft Auto could be tomorrow’s SUV driver.
Yet Chrysler may have missed the point. The ironic part of it all is that although millennials want cars to look different, they were not sure they wanted to own cars at all.
A study by the AAA Foundation for Traffic Safety in the U.S. found that from 2007-2011, the number of cars purchased by people age 18-34 fell almost 30 percent. Whilst this decline partly reflected the consumer downturn after the financial crisis, researchers believe that new devices, mainly smartphones, have replaced cars as the ‘must have’ for young people and that social media has reduced the need for individual mobility.
Carmakers are racing to adapt to these new trends, which threaten to change customer relationships dramatically.
Mark Fields, Chief Executive of Ford Motor Company, believes the auto industry is entering an era of mass experimentation, likely to be characterized by new models of transportation and mobility within the next 10 years. Speaking at the Consumer Electronics Show in Las Vegas earlier this year, Fields said: “We see a world where vehicles ‘talk’ to one another, drivers and vehicles communicate with the city infrastructure to relieve congestion and where people routinely share vehicles or multiple forms of transportation for their daily commute.”
Setting out 25 different experiments in which Ford is innovating for this new world, he said the company had to meet three basic criteria: “First, creating a better customer experience. Second, developing more flexible user-ship models for customers. And, third, connecting with every customer in a socially collaborative and rewarding way.”
The speed with which Ford and other manufacturers are making such changes reflects the priority – some might say anxiety – with which companies are trying to keep pace with their customers. This is especially true in the fast-moving consumer goods and retail sectors, where businesses are adjusted to the ‘limitless aisle,’ the online market-place where customers can search and purchase almost anything from anywhere.
Customer power in the retail sector is increasingly becoming a shared, local experience. Researchers have found that millennials tend to base their purchase decisions on recommendations and social network views of their friends and families. They review products and post pictures – the so-called ‘shelfie’ – of products before purchasing them, often seeking price comparisons for a better deal.
Retailers and suppliers are, in turn, using such data to adapt products much more closely to local consumption habits. The age of developing global products with vast economies of scale is giving way to localism where items are developed, marketed and priced according to local market conditions. This is having a major impact on the sales tactics for basic items that might appear under the same brand name around the world.
At Henkel, the German company behind products ranging from Persil to Loctite, CEO Kasper Rorsted told me: “Take Persil: in Western Europe or in the US, a consumer expects a number of things; one is cleanliness and the other is aroma. A piece of clothing is typically washed after being worn once. If you start going to Eastern Europe or the Middle East, a person is typically using his or her clothes three, four or five times. The primary objective of washing a piece of clothing is removing odour and making it clean because it is much dirtier. So we have to develop a different product for different markets.”
He added, “Take a washing machine, in Western Europe or the US, all the advertising is about how to make things shine. In Eastern Europe you load up your dishwasher with everything you have because you don’t care if it’s completely shiny. You care about whether all the stuff you put in, including your pots and pans get close to clean. So we are sorting out different problems according to different household trends around the world.”
In other words, customer power is driving the global-local strategies of companies that previously preferred a ‘one-size-fits-all’ strategy in markets around the world.
The trick for manufacturers and retailers is to appear responsive, locally relevant and digitally-smart without incurring such costs in the process that it undermines the economic viability, the basic margin that any product or service can command. In an era where customers are increasingly promiscuous – or less brand-loyal than their forebears – companies are required to build a degree of trust or must-have product capabilities that impact discretionary purchase decision-making.
This is not just impacting basic commodities like washing powder. It is also affecting areas such as technology and communications.
Customer intimacy and sovereignty is rapidly transforming the market, the devices and the networks used for all financial transactions, data consumption, entertainment and social interaction. The Internet economy, which embraces every aspect of digital communications, is expected to be worth $4.2 trillion by 2016, according to forecasts by BCG, as the number of connected users nears $3 billion. But whilst the overall market is becoming more valuable, the competitive forces and pricing pressures driven by customer trends means that content providers, network operators and device manufacturers are fighting aggressively to differentiate their product offerings.
Increasingly, customer service and anticipating customer preferences is being seen as the key point of distinction for companies facing such threats. In telecommunications, the threat is compounded by fears over data security, privacy and hacking. This, in turn, has prompted operators and manufacturers to place a premium on trust and reliability for their customers.
Interviewed for my recent business book, 2020 Vision, Augie Fabela, the founder and Chairman emeritus of Vimpelcom, the emerging markets mobile network operator, said: “Network operators need to become trusted partners of their customers. If your service provider has figured out a way to offer things that you want and need, without bombarding you with useless stuff that’s intrusive and violates privacy, then that has real value.”
“In this industry, you always talk about how to define different parts of the market-place. The ultimate place to be in the mobile market is to be a trusted adviser and lifestyle facilitator to individual customers. We must personalize what people want, with bespoke services. It will not be easy to get there, but that must be our aspiration and ambition: a bespoke provider to a segment of one, anticipating and meeting our customers’ needs. This will be the future of our industry.”
The Little Things
Across industries, the growing focus on customer trust, intimacy or sovereignty reveals an underlying vulnerability for business. Improving product reliability and ubiquitous technological advances means there are fewer genuine breakthroughs that confer competitive advantage. In a world of convergence, with less product or service differentiation, customer satisfaction can separate winners from losers.
The art of satisfying customers and better exceeding their expectations has always been a basic foundation of a strong business reputation, but such reputations are fragile in an information age when customers can easily switch from one provider to another, or when social media can influence market sentiment. Companies are focusing increasingly on the small incremental differences in their customer offerings. “The trick is to make customers feel special,” says the managing director of one famous consumer brand, which has formed a ‘special operations’ units to focus solely on personalized customer care. “It’s the little things that will make the difference. But unfortunately, as we grow, it’s easy to forget the little things.” He tells his staff: “Always look at things through the eyes of the customer and never underestimate the value of making people feel special.”
But players in every part of the supply chain, whether in a mining company or a clothing retailer, are now tending to treat each other as customers – trying to create the same sort of service differentiation that you might expect as an end-consumer.
The problem for many companies is how to marry this sense of premium, personalized, customer service with the sheer volume of demand – especially if your business deals in global markets, commoditized raw materials or business-to-business relationships. But players in every part of the supply chain, whether in a mining company or a clothing retailer, are now tending to treat each other as customers – trying to create the same sort of service differentiation that you might expect as an end-consumer. Companies that get this right tend to be able to charge a higher price for their products, which enables them to generate the cash-flow that can be reinvested in new innovations and which, in turn, can lift margins, credit ratings and stock prices. This virtuous circle includes an enhanced overall reputation, helping secure customer loyalty, which can stimulate discretionary purchase decisions.
With margins tight, technology and globalization intersecting, and small differentials in product offerings, corporate success will depend increasingly on putting customers first in every essential business decision. This is no longer a field reserved only for consumer businesses. It is the new mantra for manufacturers, natural resources groups, financial services and technology players. Without a strong and distinctive customer proposition, a company risks running a reputation deficit, which can quickly slide into a crisis.
To avoid that scenario, companies must become both more intimate with their customers by anticipating their every need and becoming more collaborative.
At GE, Beth Comstock sums up the opportunity and the risks. “This whole emphasis on customers must start with assembling relevant data and it ends with understanding how to take a new product to market. To me this brings together, in the company, this marriage of technology and marketing in a very profound way,” she says, “Without that, you can build a product that is quite brilliant. But if no one can access it or value it, who cares?”