To what extent is the consumer behaviour of Millennials’ different to that of previous generations in the area of Luxury goods? Kathryn Tiltman (13378154)

This project will analyse the consumer behavioural differences between the Millennial generation and the Baby Boomer generation with particular emphasis on the luxury goods market. The Decision Making Process model will be applied and critiqued using real-life luxury examples.

What is Consumer Behaviour

Consumer behaviour has been defined as “The study of consumers’ actions during searching for, purchasing, using, evaluating, and disposing of products and services that they expect will satisfy their needs”(Schiffman and Wisenblit, 2015).

This allows brands and marketers to appeal to specific segments through analysing typical behaviours. There are several consumer behaviour models that could be applied such as the Elaboration Likelihood Model, The Black Box Model, the Decision Making Process Model and the Instrumental Learning Model.

The Luxury Market

The consumer behaviour associated with the luxury goods market can be described as emotional and culturally specific. The sector is broad, ranging from premium FMCG’s brands which rely on a wide distribution structure and mass popularity, yet aspirational appeal such as L’Oreal, through to brands that "live of die by extreme exclusivity" (Warc, 2016), such as Bottega Veneta.

The relationship between consumers and luxury brands is evolving as the accessibility of such brands becomes increasingly easier. This makes finding an all-encompassing definition of luxury problematic. The notion of luxury has changed significantly over recent years, due to the increased accessibility of luxury goods.

“Ostentatious products fell out of favour ins the 1970s due rebellious previous decade, the 1990’s and the early part of the 21st century saw a resurgence in luxury goods” (Solomon, et al, 2015).
The Baby Boomers are the cohort born between 1946 and 1964 (Solomon et al, 2015). They are referred to as “Baby Boomers” due to the considerably higher birth rates than the previous generation (Antonides and Raaji, 1998). They were the largest generation in existence in the UK until recently, when they were surpassed by the Millennials (Fry, 2016). Their secure income has made them a marketing target by many brands (Duckett, 2015)
Millennials are defined as those born between 1977 and 1995 (Fromm and Garton, 2014), however literature opinion regarding these dates differs. They are the offspring of the Baby Boomer generation, and therefore had privileged childhoods, during a wealthy period of time This generation began their coming of age in 2008, which was coincidentally the year of the financial crisis. Therefore, the Millennials are now suffering from large student debts and having to contend with ever-increasing property rental prices. "Millennials are often poorer than their Baby Boomer parents" (Euromonitor, 2015).

Millennial Brand Case Study: Burberry

Burberry underwent a seven-year transformation from an underperforming, over-licensed, decentralised brand to one of the world's most successful global luxury brands. “Burberry realised that Millennials are more heavily influenced by peers than anything a fashion house might have to say” (David, 2014). Burberry also recognised the importance of customisation for Millennials, thus creating Burberry Bespoke, a design your own trench coat tool online.

Baby Boomers vs. Millennials: A Consumer Behavioural Comparison

The Consumer Behavioural model below, taken from Motherbaugh and Hawkins (2016), demonstrates the Decision Making Process. Consumers go through distinct buying phases when they purchase products (Tanner and Raymond, 2013).

Motherbaugh anf Hawkin (2016)

External influences of Baby Boomers and Millennials – A Comparison

A Different Era

The Baby Boomers were raised in an era of “extreme optimism, opportunity and progress”, with a “deep focus on personal fulfilment” (Schmidt, 2010). However, the Millennials were born into a far more pessimistic world. Despite this Millennials are the most diverse, most educated and the most cared for generation in history (Schmidt, 2010). However, the Baby Boomers benefit from financial stability and secure pensions.

Millennials are Digital Natives with the ability to adapt to new digital concepts quickly and easily.

Born Digital Vs Learn Digital

Now between 53-71 years of age, compared to the 22-37 year old Millennials, both these generation are active digitally. A major characteristic of Millennials is their high digital intake. They are digital natives with the ability to adapt to new digital concepts quickly and easily. It is often assumed that Baby Boomers were reluctant users of technology, however they are embracing it hesitantly. Recent studies have shown that Baby boomers spend more than 20 hours per week consuming online content, 10 hours more than the average Millennial (Morrison, 2015).

Content Consumption

The way in which the content is consumed is strikingly different between the two generations. Boomers prefer laptops and desktops, whereas Millennials are in favour of mobile devices. While both are comfortable browsing, researching and shopping online, Millennials are more likely to use their mobile devices to do so (Business Insider, 2015).

Online Influences

Their online influences also differ vastly. 82% of Millennials heavily rely on word-of mouth from friends and family, and social media and blogs. At 52% this is substantially lower for Baby Boomers, as they are more heavily influenced by retail websites, advertising and sales people (Business Insider, 2015)

Internal Influences of Baby Boomers and Millennials – A Comparison

Attitudes

The internal influences can range from perceptions to attitudes. Attitudes are particularly relevant when analysing the decision making process. Attitudes can be defined as “A learned tendency to respond to an object in a consistently favourable or unfavourable way” (Onkvisit and Shaw, 1994).

The Elaboration Likelihood Model is a more effective way of analysing attitudes.

Businesstopia.net

During a period of fast economic growth in the 70s and 80s, Boomers became career focused, were competitive with their peers and gained financial wealth as a result. Therefore, the baby boomers developed a respect of success, and used and continue to use status symbols such as luxury cars, watches and holidays to define their class (Hunter, 2012).

Application of Decision Making Process Model

Problem/Need Recognition

Problem recognition occurs when we experience a significant difference between our current state of affairs and some desired state of affairs. In some cases, marketers can create a problem for the consumer by raising the consumers ideal state through marketing efforts. In the case of luxury, opportunity recognition is rife as consumers are exposed to better quality products (Solomon, et al. 2015).

Millennials and Baby Boomers both fall victim to opportunity recognition of luxury goods, however this is encouraged by different sources. Millennials tend to develop opportunity recognition as a result of observational learning through their peers, celebrities and online influencers such as bloggers and YouTube content makers. However, Baby Boomers are likely to develop this need through conventional advertising such as magazines, television or brand websites.

Information Search

Problem recognition leads to information search. The nature of luxury products means in most cases, consumers abide by an extensive-problem solving process due to the price of the products, the lower frequency of purchases and the high involvement of the consumer (Solomon et al, 2016). Therefore, the information search is likely to be more thorough than habitual purchases.

Millennials are more likely to ask their peers for opinion look at the brands social media sites and read online reviews. A study by Goldman Sachs found that “When a brand uses social media, I like the brand more”- twice as more Millennials believe this statement than non-Millennials. Baby boomer however, are more likely to look at the brands websites and recall their past experiences. This is an example of instrumental conditioning.

Alternative Evaluation and Selection

At this stage, the consumer is ready to make a decision based on the information they gathered. For a Millennial, this is likely to be a long period of time of deliberation due to the high involvement of the purchase. A Baby Boomer may already have a favourite brand and the finances to support a more impulsive decision.

A study by Deloitte (2015) concluded that in luxury consumption, millennial are three times more likely to be driven by trend than older consumers. However, older generation such as the Baby Boomers are more likely to make purchasing decisions on impulse. This is likely to be a result of their stable income and comfortable lifestyle, and the ability to spend on themselves as opposed to their now adult children. Baby Boomers are therefore less motivated by price than Millennials and are more loyal to the styles and brands they like.

Outlet Selection and Purchase

Both Millennials and Baby Boomers enjoy making luxury purchases in store, however Millennials are more likely than Boomers to shop online.

Millennials are reluctant to use credit cards, and are more likely to save for a luxury product or use a financing option to purchase it. Baby Boomers are less reserved about using credit and enjoy a buy now, pay later mentality. The Baby boomer is likely to be purchasing a brand they’ve purchased before, with encouragement from conventional marketing activities. The Millennial is likely to be purchasing a brand that is on trend among peers, celebrities and influencers, and has shopped around for the best price.

Post-Purchase Processes

The review stage is very similar for both generations. Both will form some degree of cognitive dissonance due to the compromise each generation of consumer has to make (Bose and Sarker, 2012). Post –purchase dissonance may be caused in Millennials due to the high financial risk. Whereas, the reduced research by Baby Boomers may mean the product is not as anticipated.

Due to the high brand loyalty associated with Baby Boomers, it is likely that if they are pleased with their purchase, they will continue to make purchases with the same brand. Whereas, Millennial may use word-of mouth and social media to inform others of their thoughts regarding the product.

Critique of Decision Making Process Model

The Decision Making model assumes that the consumer, whether they be Millennial or Baby Boomers, go through each stage of the decision making process. In the case of luxury, the decision process is likely to be heavily dependent on income as opposed to the generation. The wealthier the consumer is, the less time will be spent during the information search stage. Impulsiveness will increase as involvement decreases.

Summary

There are evidently many differences between the consumer behaviour of Baby Boomers and Millennials, however the research has shown some surprising similarities. Baby boomers are not as digitally unaware as marketers and brands seem to assume. It is important to note that the Baby Boomer generation and the Millennial generation are huge groups, with the younger half using digital technology significantly differently to the older end of the generation. Therefore, generalising the generation can fail to produce a realistic idea of their consumer behaviour.

References

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Created By
Kathryn Tiltman
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Created with images by Hans - "load line monaco shopping" • STVIOD - "building harrods landmark" • shibainu - "BURBERRY" • Alexas_Fotos - "old phone 60s 70s" • Unsplash - "phone cell cell phone" • stux - "tv youtube hf 1" • Photo-Mix - "social media facebook twitter" • FirmBee - "office freelancer computer"

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