Targeting Younger Consumers: How to Increase AOV & Emerging Markets
New consumer groups are entering the market during a difficult time for spending. For the past decade, younger consumers have been buying goods in a landscape shaped by the 2008 financial crisis, and now the Covid-19 pandemic has hit wallets even further. So as a new generation of consumers enters the market, are they likely to favour cheaper alternatives over more established, high-end brands?
Generation Z Spends Carefully
Across all demographics, spending on luxury goods in 2020 is down. A forecast from consulting firm BCG predicts that it could take more than two years for sales of luxury goods to recover to pre-Covid levels.
Expensive brands may have a more challenging time attracting Gen Z consumers, as the cost of an item significantly informs spending decisions for them. A poll conducted by Business Insider found that 60% of Gen Z consumers said that price was the biggest factor when choosing which brands to buy from.
Jason Dorsey is a Gen Z consultant and researcher, and he believes that younger consumers are more likely to pick the option that gives them better value for money. “They don’t want to pay full price for anything,” he said in an interview with Business Insider. “They are fiscally pragmatic and very practical with their money, they are looking for value.”
However, Gen Z consumers are more likely to stay loyal to brands in the long run. A study from SheerID found that 2 in 3 Gen Z consumers will continue to buy from a brand that they like for a longer period of time. It might be tougher to entice them initially, but once a brand creates that consumer relationship, they can expect a high level of loyalty from this demographic.
Spending More For Brands That Care
A factor that may cause Gen Z customers to opt for higher-end branded goods over cheaper options is a brand’s ethos. Brand identity and commitment to sustainability are important considerations for this demographic if they’re thinking about spending a little bit more. A survey from Do Something Strategic found that 66% of 13-25 year olds had a better perception of a brand if they associate it with a social cause.
A study from McKinsey found that 70% of Gen Z consumers said that they try and purchase products that are from companies that they consider ethical. In the fashion industry in particular, the cost of ethical labour and sustainable materials can make products more expensive. So this could be one area where Gen Z customers are happy to spend more on branded goods…if marketed correctly.
Outdoor clothing brand Patagonia sought to develop customer loyalty via a campaign that told existing customers not to buy their new products. Instead, they encouraged them to send any products of theirs that were damaged from overuse back to their HQ for repair. Taking the idea a step further, they then posted advice on how customers can do some of the DIY repair themselves, rather than buying a new piece of clothing.
Campaigns like this demonstrates Patangonia’s confidence in the quality of their product as well as an understanding of their ecological impact, enticing Gen Z consumers to spend more on single items. Patagonia’s model, combined with the authentic tone of their marketing campaigns, is a good template for premium brands who are looking to attract Gen Z audiences.
New And Emerging Markets
A booming demographic with a taste for buying branded goods in larger numbers is the emerging Chinese consumer market. Although China has played an increasing role in global consumer spending for some time now, Chinese per-household disposable income is now rising to similar levels seen in neighbouring South Korea.
This could provide more expensive Western brands with an exciting new consumer to target. McKinsey found that China’s spending on luxury items will double before 2025, making up 40% of the global market.
To target this demographic effectively, brands should focus far more on in-store customer experience, as 49% of Chinese consumers say that suggestions from in-store staff have the biggest impact on their purchasing decisions. During and beyond the pandemic, this experience should be factored into the online cross-channel experience.
And a recent study from McKinsey found that targeting specific regions in China may be a better strategy than a one-size-fits-all approach. For example, locals in the city of Guangzhou mostly speak Cantonese, are locally born and enjoy spending more time at home with family. On the other hand, those living in the city of Shenzhen mostly speak Mandarin and tend to be mostly made up of migrants who spend more time alone.
Both of these cities have a GDP that is on par with some smaller European countries, so brands should target them in the same way that they would target entire countries elsewhere. This should be done by tailoring the content to individual regions and demographics within the city. This could help to significantly boost brand awareness, and ultimately profit. Deloitte found that 44% of Chinese consumers say that when choosing to buy a product, they care more about the brand itself than whether they have seen their favourite celebrity or influencer wearing or using it (36%).