EPILOGUE
Tools, Techniques, Challenges, and Words of Advice
Every brand owner we have ever met has high aspirations. They all want their brand to be bigger and stronger, and to have more vitality. They want to have more power and establish themselves as fixtures in their consumers’ minds. Few of them want to have anything less than 100 percent of their consumers’ category requirements. However, very few achieve this, and even fewer hold on to it.
If you have read this book, you are one of the ambitious ones.
We will close this book with four steps that can help you get started. These are the four steps of the demand-centric growth approach.
This approach looks at how the dimensions of choice influence a customer’s final purchase decision. We isolate who the consumers are by age, income, gender, life stage, marital status, and presence of children by age. We probe how they feel emotionally and what their purchase motivations are. We understand how they behave, how often they purchase and use the product, where they buy it, and how engaged they are with the category. The resulting model is drawn from three dimensions mathematically: who they are, how they feel, and what they do. It opens up new ways to think about the business, the market, adjacent categories, and growth vectors.
The goal is to deliver an astounding improvement in your customers’ experience, to break down doors that create silos within companies, and to achieve a breakthrough in the technical, functional, and emotional aspects of your product or service. It is aimed at helping you answer some fundamental questions: Where do we fully bet? What resources will deliver victory? How do we anticipate a new and better world?
Before you begin the four-step process, you need to be ready and willing to engage. You need the humility to recognize that you may not have all the answers or the universal organizational desire to transform and elevate your brand and its performance. Not everyone has the courage of a Kevin Plank at Under Armour, the sports apparel company, or his audacity in turning football underclothing into a multibillion-dollar brand.
The telltale signs of trouble are declines in sales, losses in market share, squeezed gross margins, the fear of trying to pass along cost increases to customers, and, most important, an inability to crisply explain why and how you will grow and to resolutely pick a path to growth. Other signs you should watch out for include marketing double-talk when you ask questions, the absence of an institutional view of market segmentation, an innovation pipeline with no direction, and the inability of sales reps to succinctly explain what your brands stand for, how they are unique, and who your target audience is.
In our view, the first step is to do the right research to get the frame of reference right and to build a map of demand. The Boston Consulting Group begins here with something that we call MindDiscovery.1 We meet consumers in their homes or accompany them on shopping trips in order to get a rich understanding of their behavior. This provides the foundation for our next step, a full-blown quantitative model.
We aim to understand what the consumers’ true options are. We watch consumers buy, use, and repurchase products. We discover how they make decisions and hear their words describing those decisions. We use projective exercises that help consumers express and articulate things that are normally left unsaid. We look to understand what we call the benefit attributes that drive choice. These are 30 technical and 30 emotional attributes based on the language of the consumer. In the spirits business, for example, the most important technical attributes include “smooth,” “smoky,” and “light,” whereas the most important emotional attributes include “helps me impress others,” “makes me look cool,” and “it’s all about me.”
Once you have this information, you can begin to develop, on the basis of customer segmentation, early hypotheses about what causes different people to buy different things. You can begin to understand how one individual can actually be buying for several different objectives and in several different circumstances. It is very rare, indeed, for individuals to buy one product for all their needs.
With the knowledge gained through our MindDiscovery sessions, we then launch the BCG demand spaces survey. This is a questionnaire with an expansive frame of reference. As we saw in Chapter 3, we defined Frito-Lay’s market as “macro snacks” rather than the narrower “salty snack” market. To get clear findings, we ask consumers to rank and evaluate relevant brands and relevant emotional, functional, and technical attributes. We ask them to compare one brand against another brand—in what we call a pairwise comparison—so that we can understand the drivers of relative rank. We ask them about their last trip and their last purchase or consumption occasion.
In any survey, sample size is a critical element. For our survey, we target a minimum of 300 users for each segment and demand space. For a category “demand map,” the total sample can quickly rise to more than 10,000 users.
A demand-space map is a mathematical representation of all the users’ answers, providing the projected space, sizing, needs, and decision criteria. We generate heat maps so that we can match brands with particular demand spaces. We then take the time to digest the findings and ask many questions. Discussion, debate, and internalization are the critical next steps.
The purpose of the demand-space map is to define the specific set of emotional and functional benefits a brand requires in order to win a customer. It forces choices on companies. No longer does one size fit all. No longer can a brand be positioned as being equally valuable across segments. It pushes the company to come to conclusions: What spaces are we targeting? What are we saying and claiming? What is the substantive backup for what we believe? What will it take to win?
For many executives, a close understanding of the markets is a revolution of revelation. With a demand-space map, we can describe the consumer market and the relative position of different brands. We can explain patterns of winners and losers. This is not an academic exercise. It is about bringing clarity to a complex world, to a market where consumers make perplexing choices across categories to satisfy their needs and demands.
As Frito-Lay and Hilton Worldwide found, this is a broadening exercise that allows companies to compete outside their traditional channels, categories, and price points. It sets the foundation for strategy and the creation of a commercial development plan. We are able to demonstrate that the brands that outperform on the attributes that really matter in any given demand space are the ones with a disproportionate share. We have the data to prove this. It’s not a conceptual consumer model. More than this, we can predict how big a share of a demand space you can win if you have the right mix of emotional and functional benefits that satisfy the attributes that matter. As such, we offer a road map for growth.
Once you have created a demand-space map—the singular focus of the first step—you need to set the strategic direction. This is the second step. We help you determine where your brand should play—in which demand space. We provide a supporting rationale that is based on the attractiveness of the demand space and your brand’s economic “right to win.”
For a company with a portfolio of brands, this step helps you identify independencies and forces you to make trade-offs. The goal is to maximize the position of each of your brands, minimize any overlap, and increase the probability of winning. This is a step that requires backbone and perseverance. Few companies make the hard choices. They say that they want to “distort” investment in their portfolio, so that every dollar goes toward the best brands with the best chance of winning in a particular demand space, but they often don’t have the controls or the will to say no to hungry, ambitious brand managers. It is like choosing among your children to decide which of them will get extra nourishment and which will need to survive on the streets.
During this strategic review, we help you determine where you should place your investment bets, identifying which brands are best suited to win and which are most responsive to investment. We then turn this analysis into a business case; afterward, you know that you have to “spend this to get that.”
For this to succeed, you need buy-in from your leaders. So an important part of the strategic review is building alignment, which is a foundational basis of the commercial strategy. Brand leaders are forced to address the realities of their business, their brands, the consumer landscape, and changes in consumer demand. They are forced to make the calls that are often avoided. This process creates friction—but friction that is ultimately healthy. It is a liberating battle, leading to investment decisions that are made with clear logic and a market foundation.
The third step is to create an integrated commercial plan. That means developing each of your offerings so that it can be the undisputed winner in a target demand space. This is a cross-functional process that embraces product development, packaging, shelving, pricing, and promotion, along with message development, store operations, delivery, and even employee engagement. We help you build and unify your plans for communication, innovation, and activation (pricing, in-store, store design, go-to-market) so that they are all focused on delivering the core benefits of a particular demand space. Each is to be in sync with the core drivers of choice. Communication is an art, and it requires the science of demand spaces to match the creativity of breakthrough message development.
The integration process calls for the various cross-functional experts to engage with one another. They need to share a common understanding of the demand spaces and the requisites for success. The process triggers a shift toward a common goal, away from a situation in which many well-intentioned people dispersed across the company do what they believe to be right for the business. It unleashes the power of mutual reinforcement—the true value of collaboration to win in the marketplace.
The final step is the encore. Do it again. Lay the foundation for a longitudinal understanding of the market. Use the second year to fine-tune your market understanding and to change the game. Stay vigilant; make sure that old bad habits do not creep back. Stick to what the facts are telling you. Track them and modify outdated data sources that are not aligned. Measure progress against goals. Focus on the parts of the change program that are falling behind schedule. Be quick to applaud your successes—they need to have adequate internal understanding and appreciation. Use the successes to convert more champions.
A culture change requires a broad organizational understanding of the process—how the map was generated, how opportunities were teased out, how priorities were ranked, what the biggest wins have been, why there have been calculated bets that did not pay off, and how the careers of the champions have accelerated. You need to communicate relentlessly, consistently, and broadly. People will give lip service to the changes and then attempt to carry on as before, shoehorning in their prior ideas and using the new strategy as their justification.
But remember, in the end, the consumer gets to decide, and there is no place to hide from the stark fact of progress or inertia.
A demand-centric growth approach is a story with many chapters of success. The objective is to have loyal consumers, apostles for your brand, and testimonial reviews explaining your fanatical attention to the details of your consumers’ hopes and desires. Enduring success will often require adapting your business model to use new partners, new technology, new product designs, and new venues. We urge you to bring passion and humanity to the front line of your business. We urge you to use the demand-centric growth tool to break new ground, to reimagine a better future, and to map your growth strategy with confidence and a foundation of fact.
Headline: Brand Advocacy Index: A Tool to Help You Track Progress, Provide an Early Alert on Issues, and Predict Growth
Brands can move up and down in consumers’ minds. They have momentum driven by emotional engagement, by recent innovation, and by reinvestment. Every successful brand prompts competition. Competitors enter your category with your wake as a marker. They will research your costs, your investment, and all the dimensions of your power. They will research your weaknesses, too. If you let them, they will exploit the cracks in your defenses.
To keep this from happening, you should continuously track the mood of the consumer. BCG’s Brand Advocacy Index tracks the advocates and—this is important—the critics of a brand. For example, Apple is not only the world’s favorite brand, but also one of the world’s least favorite brands. In other words, it has large numbers of advocates and large numbers of critics. That fact raises red flags concerning Apple’s future value.2
With the Brand Advocacy Index, you can uncover the real story behind a brand’s strengths and weaknesses.
How does it do this? It asks about actual behavior rather than intention. This is because what people say they will do often differs from what they actually do. Also, it puts the questions to noncustomers as well as customers—that is, to everyone who could be talking about the brand.
In January 2015, as Apple prepared to announce world-record profits of $18 billion for the last quarter of 2014,3 we surveyed U.S. consumers about the Apple iPhone. We asked them to pick one from the following list:
I’ve recommended the iPhone spontaneously (without being asked).
I’ve recommended the iPhone when asked about it.
I haven’t recommended the iPhone, nor criticized it.
I’ve criticized the iPhone when asked about it.
I’ve criticized the iPhone spontaneously (without being asked).
We found some powerful responses. Some 82 percent of customers recommended the iPhone; 46 percent were spontaneous advocates, and 36 percent were prompted advocates. But we also detected some dissatisfaction. Some 4 percent of customers were critics. This may not sound like much, but Samsung, Apple’s great rival, had fewer critics. Also, it is important to remember that the voices of critics are twice as loud as the voices of advocates. We reflect this in the weighting we give to critics: a spontaneous advocate is given a score of +1; a spontaneous critic is given a score of −2.4
Once we knew how many advocates and critics Apple had, we probed further to find out why these people recommended or criticized the iPhone. We found out that the iPhone was regarded as above average in terms of its design, technical features, brand identification, brand innovation, compatibility with applications and software products, and user-friendliness. But it was regarded as below average in terms of its short battery life and value for money.
Drilling further down, we established what types of customers liked it and what types of customers still needed to be convinced of its merits. Apple’s core strength is among women age 35 and older who earn more than $75,000. The iPhone is weaker among younger demographics and those with an income under $75,000. The iPhone is one of the strongest product brands in history. However, like all cell phones, it will ride a wave of success, and a time will probably come when a better, less expensive product with more features comes to market. At that point, price premiums will decline, phone company subsidies will erode, and the profits of its parent will come under pressure. Only powerful incremental improvements will sustain its market share, its price premiums, and the company’s market value.5
The Brand Advocacy survey helps you identify not only the advocates and critics of your brand, but also your brand’s areas of strength and weakness. You can understand whom you are connecting with and how you are connecting with them—or aren’t, as the case may be. You can develop concrete actions for improving your advocacy score.
And if you can improve your advocacy score, you will certainly drive growth. Our research shows definitively that brands with high levels of advocacy significantly outperform heavily criticized companies. In the sample of brands we studied, we found that the average difference between the top-line growth of the highest- and lowest-scoring brands was 27 percentage points.
Positive advocacy is more common for “aspirational” categories, where consumers associate a purchase with a desire to improve their social standing. Also, it is much more common with very visible purchases and purchases that involve significant amounts of money or time. People are much more likely to have conversations with friends and colleagues about a car, a prominent purchase on which they spend a large percentage of their income and, in many cases, a lot of time researching.
By contrast, negative advocacy tends to be more common in service businesses, such as retail banking and mobile telecommunications. Service-oriented brands find it much more challenging to maintain a consistent customer experience than product-oriented brands. Every customer touchpoint has the potential to create a negative impression.
We have a database of more than 1,000 brands from 35 industries in 30 markets around the world. Our pool of consumers exceeds 1.5 million. In other words, we have compiled a Brand Advocacy score for the world’s leading brands. This is available online at the BCG website.
Today’s Apostles: A Snapshot of the Five Major Consumer Groups in the United States
Anyone can be an apostle. It’s not about how affluent you are; it’s about how influential you are. What’s important is your network, not your net worth.
As part of our consumer work, we divide the population into different segments, each of which can contain apostles for your company. It is worth getting to know them and getting to understand them. These segments are defined by aspiration, appetite, and aperture.
At the top of the pyramid are the affluent, educated, and upwardly mobile. In the United States, they constitute 10 percent of households, have big dreams and fewer constraints, and control more than 20 percent of spending. But many consumers have been forced to live by the budget books. Even as the world pulls out of recession, they remain insecure about the future. They feel unprotected from global forces.
In the United States, we have identified five distinct, and distinctive, consumer segments:
1. Rich, happy, and balanced. These are couples or families who are mostly satisfied with their life today and who are focused on maintaining their lifestyle and enjoying themselves during retirement. They aspire to see the world, spend time with their loved ones, and help their kids and grandkids with homes, college, and other expenses.
2. So cheap, shoes squeak. These are consumers who are pleased with their position in life, but who are concerned about the direction of the country and pessimistic about what the future holds. They want to be sure that they have the savings to retire without burdening others and to make their frugal dreams—updating their homes, going on a cruise, buying a car—come true.
3. Rocket in the pocket. These consumers are young and full of hope and expectations for the future. They are living comfortably now, and they believe that life will only get better. They have big dreams, from world travel to luxury cars, as well as more practical desires such as paying off student debts, finding love, and starting a family. They want it all.
4. Families under siege. These consumers are struggling to make ends meet. Their biggest worries are financial. But, despite this, these families have love in their lives and optimism that life will get better for them and for the next generation. They dream of a future in which they can enjoy time with their family without worrying about money, bills, and debt.
5. Weight of the world. These consumers are single parents who are having difficulty providing financial stability for their children, but who are determined to set them on the right path. They are very dissatisfied with their lives today, but they hope that they can find love, deliver opportunity to their children, and one day be able to enjoy a home of their own and financial success.
Let’s now look at each of these consumer segments in greater detail.
Rich, Happy, and Balanced
These consumers are in the best financial position. Not surprisingly, they are more positive than the average American. They are more satisfied with their life, and their expectations for love, happiness, and money are exceeded at higher rates. Only 14 percent are financially insecure, and none of them—zero percent—face financial trouble.
They save at a higher rate than the average U.S. consumer: 15 percent versus 6 percent for all Americans. The 15 percent savings rate is the magic number. If this is maintained over the course of a career and invested prudently, it provides for a constant real retirement income. Since they have a financial cushion, fewer of these consumers are anxious about the future: 53 percent versus 60 percent for all Americans. Their biggest fears relate to financial stability, personal health, and the country’s ability to overcome economic, diplomatic, and political challenges.
These consumers value time with their family and their spouse, the chance to travel, and the ability to relax and enjoy themselves. Their vision of a successful retirement includes a long, healthy life; the freedom to enjoy retirement without stress; and the opportunity to go on special trips with loved ones (for instance, to a Disney theme park, a great city such as Rome, or one country on each continent). Also, some of them are focused on the happiness or success of their children, maintaining relationships with their spouse, or the general betterment of society.
Most of the purchases on this segment’s wish lists are connected with enjoying retirement or helping their loved ones. All the time, they are conscious of balancing their desire to buy luxury items with the need to secure funds for retirement. Vacations and cars are on their lists, and a minority would like to make more indulgent purchases such as vacation homes or boats. Some also want to spend their money on their kids’ or grandkids’ education or other practical expenses like mortgages.
These consumers believe that their lives will continue to be rosy, although some of them mention fear of social unrest and failing health. Given all their advantages, it is perhaps surprising that they are no more or less optimistic than the U.S. population overall—the proportion who believe that their life will get better in the next 10 years is the same as for the average American: 68 percent. Likewise, the proportion that says that the next generation will have a better life is the same, too: 24 percent.
So Cheap, Shoes Squeak
These consumers have more stability in their lives and more savings than most Americans, but they are no happier or more optimistic because of this. They are more satisfied with their financial situation (41 percent versus 14 percent), comfort (41 percent versus 26 percent), and success (37 percent versus 18 percent) than the average American, but when it comes to happiness (32 percent versus 31 percent) or love (40 percent versus 38 percent), they are no more satisfied.
Despite their stable financial situation, job security, and low anxiety about the future (41 percent versus 60 percent), these consumers don’t believe that the next generation will have a better life (only 11 percent think it will versus 24 percent for the United States as a whole). Also, many of them don’t think their own lives will be better in 10 years’ time (52 percent versus 68 percent for the United States). In fact, many of them take an extremely pessimistic view of the social and political situation in the United States, with some 81 percent thinking that an economic or political global conflict will emerge in the near future.
Perhaps preparing for the worst, this group of consumers saves at a much higher rate than U.S. consumers on average: more than 20 percent versus 6 percent for all Americans. They want to have enough money to live on during retirement and enough for emergencies and for helping their kids and grandkids. They are even thrifty when it comes to their wish lists. Most of the purchases they dream about are very practical—topping their lists are spending on vacations and travel, often to very attainable destinations; real estate; and home repairs or investments. Asked what they would do with extra income, they respond by saying that they wouldn’t spend it on apparel, shoes, food and beverages, or electronics—in contrast to most American consumers. Instead, they dream of a long retirement with continued financial stability and the success and happiness of their children and their loved ones.
Rocket in the Pocket
These young consumers are living comfortably today, but they have big aspirations for tomorrow. They feel more comfortable than their fellow Americans (52 percent versus 26 percent) and happier, too (37 percent versus 31 percent). Very few of them feel insecure about their job (17 percent versus 22 percent) or their finances (33 percent versus 51 percent), although many long for a future without the burden of student loans to repay.
If they are content with today, they are even more content with their prospects for the future: they hope to find love, start families, and see the world. Their professional hopes are anchored in successful jobs with a good income, but meaning and fulfillment are important, too. They want to do more than just “make it.” Their aspirations are to succeed in every aspect of life. They desire a meaningful career, the ability to have a positive impact on society at large, and the opportunity to start a family.
Rocket consumers save 5 percent of their income and spend 20 percent on paying back loans. The remainder is used to treat themselves to nice accommodations, dining out, and travel (34 percent, 7 percent, and 5 percent of current spending, respectively). International travel is more than a hope for these consumers—it is an expectation. When they are no longer paying back their loans, they want to spend their money on an experience or a luxury indulgence, with only a minority looking to purchase homes or cars. Also, these consumers mentioned upgrading their wardrobes, taking long trips with their loved ones, and sometimes treating themselves to something like season tickets for their favorite team.
With so much to look forward to, these consumers are very optimistic about the future, both for themselves and for society at large. Some 88 percent believe that they will be earning more in 10 years, and 38 percent believe that the generation to come will live better (versus 24 percent for the average American). Their hopes for the future center on continued success at work and building a fulfilling home life. They do not share the sense of helplessness that some consumers feel about climate change or the U.S. economy.
Families Under Siege
These consumers are striving for the American Dream—a house, a car, a happy family, and no debt. But it all feels out of reach. Their concern and stress over money permeate their thoughts, despite their having a good family life at home. Even with an average annual household income of $86,000, the vast majority of these families feel more financially insecure than the average American (70 percent versus 51 percent). Their average savings rate is below that for the average American (only 2 percent versus 6 percent). They struggle with debt, probably linked to the financial crisis, and having a large family to provide for (with an average of 2.5 children) may be at the root of these monetary struggles. Their top priority is achieving financial security by paying off their mortgages and credit card debt.
But despite their financial difficulties, they are relatively satisfied with their family relationships: 53 percent are satisfied with the love in their life (versus 38 percent for the average American). Only 23 percent say that they are unhappy. In the next 10 years, 70 percent believe they will earn more income (versus 60 percent), and nearly 80 percent believe that their lives will be better (versus 69 percent). But only 16 percent believe that the economy has bottomed out (versus 27 percent), and only 10 percent believe that the next generation will live a better life than their own (versus 24 percent). Although these families are hopeful about their own lives, their feelings about the direction of the country have been jaded by their struggles.
Weight of the World
These consumers are very dissatisfied with their current lives because of their financial struggles and their lack of a significant other. With an average household income of just $37,000 and an average of 2.1 children to take care of, these consumers struggle from day to day to make ends meet. This financial insecurity explains their perilously low average savings rate of just 1 percent (versus 6 percent). Across nearly all categories, they are more dissatisfied with their lot in life than the average American. They have high levels of dissatisfaction with love (56 percent versus 30 percent), stress (65 percent versus 46 percent), and happiness (44 percent versus 26 percent).
Along with their financial difficulties, their lack of a significant other to share their life with explains much of the unhappiness and dissatisfaction among this segment. These single parents hope that their children will learn from their mistakes, attend college, and live the stable life that they themselves haven’t been able to achieve. Their purchase wish lists reflect their desire to achieve stability and provide for their children. Clearing debts and owning a home are their top goals. Providing their children with basic needs such as clothing and shoes, as well as money for education, is also important.
Although they don’t have the money, many of the people in this group expressed a desire to get away from the stress and go on vacation. And, remarkably, despite the dire straits in which they find themselves, these consumers are optimistic about the future. They believe that in 10 years, their lives will be better and they will be earning more.
Meet the Millennials: The Next Generation of Apostle Consumers
Consumers between the ages of 24 and 35—the millennials—will make or break your brand. They are setting the tone for all of us. They are determining what language we use, what styles are “in,” and what is cool and what is not. They are heavily influencing what, where, and why we’re purchasing. Their aspirations and decisions are emulated by their friends and family members of all ages. This vital generation is beginning to hold sway over the fortunes of the world’s most successful brands.
To become and remain apostle brands, companies need to understand how these consumers influence others, how they are activated, and how they think. The best companies have already learned to listen to millennial consumers. They teach their salespeople to collect information on “unstocked” items; to systematically record why an item is being considered, returned, or rejected; and to observe and report facts about fit, try-on rates, payment choice, the time spent from browsing to making a purchase, and the shopping bags of competitors.
Millennials go to college. They graduate with degrees in soft subjects, not the hard STEM (science, technology, engineering, and math) subjects. They take a first job, and then they try to grow up. They become consumers and brand connoisseurs. Their consumption is largely food and beverages away from home, clothing, rent, utilities, electronics, some furniture, and travel. In our quantitative research, they say that they eat out so often because they want to treat themselves, celebrate special occasions, and gather with friends and family, and—most important—they have neither the time to prepare and eat at home nor “the ability to prepare the same food” as what they eat when they’re out.
Their readiness to shop frequently, experiment, and engage with brands makes them ideal customers and advocates for their favorite choices. They can quickly fill a new restaurant’s seats and empty out an old-time favorite. This same behavior is true in other sectors, too—apparel, vehicles, entertainment, leisure time, vacations, and home.
If they represent an opportunity, they also represent a huge challenge. They buy and neglect products. They cycle through brands. They are highly influenced by peer recommendations. Also, they are hard to reach: they are always on the go; they are not home birds; and they do not consume much conventional media.
But you should go out of your way to meet them. They are too important for you to ignore. In the course of our work, we have met hundreds of millennials. In the final section of Rocket, we present our encounters with three of them: Mark, Andrea, and Erik.
Millennial Number 1: Mark
When we were looking for millennial consumers to talk with, we had some very specific requirements. They needed to be employed, less than 30 years of age, middle income, articulate, and willing to tell their whole life story (in exchange for a modest honorarium). Also, they needed to be willing to fill out an extensive questionnaire and to log their purchases for the previous month. Over the last 30 years, we have done thousands of interviews of this kind. Consumers love to talk. They enjoy sharing their tales. But although most of what they say is truthful, they have a tendency to exaggerate both the good and the bad. A qualitative interview, balanced by related quantitative research, really gets to the heart of the matter.
We met Mark at the food court of a Paramus, New Jersey, mall less than an hour from Manhattan. We told him, “We’re buying!” He was happy about that. The mall is midscale, with a JCPenney, a Lord & Taylor, a Macy’s, a Neiman Marcus, and a Nordstrom. There are 281 other retail locations in the mall. You can purchase food and beverages there at 123 different outlets.
Mark chose McDonald’s and, like a reflex, ordered a number one Big Mac meal. We ordered a grilled chicken salad. Lunch for two was just $12. Mark ate the meal according to his routine. He devoured the fries—which he thinks are “the best fries in the world.” He then ate the sandwich slowly, taking eight bites to finish “two all-beef patties, special sauce, lettuce, cheese, pickles, onions—on a sesame seed bun.” Mark says he’s been eating the sandwich at McDonald’s since he graduated from Happy Meals some 18 years ago.
Mark is a good-looking young man: 25 years old, just under six feet tall, with curly brown hair and a neat appearance. He has a stubble beard instead of being clean-shaven. He is part of the reason why blade salespeople at Gillette are in a state of panicked frenzy. Mark and his peers think that a clean shave is for their fathers.
Mark is moderately fit—his youth is his advantage. He exercises three times a week—two three-mile jogs and two hours of basketball every Sunday morning with a local twentysomething league. He played basketball in high school, but he was second string. He never tried out for the team at his state university. He wears a Jawbone fitness band that he tells us is “a conversation piece and a reminder.” He graduated from college with $25,000 in student loans, and is paying them off at the rate of $225 a month. He does not resent the payments.
Mark is now in his first “real” job. “I’ve never had trouble getting a job,” he tells us. “People like me are in demand. I’m industrious, curious, hardworking,” he continues, somewhat immodestly.
As an entry-level salesman for a food company, Mark drives a company car. He is making about $45,000 a year and receives (and takes) three weeks of vacation per year: “I take every day I can.” Recent trips include a “singles” cruise, a lazy Mexico beach vacation, and a week in Los Angeles. He has the potential for a $5,000 bonus (but he doesn’t think he can count on it). Work is not quite what he expected. “Too much routine. Too much paperwork. Lots of hierarchy. I’m with customers 10 percent of the time. I am the bottom of the totem pole.” He speaks with a touch of a New Jersey accent. His parents were blue collar.
Every week, Mark has to visit stores where his product is sold. He is aware of prices and values. He has an insider’s view of the motivations of retailers and the role of merchandising in influencing consumer purchases. He knows how much his company pays for an end-of-aisle display, a temporary price reduction, and a space in the retailer’s ads.
Mark lives in a suburb of New Jersey about 14 miles from Manhattan with three guys from college. His rent is $865 a month—his single biggest expense. “Too much!” he says. “But I want to live in a cool neighborhood in a cool building.” He has his own bedroom and shares a bath with one of his friends. He spends every nickel he makes. He has only minimal savings; he keeps a $500 balance in his checking account and contributes the matching amount to his retirement account. He says that he can’t really think 40 years out and he believes that his earnings will grow dramatically. He has heard that a district manager at his company makes $200,000 and that the higher-ups make a lot more than that.
Mark is a big discretionary spender, allocating about $1,250 per month—or $15,000 per year—to use any way he wants (making him a powerhouse compared to married couples with children who are scrimping to make ends meet or an older couple saving for retirement). “I’m living large,” he tells us proudly. “When I’m older, I’ll make more money, and then I’ll save. When I am married, I’m sure my wife will have me on a budget.”
Mark makes a clear separation between his buddies and his girlfriends. He is generally “sleep deprived,” although he will sleep until noon on weekends. He goes out after work three nights a week, but he sets himself a curfew. “I have a 1 a.m. rule on work nights,” he reveals. But he needs a pick-me-up the following morning: “It means Red Bull and coffee the next day.” Typically, he will see a movie or go to a bar or a club with his friends. He talks to a lot of women, but he rarely goes on a date. “Sex is easy. Relationships require a lot of time and money. I don’t have either right now,” he explains.
When it comes to buying for himself, Mark has a certain number of favorite brands. He chooses things that are visible to the world; clothing, athletic equipment, and electronics are top-priority categories. He has a strong preference for lifestyle brands: Nike, Under Armour, Apple, Sam Adams beer, Grey Goose vodka. He says that someday he’d love to drive a BMW or an Audi.
Mark grew up with an Apple computer—it was cool and sleek. When the iPod became available, he suddenly had an unlimited quantity and variety of music. He traded with his friends, broke the code to “free” music, and always had “buds” in his ears. To this day, he remains loyal to Apple, and he has an iPhone 5c and a full armament of apps.
Although he’s constantly trying out new places, Mark’s fast food “go to’s” include Five Guys and Chipotle. Five Guys has a “great” burger made exactly the way he wants it—loaded with “everything.” Chipotle is his fill-me-up meal.
The burrito he likes best is made with a flour tortilla, cilantro rice, adobo-marinated chicken with honey, garlic, black pepper, guacamole, salsa, cheese, and sour cream. He explains that Chipotle chicken has no added hormones and that the chickens are not “factory animals.” By our calculation, when using the company’s website, this meal without chips and salsa is a whopping 1,125 calories, with 57 grams of fat, 2,280 milligrams of salt, and 126 grams of carbohydrates.6 It has more than 55 percent of the recommended daily calories, nearly three times the recommended fat, and a day’s worth of salt. On different days, Mark will guide his group of friends and coworkers to one fast food place or the other, depending on his mood and taste at the moment.
Neither Chipotle nor Five Guys is in the mall. They have a “locational disadvantage”—our term for retailers that are in build-out mode and do not have a full network of locations. If they are to become apostle brands, they will need to increase their presence. That’s because apostle brands operate under rules of ubiquity; this entails a race to prominence and visibility in the top 300 malls for apparel retailers; a 3,000-plus store network for a national restaurant chain; a near-100 percent distribution in the nation’s grocery stores for a premium food product; and a richly capitalized, high-velocity network of at least 500 dealers to sell cars. Mark commented that McDonald’s is a safe choice. “Everyone can get something,” he said, pointing to my salad.
Mark almost never cooks. He tries to go to Whole Foods for lunch or dinner, but rationalizes that often he “doesn’t have the time.” Mark eats a lot of ethnic food, including cheap Indian, Vietnamese, Thai, and Americanized Mexican. He visits restaurants with a wide range of price points, from Subway and McDonald’s to Starbucks and an occasional white-tablecloth restaurant. “It depends on who I am with and what they want.”
His clothing preferences include Urban Outfitters, North Face, Banana Republic, and Nordstrom when Nordstrom is having its biannual men’s sale. He wears a Tag Heuer stainless steel watch that he received as a graduation gift, but only on big dates. “Why do you need a watch,” he asks us, “when you have a phone?” He broadly rejects his father’s and mother’s favorite brands. “They are conservative and older,” he says.
Mark has a shaded view on the future: he believes that the world needs to fight pollution and global warming, protect U.S. security, and avoid global conflict.
Indeed, Mark has a deep-seated belief in social responsibility. He tells us that “we owe it to leave the world better, less polluted, with more opportunity.” In college, he is proud that he led the campus effort to reduce cafeteria waste, driving total dining garbage down by nearly half by advocating recycling and composting. These days, he reads labels and studies menus carefully. We have a very active discussion about chickens. He has seen a television show about chickens that never see daylight, are genetically distorted to produce more white meat, and live sad 14-week lives. “If these chickens could talk,” he says, “they would tell me, ‘Find another way.’”
Mark also seems sensitive about how the companies behind his favorite brands treat their employees. He tells us that he “knows” which retailers are paying a fair wage and treating their employees decently—and which ones aren’t. He is willing to pay somewhat more for products from what we call good companies—the ones that manage their supply chains and the ones that pay above minimum wage. He likes the attention his generation is getting. “We are concerned; we are caring; we want more than just money,” he says. “If you want to sell me something, it’s gonna happen because my friends tell me or someone I trust tells me on Facebook.” He thinks that if companies pay enough attention to him and his fellow millennials, they will be rewarded. But he does not consider himself to be either a trendsetter or a creator or destroyer of brands.
Mark has “at least” 500 friends on Facebook, and he is on Facebook every day. He changes his cover photo every other week. He tries to spread his “philosophy of life,” which is, “Do good, work hard, play hard, don’t sweat the small stuff, and treat people well.” He received 300 birthday wishes. He is a big user of Wikipedia—“a college term-paper habit”—and he believes that almost everything on it is true. He reads a newspaper once a month when it is left around and free. He devours Rolling Stone, the music magazine, from cover to cover.
After lunch, we walk the mall with Mark. Mark struts through it as though he is walking the perimeter of a basketball court that he has run 1,000 times. He tells us that he doesn’t actually go to mall department stores very often because they usually have “nothing for me—and no one to help me.” Mark will use the malls for specialty establishments—athletic shoes, a haircutter, movies, and a dine-in restaurant like the Cheesecake Factory at the nearby Short Hills mall.
It is clear that Mark knows the different retailers well, even if he doesn’t go into them. There are stores that he just won’t enter, and there are stores that he “adores.” He calls Abercrombie & Fitch overpriced and “so ’90s.” He carefully stops at the Victoria’s Secret window “just so I know what to look for.” When it finally comes to purchasing his “free” item courtesy of the authors, we walk into Banana Republic. He is modest in his desires. He picks three T-shirts, medium stretch cotton in gray. They are on sale for 40 percent off, and the price is under the magic $50 gift. “I like them tight,” he says.
Mark says that he probably has put “thousands” of hours into purchases and that he is an expert on the “design” and quality that work for him. He says that he tells his friends about all of his major (and many of his minor) purchases and that most of his male friends have the same level of conviction on retail brands. He goes out of his way to tell them the horror stories and to offer a quick endorsement of the good experiences. He says his good-to-bad ratio is two to one. He is a savvy shopper, and he says that he learned his skills from his mom. “Cheap is good for most things. But not for vacations, cars, computers, TVs, and music.”
Our questions to Mark are like short commas in our conversation. He answers them indirectly and stays on his line. He laughs a lot when he talks about his behavior and motivations. He is energetic and happy to share.
You need to get to know consumers like Mark.
Millennial Number 2: Andrea
Andrea is another classic millennial consumer. We met her through our BCG Consumer Sentiment Survey. She responded as an advocate of Nordstrom, the department store. She is also a big fan of 7 For All Mankind, the jeans maker; Lululemon, the sports apparel outfitter; and Kenneth Cole, the fashion retailer—an interesting menagerie of brands.
She grew up in an affluent suburb of Chicago, the daughter of a lawyer and a French immigrant. She lived in a two-story, brick, 100-year-old home in a neat, manicured suburb. Her parents have been married for nearly 40 years, but they now sleep in separate bedrooms and have grown apart. She was a top 1 percent student at her high school. She went to a neighboring “Big Ten” college, where she majored in French because it was “easy.”
Her first job out of college was as a rental leasing agent. She found that she had natural selling skills and went from “agent-at-large” to top agent at a major new 500-unit apartment complex. In five years, her annual income jumped from $40,000 to $90,000. The rental apartment building charges $2,000 for a studio and up to $12,000 a month for a penthouse.
Andrea is fit and beautiful—she has sparkling white teeth, neatly styled short hair, and an easy smile. She stands 5 feet 5 inches and weighs 127 pounds. She weighs herself every day. She works out five days a week and spends at least 20 percent of her income on apparel and personal care products. She’s been through a string of men, but no one has tempted her with marriage.
Her big budget items are rent, clothing, food, alcohol, and travel. She eats out almost every lunch and dinner and goes out drinking with friends five nights a week. Budgeting is hard for her. She has one credit card, but she uses only her debit card so that she doesn’t go into debt. “I spend most of my money on rent, food, dining, cabs, and shopping,” she says. She proudly carries a Céline purse. “It is my first expensive purse—$2,500. I’m 27; I think it’s appropriate.”
She has a new favorite shoe brand—Saint Laurent, where pairs range from $600 to $1,200. She buys them at the semiannual sale at Nordstrom. She also has a preference for Victoria’s Secret. In her lingerie drawer, there are 10 bras and 40 pairs of underwear—“classic, simple, solid colors.” In her closet, there are 40 pairs of jeans, but her active jeans wardrobe is 10 favorite pairs. The remaining pairs are “old or too small,” but she is not prepared to part with them just yet.
She has limited savings. “I have a savings account with maybe $1,000 in it,” Andrea confesses. “If I had an emergency come up, I could get help from my parents.” She says that if she had more money, she would spend it on travel—New York, Miami, Los Angeles, or perhaps a return to Paris, where she completed her junior year. When she travels, she likes to go to bars and clubs.
Her one-bedroom apartment is clean and uncluttered. “It’s not always like this,” she says. “Most of the time it looks like a big closet, but my cleaning lady comes once a week and straightens things out. I don’t ever cook, so there are no food messes.”
On the walls are pictures of her family and her dog. Her small bedroom has a queen-size bed with purchased Ritz-Carlton sheets, a dresser, and gift boxes from Gucci. The closet is packed with dresses, blouses, pants, jeans, and shoes. She keeps the Saint Laurent shoe boxes. Her reading material includes Shape and Chicago’s social magazine Modern Luxury. There is a 40-inch flat-screen TV in her living area. The furniture was a gift from her parents. Her refrigerator is virtually empty. It contains a case of Miller Lite, two opened bottles of white wine, a bottle of soy sauce, aerosol whipped cream, a jar of Grey Poupon mustard, a bag of Trader Joe’s frozen brown rice, and a frozen Stouffer spinach soufflé.
As we sit and talk, it is clear that Andrea wants advice and direction. We are strangers, but she thinks nothing of asking, “What would you be doing if you were me?” Her parents want her to get married, but she is resisting. “I have not met ‘the one.’ I don’t know if I ever will. Everyone requires compromises. Looks, job, love—they’re hard to find in one person.”
She has fond memories of her original boyfriend from high school, Kevin, but has no intention of going back to him. “He has not aged well,” she says. “He gained weight, lost his hair, and is stuck in a go-nowhere job.” Last night, her ex-boyfriend came over. “We broke up a year and a half ago, and he wants to hang out all the time. He’s a good person, and he loves me unconditionally. But there is no hot passion.”
Millennial Number 3: Erik
Erik grew up in Raleigh, North Carolina. He is the son of two lawyers and attended a private school with 875 students and a full-time faculty of 100. He grew up rich, loved, catered to, and protected. At the very last minute, just before he graduated from high school, he switched his college choice to the University of Michigan, where he knew “no one.” He had been set to go to the University of North Carolina, which his high school sweetheart was attending and where he knew “many” people. He just felt that he had to get out of the Deep South.
In school, he dressed “preppy”—polo shirts and khaki pants—and drove the family Range Rover. He is now 25 years old, but his mother still buys many of his clothes.
At the University of Michigan, he joined a fraternity for the parties, the friendship, and a sense of belonging. He was a business major, but he had a very active social life. “Drinking bourbon, whiskey, and beer” three or four nights a week was routine. It was a time of hookups, cram studying, and fun. He describes life in the fraternity as similar to the movie Animal House. He was a mediocre student as a freshman, but he got serious by his junior and senior years. His family helped with good jobs for the summers.
He comes across as a polite, refined southern gentleman with an edge. “Do you remember the character Eddie Haskell from Leave It to Beaver?” he asks over breakfast in Manhattan. “They say I’m like him: charming to the parents on meeting, a hell-raiser when out of sight.”
Today, he works for a media start-up. He wants to work in the venture capital industry. He used to work at a major New York bank, where he was part of a team that helped private investors with wealth management. “My boss believed you needed to look the part,” he says as he describes his clothing preferences. “So I upgraded my wardrobe. Ferragamo loafers, Hermès ties, and I traded in my Brooks Brothers suits for Suitsupply—a $900 suit that they make to look custom.” Erik explains that investment counselors like suit coats with buttonholes that open and coat linings that make the suit look custom. “In the financial world, people comment on your dress. I’ve heard the bosses say, ‘We would never take Jim (a coworker and coassociate) to a client.’ It’s not what you know. It’s what you look like that counts.”
Erik admits that working in a big financial institution was a source of anxiety. “There were so many people on top of me. There was nowhere to go.” He took a major pay cut to work in the social media company that now employs him. “I am learning how start-ups work.” His life goal is to be a successful investor. But for Erik, money has never been an issue. He has $25,000 in the bank—enough for a rainy day. His current income covers all his expenses. He still gets help from his parents.
Erik spends virtually all his income. He has the proverbial summer share in the Hamptons for $1,800 a season (with 30 other participants), one room in a three-bedroom apartment for $2,000 a month, and an “entertainment” budget of close to $2,000 a month. He provided us with a week of receipts for his purchases.
His budget is divided into thirds: one-third for taxes, one-third for rent, and one-third for entertainment and personal consumption. He was lucky enough to graduate without any debt, so his entertainment budget is for food, clothing, transportation, and “girls.” He claims to be a master of the “pickup.” His routine is to meet his date at his favorite speakeasy, Little Branch on Seventh Avenue in the West Village. He is known at this dark underground bar where live jazz is played a few nights a week. Little Branch makes custom cocktails and takes only cash. “We go for three drinks each, and then I call it a night. If I like her a lot, I send her home in a cab and send a text message 20 minutes later inviting her for a second date,” he says. “Otherwise we go to her house or mine.”
Little Branch is very different from the bar he used to go to when he lived in Ann Arbor. That was Scorekeepers, or simply Skeepers if you were a local. It was “big, loud, dirty,” according to Erik. But pitchers of beer are $2.50, and some weekends he is tempted to go back. “I’d pay for the airfare by just saving on the drinks I buy in Manhattan.”
Erik’s postgraduation lifestyle is work, drink, and women. He does not work out, even though he has an Equinox fitness club membership and even though he was a three-letter sportsman in high school. “No time, no energy,” he says about staying fit. Age is working to his benefit for now. He is 6 feet tall, weighs 180 pounds, and looks clean-cut—short hair, close shave, neat dress.
Erik says that he is starting to mature and to see a path to his future. His friends in North Carolina are getting married, but he says that people living in New York don’t even think about marriage until age 30 or later. He wants to have a relationship. Three weeks ago, he saw his first girlfriend, Lizzie, on her first trip to New York. He describes her as a “blond, blue-eyed, 5 foot 8, 115 pounds, southern beauty.” Then he confides: “I’d marry her if I could, but she’s involved with another guy and wouldn’t think about taking me back.” He later e-mails us, suggesting that our discussion has gotten him thinking, and he is going to make a run at her. “If she will take me back, I’m hers,” he writes.
Erik cares about only a handful of brands. Hermès, Ferragamo shoes, and McDonald’s are at the top of his list. He thinks the ties are distinctive, the shoes carry prestige, and McDonald’s offers better quality than anyone would think at the price point. His home furnishings are from IKEA and Pottery Barn.
Like the other millennials who we met, Erik pays little attention to advertising and watches only sports on TV. “I listen to friends about brands. They vote thumbs up or down,” he says.
On any given day, he will be on Facebook, Google+, Yelp, or other social media sites. He can be found in bars, at sports events, and at concerts. But it’s not easy. Millennials “hear” about hot new brands, but they may only sluggishly adopt them.