Pricing and the perception of value
Price is king for millennials. The main reason 16-36-year-olds would opt to shop with Amazon over another site is the perception that the products they’re looking to buy are ‘often cheaper on Amazon’ (28%). An additional 19% of millennials say they’d head to Amazon first because they’re Prime account holders and do not have to pay a delivery charge each time they make a purchase.
What’s the main reason you would shop with Amazon rather than another site?
- The products I’m looking to buy are often cheaper on Amazon 28%
- The number of product categories and range of products 23%
- I’m an Amazon Prime account holder so don’t have to pay a delivery charge each time I purchase something 19%
- Products I’ve purchased can be delivered quickly and conveniently 15%
- It’s fast and simple to checkout e.g. one click 14%
- Other 1%
‘Product pricing’ is the primary reason millennials would shop again from any ecommerce website, and a huge 87% of millennials are very likely (41%) or likely (46%) to look at several different websites or apps to see where they can get the best price for a product.
Even as they’re looking for other values such as product authenticity, millennials are highly driven by price – something Amazon, as a very transactional website, caters to with its prominent product pricing information and the ability to easily compare products and suppliers at different price points.
This transparency has certainly contributed to Amazon’s reputation for competitive pricing. But does Amazon always offer millennials the best value for money? The answer is ‘no’, with almost a third of UK millennials (30%) telling us that price is the main reason they would avoid shopping with Amazon in some instances, because the products they’re looking for on Amazon ‘are not always cheaper’ there.
What is the main reason you wouldn’t shop with Amazon?
- The products I’m looking for are not always cheaper on Amazon 30%
- I worry about being sold a product that isn’t authentic 15%
- I don’t always know what I’m looking for and it’s hard to find inspiration on Amazon 9%
- Other retailers reward me for my purchases e.g. loyalty points 9%
- I can find a better range or quality of products elsewhere 8%
- I can get products just as quickly and easily elsewhere online 7%
- I prefer to shop directly from brand manufacturers (e.g. Nike) 7%
- I prefer to support smaller or ethical businesses 6%
- Other 5%
- I need more content to help me decide whether to make a purchase 4%
Providing value to the millennial shopper
With Prime, Amazon has found a way to cater to price-conscious, frequent buyers, and it has done so by understanding consumers’ perception of value.
In offering consumers ‘free’ shipping on every purchase, Amazon Prime has become central to Amazon’s cost proposition today. Many consider Amazon Prime to be a shipping programme, but it’s best thought of as a very sticky pay-to-play loyalty programme that takes price into consideration, ensuring customers get the items they want, when they want, at a reasonable cost.
Kantar research shows the value of this cost-centric approach to loyalty; Prime customers become more loyal over time, with 41% of Prime customers tending to check Amazon before anywhere else in the first year of their membership – rising to 60% after being a member for three years.
We know many millennials are seeking discounts as the price of their loyalty, and the second-most-popular reason (17%) why millennials would shop with a website again is where incentives in the shape of points and discounts are on offer. What’s more, the majority of millennials engage with retail brands on a least one social media platform in order to get discounts.
Millennials clearly view loyalty programmes as a way to save money, but it’s critical for retail brands to understand how to offer real value to them as individuals. Transforming millennial shoppers into brand advocates requires a lot more than the discounts that loyalty schemes are largely still focused on.
According to KPMG research, younger consumers tend to be more loyal to companies that offer personalised interactions, and Forrester research has shown that emotion is a strong loyalty driver, so investing in understanding the actions and motivations of your customers across different points in the customer journey is key.
As Forrester senior analyst Emily Collins explains, discounts drive short-term behaviours, but can cut into a brand’s ability to add value in the longer term. It’s only where a retailer truly understands the emotions they need to elicit from consumers that they can work towards engendering real loyalty.
Achieving this hinges on a retailer’s ability to incentivise consumers to identify themselves, because capturing their data is key to providing better products and services (and, ultimately, to driving more revenue). Loyalty programmes have typically been the tool to capture this insight; a retailer offers something in exchange for the customer identifying themselves. But a retailer must do more than simply reward the consumer for sharing their data; the true goal here is to continually learn more about that user and use that insight to deliver better experiences.
Appealing to the loyalty of price-conscious millennials is about more than rewards; it’s about giving loyal customers the best experiences and the best of what the brand has to offer. A massive 86% of UK shoppers say they would volunteer personal data for improved privacy, faster shipping, and greater discounts and deals, and retailers really need to be continually mining and applying that insight to deliver compelling, personalised customer experiences.
37% of millennials say they would like ecommerce sites to change the content and products they see based on their personal tastes, interests, and past purchases, but 49% of millennials are still undecided on this, so there’s a clear opportunity here for transparent, two-way communication that helps consumers see the value and services that are delivered when they consent to share their data.
‘The most effective loyalty programmes offer personalised benefits that go beyond simply offering discounts towards future purchases. Keeping a millennial customer engaged is about understanding what improves their individual satisfaction. Just as different customers will want to purchase in different ways, customers respond to different types of loyalty schemes and rewards. It’s about identifying and offering real value to individuals, from advanced access to new products and services, to events and exclusive content’.
– Brett Lawrence, Business consultancy director, Inviqa
Convenience is the new ‘value for money’
While motivated by price, millennials have individual perceptions of value, and while a retailer may not always be able to compete with Amazon on product pricing or shipping charges, they should consider where else they can provide value.
15% of millennials say that ‘convenience’ (for example, retained payment information, local collection points, a good after-sales experience etc.) is the price of their loyalty and the main reason they’d shop from a website again. This was the third most popular choice amongst our sample group.
Which one of the following is most likely to make you shop from a website again?
- Price 39%
- They incentivise me to shop with them again e.g. they offer discounts, loyalty points etc. 17%
- Convenience e.g. online account, local collection points, good after-sales experience etc. 15%
- Easy to transact e.g. fast to find the product, simple to checkout 13%
- Product range 11%
- The website shows me relevant content that’s tailored to my interests or past purchases 4%
- Other 1%
When asked about the most important thing a website can do to make it more convenient to shop with them, the majority of millennials (27%) chose ‘a choice of delivery options’, for example specific time slots for delivery, click and collect, and so on. The second-most popular choice (22%) was ‘a convenient and easy returns procedure’.
What’s the most important thing a website can offer to make it more convenient to shop with them?
- A choice of delivery options e.g. specific time slots for delivery, click and collect etc. 27%
- A convenient and easy returns procedure 22%
- A guest checkout so I don’t have to log-in 18%
- Provide channels for faster delivery 17%
- Option to buy now, pay later 10%
- Option to store my payment and delivery details 5%
- Other 1%
So with 49% focusing on ‘get it to me quickly and easily – and make it easy to send it back’, retailers need to be aware that returns are a key focus area for millennial shoppers; they’re expecting to need to return something at some point, and so they care about the returns process.
The key strategy here is to focus on ways of decreasing likely returns and maximising chances of ‘right product, first time’ through strong product information, imagery, reviews, and content that enables informed decision-making.
That said, millennials are often shopping with the intent to return a purchase. The consumer trend of buying multiple items online with the intention of keeping only one item (and returning the rest) is most common among millennials and has driven multiple ‘try before you buy’ offerings such as Amazon’s Prime Wardrobe service. It’s also paved the way for ‘buy now, pay later’ models which 1 in 10 millennials say are the most important factor when it comes to making online shopping more convenient.
Convenience is ultimately about understanding and catering to the ways in which millennials want to shop. The ASOS Instant service, for example, which offers same-day delivery, caters to millennials’ appetite for a choice of delivery options and the option to pay more for faster delivery. The pure-play retailer’s continued focus on using customer insight to enhance customer journeys is, in turn, raising customer expectations.
In a world where millennials are often loyal to convenient services (Amazon, Uber, AirBnB, and so on), rather than brands, providing value through logistics and delivery is key for retailers looking to deliver a differentiated experience. Fast delivery appears to be a key priority for online shoppers, and technology firm Radial has found that delivery-related dissatisfaction rates are 12% higher for millennial and Gen Z shoppers compared with the over-55s. It also found that 40% of consumers report frustrations with receiving orders – especially in relation to speed and shipping costs.
Fulfillment clearly makes an impact on customer experience, but can often be approached as an afterthought by retail businesses. That’s why retailers should be reviewing their in-house and third-party logistics capabilities to see where they can drive efficiencies and better cater to price-conscious millennials with flexible fulfillment options and competitive shipping costs.