Retail has a unique opportunity due to the increasing population and influx of dollars in the marketplace to customize a message that speaks to all four population targets while laying the foundation for future success. From a pure dollars standpoint, furniture retail, is ripe for expansion in the coming years even with the inclusion of more distribution channels in the market place. We should be customizing marketing messages that speaks to today’s consumers while laying the foundation for future generations.
Expansion has become necessary for survival in today’s retail environment. The clients in R&A’s portfolio that have seen the most dramatic growth patterns can link their success to expansion, whether targeting an audience outside of a retailer’s “back yard” or physically investing in new store fronts. The need for expansion or pulling dollars from neighboring markets is needed due to stagnant population growth in these home markets.
Our expectation from an advertising and traffic standpoint is to mine as much of the two percent of those in the furniture market during any giving time. The problem that many retailers have faced in 2017 is that our “two percent” net has shrunk due to many factors, such as decrease in market population and where Ms. Jones is at in the FURNITURE BUYING CYCLE.
In an effort to widen our “two percent” net, we’ve been forced to expand our footprints to outside markets. This is the reality our retailers live every single day.
We’ve established that the population, and in turn economy, is primed for a huge upswing in the years to come. What we haven’t firmly established is which population segments the economy is comprised of. In years past, retailers focused on the Baby Boomers as the prime segment target, or the money cow if you will. In general, Baby Boomers held strong value to physical positions (cars, houses, stocks, brand names) and spent their dollars on these status symbols.
As the Baby Boomers started to cycle out of the buying cycle, Generation X was left filling the void in an unstable economy. The problem? The population of Generation X is about 4% lower than Baby Boomers. Four percent! This stat explains why traffic is down across retail (not just furniture), but sales have continued to increase. Our advertising is doing a good job bringing in a qualified lead, and our retailers are holding up their end of the bargain by closing business with a high close rate. The problem is simply that there isn’t as many Generation X’ers in the market place as there was Baby Boomers.
Our current economic breakdown looks like this: Baby Boomers are still present, Generation X is holding the buying power, and Millennials are finally starting to reach a life stage where they can make furniture purchases. But here is where it gets scary…. The next big boom isn’t coming from Millennials… its coming from Gen-Z. As the chart below shows, Gen-Z has surpassed Millennials for the largest population segment.
I know what every retailer is thinking: “Great! I can’t get Millennials to shop in store, how am I going to get Gen-Z to come in?” Well, the good news is: both population segments value the in-store experience. Here is an article from Forbes that sums up Millennial and Gen-Z’s feelings towards online shopping vs in store shopping:
“ Most global millennials (70%) prefer brick-and-mortar retail stores, according to CBRE.
And in the U.S., over 77% of Gen Z, consumers born after the mid-1990s through the early 2000s, said brick-and-mortar stores are their preferred shopping channel, according to Accenture research.
These groups are the future of retail.
Millennials have displaced baby boomers as the nation’s biggest buying group. There are an estimated 80 million millennials in the U.S., and each year they spend approximately $600 billion, according to Accenture.
Meanwhile, Generation Z is set to reach 2.6 billion by 2020, with $44 billion in buying power, according to a study by IBM and the National Retail Federation.”
What this research is saying is simple: online shopping isn’t going to replace brick-and-mortar stores in the near future. The two largest population segments since Baby Boomers is telling us that the in-store experience still matters, especially with big ticket purchases such as furniture. What we have to do is find a better, more efficient way of reaching these segments.
We are living in a marketing landscape where the traditional thought processes of picking one media to reach the masses is dead. The reason why this method of marketing was left in the dust during the recession is because we now have to market our message to four different population segments at the same time.
There are a few factors to success that we have no control over (population growth, economy, competition, buying cycles) but there are two things we can improve and influence that will make an impact today and lay the groundwork for future success: Audience Targeting and Messaging.
Audience targeting is now easy to accomplish due to the incorporation of digital marketing. We now have the ability to target a digital audience based on income, age, household make up, credit score and so on. This is exact, EXACT, demographic targeting that wasn’t an option 10 even 5 years ago. We have the tools to target Baby Boomers, Gen X’ers, and Millennials. Now we just have to incorporate the capture of Gen-Z into our digital audience.
But how do we capture Gen-Z? This part of the equation is simple. We add in media that they prefer into our media mix. The chart below sums up how a Gen-Z’er shops and the media that pushes them to make consumer choices:
As marketers, we need to start adding in all of these elements to our toolbox now before we are forced to play catch up in the future. Furniture retailers are already playing catch up to Millennials by being late adaptors to the digital world. We can’t miss out on the early influencers of Gen-Z. The Furniture Country market is ripe for expansion within their own back yard. With an economic and population boom right around the corner, we can afford taking 2% of our digital spend away from our core target audience and laying the groundwork for Gen-Z now because we will be getting our fair share of dollars. We have to start investing in this monumental purchasing segment now because missing the first wave of Gen-Z consumers would push back potential earns by years.
As with any advertising strategy, there is a counter argument to pumping precious advertising dollars to a target population segment that is just now reaching 20 years old. And the truth is there is sound reasoning to that argument. We live in a dollars and cents world were ROI is expected within the same weekend. Moving a small amount of ad dollars and targeting Gen-Z is a long game. We have to look at this investment through different lenses then we do when we invest $5,000 in a direct mail and expect x amount of return over the weekend. This game plan is the equivalent of drafting a foreign player and stashing them overseas for a year or two. The GM knows that that player won’t help their team next year, but they could be a vital All-Star in two years. They are banking on the future and investing early. This thinking is what will set retailers ahead of bigger boxes (and online ones) in the next five years.
The next hurdle we need to overcome is messaging. What is the story we are trying to tell and how does that story provoke an action? This is the question we should be asking with every strategy we approve, and every revision we review.
Each of the four major population segments are in different life stages, and in turn are searching for different products. We are fooling ourselves if we think saying the same advertising story will provoke action from both Baby Boomers and Millennials. In today’s marketing climate, messaging can’t follow a shotgun approach. We have to be targeted and guide each bullet to its final destination.
We need to tailor messages that speaks to specific segments instead of relying on one message to reach the masses. The next evolution of furniture marketing isn’t a magic bullet media, its telling a different story to different people within a set market place. We need to develop a story that speaks to the life stage Ms. Jones is currently living when she picks up your direct mail, or sees your display ad.
We don’t want to confuse message with offer. The same 25% offer can and will work with all four major population segments. What does need to change from segment to segment is the copy, product, and price points. As a retailer, you wouldn’t try to sell a Flexsteel, full motion sofa to a couple who are just starting out on their own. That couple’s life stage doesn’t line up with Flexsteel, and even worse, we are planting the seed in their minds that a retailer is outside of their budget. It doesn’t matter that your showroom offers a wide range of price points and products, we’ve already lost that couple. We are doing the same thing with the messaging of our advertising.
For example, let’s say we are running a 25% off Friends and Family direct mail event. For the sake of this exercise I’m going to use my client from Texas as the case study. This client claims that they are the “Something for Everyone Store”. Their showroom is organized in a “good, better, best” format (Ashley, England, Flexsteel). Under a population segmentation driven media plan, we would have one offer with three different direct mails in the market place:
- Baby Boomers- up to 25% off and copy showcasing Flexsteel price points.
- Gen X- up to 25% off and copy showcasing England price points.
- Millennials- up to 25% off and copy showcasing Ashley price points.
The most efficient use of our ad dollars is telling a story that speaks to the population group that we are trying to target. In the above scenario, we are no longer alienating one population group over another. Now we have a chance to customize a story to Ms. Jones’ needs instead of guessing on the message we think she wants to see.