Lately, it seems everything I read about brands is at least in part related to how they are rethinking their approach in order to better appeal to Millennials. Brand positioning, marketing plans, media buys, product design – there is almost no part of the business that is not up for a refresh. Making sure your brand remains relevant as the world changes is always a smart business plan, but given the number and purchasing power of Millennial consumers (now the largest living generation), it is mission-critical for brands to pressure test their value proposition with this specific demographic in mind.
A personal observation of my own generation that I believe translates into a big opportunity for businesses is that there are many ways for brands to create value. However, it seems an emerging theme in courting Millennials is to sell a premium experience at a more affordable price to match the relatively lower incomes of this demographic. I believe this thinking, along with the observed success of lower-priced competitors, must have contributed to the May announcements made by Macy’s and Whole Foods to open lower-priced sister brands. Their challenge will be to keep the value proposition generous enough in favor of the consumer while making the necessary concessions to make the business viable financially. This is because the experience that is “coming down market” still has to compete with all of the other choices that already exist at the lower price point. Achieving this is the difference between wanting to be “the Uber of XYZ category” and being Uber. Uber successfully enabled a premium experience at a lower price point by launching UberX. This popular Millennial service trades off a luxury private car while still delivering incremental convenience, cleanliness and reliability at a comparable price to a taxi. Even if a Whole Foods sister brand can now match Trader Joe’s on price, it will have to so while also delivering on quality, personality and location to a high enough extent that its offering can win on one or more of the attributes that drive purchase.
All in all, due to the proclaimed innovative thinking that has gone into development and my personal love for a good bargain, I’m very curious to see these new brands when they are unveiled. A lower-priced Whole Foods that maintains high quality produce, artisanal brands and a commitment to the values of the parent brand strikes me as being very competitive. A Macy’s Backstage that truly brings, as they claim, a “whole new level of value” could win. However, what they seem to be rolling out – a knock-off Nordstrom Rack store with a lower equity parent brand and free wi-fi in a strip mall that already contains direct competitors – doesn’t strike me as an offering that will bring enough shoppers over from TJMaxx or Marshalls to justify the investment in resources and the opportunity cost of taking their eye off improving their core business. But I guess we’ll see!