Styles die, but well-managed brands live forever

If you’re part of a consumer facing organization, you’ve undoubtedly heard — ad nauseam — the “necessity” to engage Millennials. You’ve probably thought about how to tailor your messaging, change your media mix, or alter your design strategy to be more “Millennial friendly”. You might have even thought about how to appear more “socially responsible”, “community minded”, or whatever else you believe to be top of mind among Millennials. But as is made clear through the recent struggles of retailers Urban Outfitters and American Apparel, effectively capturing the Millennial market is about more than emulating trends. It’s about truly understanding what drives your customers at their very core, and adapting as those drivers change over time. As iconic fashion designer Karl Lagerfeld puts it, “Trendy is the last stage before tacky.”

In a recent article for racked.com, Elizabeth Segran pointed out how both Urban Outfitters and American Apparel were able to achieve great success by perfectly capturing the aesthetic of the fixie-riding, vinyl-listening, mustachioed Brooklyn hipster; packaging it up; and subsequently taking it to the masses. But as beards have begun to be shaved and PBR cases remain on the shelves, both organizations have suffered greatly: American Apparel hasn’t posted a profit since 2009 and Urban Outfitters has seen steady sales declines since 2011.

So what did they miss? Where did they go wrong? It is this author’s opinion that they’ve clung to style over substance, and unfortunately for them, styles have changed and they’ve been left behind. They pandered to a hipster aesthetic that, at the time, was synonymous with the notion of what a Millennial was, but failed to really understand what it was about the hipster aesthetic that drew Millennials to them in the first place.

Here are two proof points:

1. Social responsibility: As Nielsen Research points out, Millennials have a higher propensity to pay more for products from organizations with social impact programs — in other words, they’re a socially conscious bunch. Recently Urban Outfitters has come under fire for a number of questionable design choices, including shirts with the words “depression” and “eat less” on them, and a blood-covered Kent State sweater. These are clear indications that when making decisions the folks at Urban Outfitters didn’t understand what their customers care about.
2. E-commerce: We all know and believe that Millennials are a technologically proficient group, meaning all organizations hoping to engage them must have some sort of digital strategy. In the case of retail, this of course manifests itself primarily through e-commerce. Recently, American Apparel reported its conversion rate — the proportion of site visitors they convert into paying customers — is just 1.6%, a very weak figure compared to industry standards (2.5%). Meanwhile, direct-to-consumer insurgents such as Everlane, Bonobos, and AYR are gaining steam, all growing 50–200% in 2014. It seems just being in the game isn’t enough in the world of clothing e-retail, brands must innovate (or perhaps even acquire) in order to keep up with rapidly growing innovative upstarts.

What’s interesting to note, is that in both these examples product is secondary. They showcase that without a clear understanding of key emotional drivers (point 1) or channel preferences and competitive activity (point 2), brands can easily be left behind.

So what established retail brands have been able to keep up with the changing tides? A perfect example is Burberry, the classic British luxury clothing brand. In the wake of unimpressive sales growth, CEO Angela Ahrendts made a series of adjustments, one of which was to put a sharp focus on Millennials from a targeting perspective. To better meet Millennial needs, Burberry revitalized their marketing approach, injecting more digital capabilities, taking cues from online retailers by adding a bespoke option online, and emphasizing the Burberry story, history and product authenticity in communications. These adjustments — among others — paid off: at the end of fiscal 2012 Burberry’s revenues and operating income had doubled over the previous five years.

Though this blog post focused on retail examples to discuss the topic, the thinking can be applied to any business context. So, in order to conquer the modern Millennial in your world, I recommend:

• Starting from an insight base: Not only should you be conducting consumer research to incorporate the voice of the customer into brand and business strategy decisions, but also ensuring that this research is refreshed every 2–3 years to keep up with changing customer needs
• Avoiding over-segmentation: Many organizations become obsessed with detailing very specific segments without any real way of even speaking to them (are you really going to create dedicated marketing materials to 40–45 year old South Asian males, living in urban centres, with 2 homes, 1–2 kids and a boat?). The goal is to make your segments specific enough that you can meet different varying customer needs, but broad enough that they remain actionable.
• Keeping your brand’s promise across the entire business system: Nielsen research shows that Millennials value authenticity, which heightens the need to ensure that what you stand for is being effectively reinforced across the entire business: inconsistency breeds dissension
• Ensuring emotional resonance: As Simon Sinek has famously articulated, it’s all about the “why”. Ultimately what he is saying is that we can’t just deliver against functional benefits (in this case: skinny jeans and Lana Del Ray LPs), but emotional benefits as well (like the desire to feel different or socially conscious)
• Recognizing that Millennials are reaching life stages later than previous generations: Businesses that provide products and services that are life stage driven have to recognize that Millennials are coming to the party later than their predecessors — e.g., average marital age for men has jumped from 23 in 1960 to 29 in 2011, the median age of first time home ownership has increased by 3 years compared to the previous generation, and the average age of a first time mother has increased by more than 3 years between 1980 and 2013

This post was written for LEVEL5 Strategy Group’s blog. LEVEL5 Strategy Group is a management consultancy that specializes in creating competitive advantage.