By Amitabh Bose (Ambo), Fractal Analytics
The demographic segment retailers desire most – yet which is often the most elusive – is the millennial consumer. The fervor to unlock the buying power of millennials makes sense; those 26-42 are the largest percentage of working-age adults and currently account for $600 billion in annual purchase power – a number expected to mushroom to $1.4 trillion by 2020. So, it’s no surprise that forward-thinking retailers are adapting to reach this generation.
Consumer packaged goods (CPG) companies, in particular, are eager to crack the millennial market. In fact, it was recently projected that millennials alone will spend $65 billion on CPGs over the next decade. So why not double, or even triple this projection? That’s exactly what CPGs have in mind.
For CPGs to get the attention of millennials, however, they’ll need to identify what differentiates them from other generations – including interpreting their spending habits and understanding their personal needs and wants. This is harder for CPGs than it is for online retailers, as most CPGs are sold through third-party sellers.
This is where AI-driven strategies can come into play.
For example, millennials are known for demanding personalized experiences much more than earlier generations. In fact, 75 percent of millennials say they’re willing to give up personal data in order to work with businesses that have instant on-demand engagement, as opposed to only 53 percent of baby boomers or traditionalists. CPGs that learn how to leverage AI technologies to create these tailored experiences will become the leaders of their industry.
One way CPGs can harness the power of AI for personalization is by analyzing various customer datasets-both first-party and beyond-to conduct an “equity drivers evaluation.” AI can help identify the most resonant brand drivers for different types of consumers. It can also segment consumers in a very granular way, by the drivers identified for each, and develop brand “ratings” for each segment. This type of analysis can reveal valuable new insights that may be adopted in the design of campaign messaging, product positioning and even product innovation.
Leading CPGs understand that scale is no longer a competitive advantage. In fact, millennials, which were the generation to drive the Direct-to-Consumer (DTC) market to the size that it is today, prefer a much more simple, personalized approach. To adopt a strategy that answers this demographic’s demands, CPGs need to adapt their current offering and develop new ones, through analytics, machine learning and AI. In doing so, they will be better equipped to develop and market products that will address the millennials’ very specific preferences, helping them to expand deeper into this coveted segment of the market.
The CPG that can understand and cater to the millennial consumer in an authentic way will be king in this new age of retail. And, the key to unlocking the lion’s share of that revenue opportunity will be AI.
This interest in using AI to conquer new revenue streams, such as the millennial, is a perfect example of how the consumer goods and retail industry are currently in the middle of an AI and machine learning transformation. My company, Fractal Analytics, a global leader in artificial intelligence and analytics that powers decision-making in Fortune 500 companies, has much to bring to the table in terms of strategy and implementation for such a transformation, due to our ability to identify future consumer and shopper needs, as well as market trends, through our trifecta of enterprise capabilities: AI, engineering & Design.
This year, we are the Title Sponsor for the 2019 Retail and Consumer Goods Analytics Summit. At the summit, we will showcase our recent, exciting work in artificial intelligence, machine learning and behavioral sciences. By presenting specific cases from the industry’s largest brands, we’ll be sharing how our technology and expertise have been used to drive positive results in the form of more sales, reduced costs and beyond.