Millennial Trends Driving Next-Generation Manufacturing Production
Manufacturers are in the business of making products that consumers purchase. Today, however, more factors impact consumer purchasing than ever before. One example is changing demographics—as baby boomers retire, millennials are becoming a greater purchasing force, racking up more than $200 billion in sales in 2017.
Research firms steadily release new studies on the impact of millennials on global consumer trends—millennials currently account for 40 percent of retail spending worldwide, and that share is expected to grow.
Millennials are a shifting target for manufacturers, because their purchasing preferences can quickly change. There is no better example than the food and beverage industry. These manufacturers must be able to respond quickly to changing preferences, such as eating habits, flavors, ingredients, preservatives, packaging, health and wellness trends and sourcing.
“With a quick search on their smartphones, consumers can make informed and speedy choices about the products they consume,” said Cristin Singer, a partner with RSM US LLP, a business consulting firm. “Successful food and beverage businesses will use digital and social platforms to connect with consumers, providing robust product research avenues, tips, stories, forums and more. Staying on top of these shifting lifestyles and preferences will be essential for relevant and profitable food and beverage companies. As we witnessed in 2017, large packaged food companies that were not on-trend with healthy snacking experienced declining sales.”
To successfully sell to millennials, manufacturers must be able to understand, and respond to, the many factors that influence their purchasing decisions, which means investing in big data and effective analytics. Smaller companies can purchase data studies; larger companies can use the Internet of Things to collect their own data and identify trends to deliver better customer experiences. “Internet of Things data by itself, however, is not always useful,” stated Jesper Grode, director of product strategy with Stibo Systems, a provider of customer management solutions. “Only when combined with other data, such as product master data, customer master data, or location master data, will a better understanding of how products are being used ascend—thereby paving the way for improvements.”
Also, as a result of the focus on data analytics, more manufacturers are hiring data scientists to run big-data programs and identify emerging consumer trends, allowing them to quickly respond with new or adapted products that meet evolving consumer demands.
Customers expect tailored products that match their personal preferences. In fact, brands that offer personalized experiences enjoy a 50 percent higher loyalty rate.
Traditional production lines are set up to mass produce, which makes it harder to customize or personalize products to meet customer demands. For instance, a new survey indicates that “a high proportion of manufacturers are challenged with being timely in identifying category opportunities,” said Grode. “Twenty-seven percent spend three to five days consolidating data to support category insight, and another 26 percent spend five or more days. Consequently, organizations are unable to respond quickly to market trends and consumer needs.”
Companies that can rapidly adapt production lines to market trends have a greater chance of being market leaders. A key advantage for these companies is the implementation of Industry 4.0 technologies, such as Internet of Things, sensor technologies, automation, robotics, and even additive manufacturing. A 2016 McKinsey and Company study showed that early examples of fully digitalized factories “have seen cost savings of up to 30 percent—and these factories have the capability to manufacture individualized products.”
Forbes indicates that more than 50 percent of millennials prefer to buy products from companies that support the causes they care about—especially environmental stewardship, such as reduced energy use, smaller geographic footprint, less landfill waste, recyclable products and packaging made from renewable materials. In fact, to maximize this impact, forward-thinking companies create a culture of sustainable manufacturing throughout their supply chain, including following fair-trade policies and meeting or exceeding regulatory guidelines.
According to Acuity Insurance, manufacturers that pursue sustainability see improved consumer loyalty and increased profits. These profits are then returned to employees through more secure employment, better wages, and company growth. “Manufacturing companies that practice sustainable manufacturing often demonstrate greater involvement within their communities, donating to local causes, supporting events, and investing in sponsorships,” stated Acuity Insurance. “In addition, as companies become more profitable, they will attract a more talented workforce and reduce turnover, adding dollars to their bottom line.”
Manufacturers that pay attention to these consumer trends, and invest in the technologies that are needed to meet these consumer demands, will deliver more satisfying customer experiences. They will also expand brand loyalty and gain market share as the marketplace shifts toward product customization and greater digital interaction.
Manufacturers who are proactive and prepare for these trends will clearly have a competitive advantage for future generations.
Some opinions expressed in this article may be those of a contributing author and not necessarily Gray.