Millennials Transform Social Commerce: Hashtag Buy Buttons?

Millennials Transform Social Commerce: Hashtag “Buy” Buttons?

Conducted By: Nora Ganim Barnes, Ava M. Lescault, Center for Marketing Research University of Massachusetts Dartmouth

Introduction Social commerce is a term used to describe a form of commerce mediated by social media that facilitates the sharing of information about products and services for both online and offline purchases. Yahoo first used the term in 2005 in a launch of a new online shopping store. Social commerce is shaping emerging commercial channels and marketers are taking advantage of social technologies to expand their businesses. Given the potential of social commerce and the size and buying power of Millennials, along with their propensity to make social inspired purchases, a study on this group is invaluable in developing new strategies for selling to this tech savvy and always connected cohort.

It is estimated that Millennials will have a combined purchasing power of $2.45 trillion worldwide by 2015. Forrester Research estimates social commerce in the US to reach $30 billion by 2015. This buying will be carried out online and in stores. At this time, tracking meaningful social commerce conversions tied to user behavior is at its early stages. While we can assume that social interactions in the form on online reviews, posts, forums and recommendations is driving some purchasing, documenting the scope of this activity and final channel for purchases is difficult. This is further complicated by the race of the most popular platforms to add “buy” buttons and new payment options to encourage buying while remaining on the platform.

The driving force behind social commerce can be attributed to the Millennial generation’s penchant for social media. Numbering 76 million strong, Millennials, also known as Generation Y, are defined as the demographic cohort born between 1980 and 2000. Their size and combined purchasing power make Millennials a valuable market segment for the future success of most companies.

However, unlike past generations, Millennials are not influenced by traditional ‘push’ marketing strategies. Born and raised in the age of technology, Millennials consume information when and how they want to. This has grave implications for companies who cannot adapt their marketing strategies quickly enough to capture and capitalize on their intermittent attention. Social media has provided companies with valuable tools to attract and engage Millennials on their own terms. However, despite the prevalence of social media, social commerce remains a relatively new phenomenon. It will demand a new understanding of the power of sharing and its impact of consumption patterns.

In September 2014, ShareThis released one of the first studies focusing on Millennials and social commerce gathering data by observing online browsing and social patterns of Millennials. They conclude that for these young consumers, interactivity and discussion are central to purchase decisions. The study did not report on behaviors for any specific platforms and reported findings

©University of Massachusetts Dartmouth Center for Marketing Research 1 | P a g e only in relation to the non-Millennial population, for example saying Millennials are “3x more likely” to behave in a certain way.

This study, conducted by the Center for Marketing Research at the University of Massachusetts Dartmouth, is an in-depth look at current purchasing habits and trends of Millennials using three of the most widely used social media platforms (Facebook, Twitter and Pinterest). Last year, the Center conducted its first study on this topic, which served as the basis for this 2014 longitudinal look at Millennials and social commerce. Changes over the past 12 months will be noted.

In an effort to discern what turns a like, follow or pin into a sale, this study, like the 2013 study, explores and analyzes lead conversion tactics as identified by Millennials themselves. Also included is a look at mobile technology and its role in online purchasing. The potential for “buy” buttons is explored for the first time along with specifics on what products Millennials are buying on the most popular platforms.

Highlights of the study include:

 35% of Millennials are likely to use a “buy” button on Facebook and 24% are likely to use one on Twitter, should those be provided by the platforms.

 Facebook declines but is still the most popular platform among Millennials when looking to interact with companies/brands online. While their numbers have fallen slightly, Twitter and Pinterest have made modest gains. Fifty-five percent of respondents currently like at least one brand on Facebook (down from 62% last year). Twitter has 29% (up from 23%) and Pinterest has 16% (up from 11%) of Millennials following or pinning a company/brand.

 Nike is the most liked/followed brand on Facebook and Twitter for the second straight year.

 Hair, Beauty and Apparel continues to be the category in which most products are purchased by Millennials across all platforms studied.

 Relative to users of larger platforms, Pinterest again has the highest online sales conversion rate. Fifty-one percent of Pinterest users make their purchases online exclusively compared to 16% of Facebook users and 35% of Twitter users. The user- friendly, highly visual design of the website facilitates information search and evaluation of alternatives. Pinterest makes the transaction process flow with optimal ease for consumers.

 48% of Millennials use smart phones to make purchases online and 21% use tablets.

©University of Massachusetts Dartmouth Center for Marketing Research 2 | P a g e Methodology Like the 2013 study, this study was conducted via a comprehensive survey available in both digital and physical form for distribution. Qualification for participation required the respondent to be a member of the Millennial generation, using the popular demographic for this group of having been born between 1980-2000. The surveys were hosted on online and the URL was shared online by channels including, but not limited to, email, Facebook, Twitter and LinkedIn. All data was collected during the fall of 2014. A total of 405 surveys provide the basis for this report.

In an effort to identify the link between online interest and related purchases, respondents were asked detailed questions about their social media decisions. The survey was divided by the platforms Facebook, Twitter and Pinterest. Respondents were first asked if they currently follow any companies or brands on that platform. If they did not, or indicated they did not have an account on that site, respondents were instructed to move to the next section.

For those that did qualify, questions were asked relating to respondents’ motivations for following a company online and if they ever made a purchase resulting from their online experience. Respondents were asked to classify their purchases by platform and product category. Millennials were also asked to indicate what a company would have to do in order to convert their like/follow/pin into a sale. This iteration included questions about the new “buy” buttons currently being tested by Facebook and Twitter.

The 405 respondents in this study are diverse. They represent 26 US states and 37 people (9%) residing outside the US. There is nearly an even split in respondents’ gender with 49% male and 51% female. The youngest Millennials, those 14-17 years old, make up 17% of this study, 38% are between 18-22 years old, 25% are between 23-27 years old and 21% are in the upper range of 28-33 years old.

1a. Online Liking, Following and Pinning Behavior When looking to interact with companies/brands online, Facebook is the most popular platform with 55% liking companies/brands, followed by Twitter at 29% and Pinterest at 16%.

In last year’s study, 62% of Millennials liked companies/brands on Facebook, 23% followed them on Twitter and 11% pinned them on Pinterest. As it relates to companies/brands, there is a 7% decrease in liking behavior on Facebook and an increase of 6% following and 5% pinning on Twitter and Pinterest. This is consistent with many studies showing Millennials engaging less with Facebook and exploring other platforms.

Although not a major player at this time in the social commerce space, Instagram appears to be a popular alternative/supplement for Millennials rethinking their Facebook use. As ads are now beginning to appear on Instagram, it will be important to watch buying trends on that platform going forward.

1b. Top Companies/Brands ‘Liked’ on Facebook

©University of Massachusetts Dartmouth Center for Marketing Research 3 | P a g e The top 5 companies/brands most “liked” by Millennials on Facebook remained mostly the same as last year, except Dunkin’ Donuts has replaced Starbucks while Amazon has also entered the rankings. Nike led the way for the second year in a row with Apple again in second place. Amazon and Target rounded off the top 4 while Dunkin’ Donuts and Forever 21 tied for fifth.

1. Nike 2. Apple 3. Amazon 4. Target 5. Dunkin’ Donuts / Forever 21

1c. Top Companies/Brands ‘Followed’ on Twitter Millennials follow a range of companies on Twitter. Championing across platforms, Nike remains the most “followed” brand and Starbucks continues to make the top 5. Mega brands Victoria’s Secret and Forever 21, along with coffee company Dunkin’ Donuts, are newcomers to the top 5 replacing ESPN, NHL and NFL. Millennials were still following sports, but there was more following of individual teams this year than leagues.

1. Nike 2. Victoria’s Secret 3. Dunkin’ Donuts 4. Forever 21 5. Starbucks / Footlocker

2. Motivation for Liking, Following and Pinning When asking Facebook users why they like a company/brand, many respondents said it is to support the brand they like, receive regular updates from brands or get a coupon or discount on their next purchase.

The top reasons why Twitter users follow a company or brand are similar to those reported by Facebook users with the exception of their prime motivation. Twitter users report that getting coupons or discounts, supporting a brand and receiving regular updates from brands are most important to them. These results are consistent with last year’s study.

Pinterest users also pin brands to support them and get coupons or discounts. The biggest difference between the 3 platforms is that Pinterest users are motivated by their desire to share their interests/lifestyle with others. This is consistent with last year’s findings.

Facebook Twitter Pinterest To support the brand 84% 78% 70% To receive regular updates from brands 83% 47% N/A To get a coupon or discount 66% 85% 41% To research brands when I was looking for specific products/services 40% 34% 67% Seeing my friends are already a fan, follower or have a board 36% 28% 36%

©University of Massachusetts Dartmouth Center for Marketing Research 4 | P a g e To share my interests/lifestyle with others 40% 35% 76% To participate in contests 37% 37% 27% A brand advertisement on TV, online or in print led me to like the brand 28% 25% 21% Someone recommended me to like, follow or pin the brand 31% 21% 29% To share my personal good experiences 26% 23% 38% Other 3% 9% 11%

Respondents citing “Other” motivations stated that they follow their own employers or those of their family and friends. Others saw opportunities for professional networking. On Pinterest specifically, potential pinners seek out advice on fashion, cooking, and other fun DIY activities.

3. Lead Conversion across Facebook, Twitter and Pinterest Companies have long been trying to understand how to convert traffic to their social media sites into sales. Millennials in this study indicated across Facebook, Twitter and Pinterest, that those companies offering coupons or discounts in exchange for a like/follow/pin would be more likely to see an increase in sales. Other similar incentives suggested include exclusive offers, free products, and more directed advertising.

4. Ease of Purchase on Pinterest Sixty-three percent of Pinterest users find it easy to make a purchase through the site. The user- friendly, highly visual design of the website facilitates information search and evaluation of alternatives. Pinterest makes the transaction process flow with optimal ease for consumers.

5. Purchasing Habits as a Result of Social Media Exposure When it comes to social media purchasing, Facebook and Pinterest resonate with Millennials. Thirty-one percent of respondents with Facebook accounts said they had purchased something online after liking or sharing it while 17% of Twitter users said they made a purchase after following or sharing the item. For Pinterest users, 28% purchased something after pinning or sharing it. A white paper was released in 2013 on social commerce. It did not focus specifically on Millennials. Business Insider (The Rise of Social Commerce) concluded that “…one of the obstacles holding back social commerce has been the inherent friction in the buying process and the lack of intelligent buy now features incorporated directly into the social conversion.” Their data comes from retailer tracking codes where sales are attributed to referrals from social media. The table below compares the results of that study with our study. Our study indicates Millennials buy more on Facebook (3%) and Pinterest (5%) and less on Twitter (5%) than the general population.

Comparison of Recent Studies on Purchasing After Liking/Following/Pinning* Source of Study Facebook Twitter Pinterest University of MA 31% 17% 28% Business Insider 28% 22% 23% *The University of Massachusetts Dartmouth study focused solely on Millennials

©University of Massachusetts Dartmouth Center for Marketing Research 5 | P a g e 6. Facebook, Twitter and Pinterest Purchases by Category Of those purchases made after sharing something online, Millennials clearly prefer to buy goods in the category of Hair, Beauty and Apparel. This is the category where the most purchases were made across the three platforms studied, accounting for approximately half of all purchases. Pinterest is leading the way with these purchases with nearly 2 of 3 users purchasing items in this category.

On Facebook, Tech and Electronics was the second most socially influenced purchase category with 18% coming from this category. On Twitter, second place is also “Tech and Electronics” (23%), while Pinterest users are likely to buy Art, Design, DIY, Photography and Craft products next (23%) as a result of online social influence. Facebook and Twitter users are least likely to purchase Gardening & Décor. Pinterest users purchase “Food & Drink” the least. More Tech & Electronics are purchased through Twitter and Facebook while more Art & Design, DIY, Photography and Crafts are purchased through Pinterest than through their competitor platforms.

Social Media Influenced Purchasing By Category Purchase Category Facebook Twitter Pinterest Food & Drink 8% 8% 2% Art & Design, DIY, Photography, Crafts 9% 3% 23% Gardening & Décor 3% 0% 4% Hair & Beauty, Apparel 53% 53% 64% Tech & Electronics 18% 23% 6% Other 9% 15% 0%

7. Millennials as Multi-Channel Shoppers All three platforms contribute to both online and in-store purchasing. Although in the past year, there have been significant changes. The survey asked if purchases were made solely online, only at a brick and mortar store, or if both channels were utilized.

As might be expected, the number of Millennials making their final purchases online, after viewing or sharing on a social network, has increased. For all three platforms studied, Millennials are staying on the site to click through to a purchase. Facebook realized an increase of 6% online only buyers since last year’s study. The increase was even greater for Twitter with 35% now buying online and Pinterest with 51% of users remaining on the site to click through to their purchase.

Those saying they only use brick and mortar stores for their actual purchases increased by 3% for Facebook users and 1% for Pinterest users. Twitter users are 6% less likely to go to a store than they were last year. The most striking change in the past 12 months is the number of Millennials

©University of Massachusetts Dartmouth Center for Marketing Research 6 | P a g e who make both online and in store purchases. That group is down 8% for Facebook users, 11% for Twitter users and 27% for Pinterest users. Clearly, some of those buying both online and in stores last year are now buying more online through their social networking sites.

8. Percentage of Millennials Using Smart Phones/Tablets to Make Purchases Similar to last year, nearly half of the Millennials surveyed have used smart phones to make purchases online while 21% have used tablets to make purchases. With the recent introduction of technology like Apple Pay, CardBlanc and others, mobile devices will play an increasing role in online purchasing behaviors in the near future as the buying process is optimized.

9. How Much Millennials Spend Smaller purchases (less than $20) are most common on Twitter. Purchases of more than $75 are most common on Facebook. More than half of Pinterest users spend between $20-$49 buying on the site.

Social Media Influenced Spending Spending Category Facebook Twitter Pinterest Less than $20 18% 28% 17% $20-$49 36% 44% 52% $50-$74 27% 22% 19% $75-$100 10% 6% 8% Over $100 9% 0% 4%

10. Internet User Identification When asking respondents what type of Internet user category they fall into, the majority, with 42% claimed to be a Functional User, using the internet as a tool for shopping, organizing, notifying and information. Thirty percent described themselves as Connector/Sharer types, 18% are Casual Participants and 6% are Content Producers. There are fewer casual participants and more functional users this year, as Millennials become more dependent on their mobile devices in their daily lives. Millennials use the internet for purposes that exceed connecting with friends. The following definitions for each type of user were given to help Millennials in best identifying themselves online:

Functional User Use internet as tool for shopping, organizing, notifying and information Connector/Sharer Spend most of your time connecting with friends, family, sharing content Casual Participant Check in periodically with family and friends or make an occasional purchase Content Producer Constantly creates new content, blogs, uploads video

©University of Massachusetts Dartmouth Center for Marketing Research 7 | P a g e 11. Buy Buttons In July 2014, Facebook announced the addition of a “buy” button and Twitter quickly followed suit. In both cases, once a user establishes a payment account with an address, they can purchase anything that appears in their feed. The goal is keep users on the platform even as they make purchases.

While it is early in this experiment and only select consumers have been exposed to the buy button, we asked those who use Facebook and Twitter how likely they would be to use this option.

For users of Facebook, 7% said they would be very likely to use a “buy” button and 28% said they would be somewhat likely. Responses were lower for Twitter with 5% saying they would be very likely to use a buy button and 19% were somewhat likely. Given the large number of Millennials with accounts on these two platforms, there is potential for enormous success. Other mitigating variables will be the payment plans the platforms utilize and how many clicks will be needed to secure information and a purchase.

12. Older vs. Younger Millennials In this study, there are statistically valid differences between Millennials when broken down by age. The 18-22 year olds are the most active across all three platforms studied with 45% pinning companies on Pinterest, 63% liking them on Facebook and 39% following them on Twitter. The least active in liking, following or pinning companies/brands are the youngest Millennials. Approximately 1 in 10 of the 13-17 year olds is engaged with retailers on these platforms. Of those engaging with businesses in the 23-27 year old group, more do it on Facebook and for the 28-34 year olds, more do it on Twitter. Younger Millennials were far more receptive to the concept of a “buy” button than older Millennials.

Conclusion Millennials are embracing social commerce and putting their own mark on it. There is evidence that the companies/brands they like, follow and pin changes with time as does their preferred way to purchase products. Smart phones and tablets are central to social influenced purchasing. Older Millennials engage with businesses on Twitter while the youngest Millennials (13-17 years old) are least likely to engage with businesses through social networking sites. If Facebook and Twitter move ahead with their plans to add “buy” buttons, there is interest among this group. For social commerce, that addition could be a game changer.

Millennials share information online through recommendations, reviews, ratings and referrals leading to purchases via social networking platforms. For companies and brands looking to target these connected, mobile and multi-channel shoppers, it is essential to understand what they want as social commerce is poised to explode.

Nora Ganim Barnes, Ph. D. Nora Ganim Barnes is a Chancellor Professor of Marketing and Director of the Center for Marketing Research at the University of Massachusetts Dartmouth. Nora has worked as a consultant for many national and international firms. Working closely with businesses in the Northeast US, Nora and her students have provided marketing research assistance to hundreds of small businesses. She has published articles in academic and professional journals and proceedings, has contributed chapters to books, and has been awarded numerous research grants. Her work has been covered online and in print by Business Week, the NY Times, Washington Post, CNN, Reuters, Wall Street Journal, Fox News, Computer World, Time Magazine and the Harvard Business Review among others. She has been named Co-chair of Research by the Society for New Communications Research. Dr. Barnes is a frequent speaker at corporate meetings and keynote at conferences. She can be reached at [email protected]. Ava M. Lescault, MBA Ava M. Lescault is Senior Research Associate and Associate Director of the Center for Marketing Research at the University of Massachusetts Dartmouth. Ava graduated from UMass Dartmouth with a BS in Marketing and a Master's Degree in Business Administration with a concentration in Marketing Research. She recently completed a Certificate in Marketing Research from the University of Georgia. Ava has worked on approximately twenty-five extensive research projects and is a published author. Her clients include the cranberry industry, the shellfish industry, a national juice manufacturer, the Massachusetts Department of Agricultural Resources and a Fortune 500 company. She was the first person to hold the position of Senior Research Associate in the Center. Ava can be reached at [email protected]. Acknowledgement The authors wish to acknowledge the work of MBA candidate Kevin Augusto, as well as Brenden Baskin, Andrew Boucher, Melanie Freitas, Henry Ho, Dave Merken, Bailey Rice, and Ami Walz, students in the Social Commerce Marketing class at the University of Massachusetts Dartmouth, in the data collection and preparation of this report.