Are Millennials all that important?
According to Forrester Research’s "The Future of Shopping" report, retailers should be focusing on consumers 45 and older because they have equity in their homes and bigger incomes. Millennials, by contrast, are saddled with student loans and struggling to get ahead.
"There’s this obsession with Millennials," Sucharita Mulpuru, Forrester’s analyst told Bloomberg. "The truth is Millennials aren’t spending any money with anybody because they don’t have any."
Ms. Mulpuru isn’t alone in questioning the spending clout of Millennials.
Articles over the last year have lamented how Millennials have been delaying key life events, such as marriage and home ownership. Many in this age group, it is asserted, are struggling to find quality jobs after the Great Recession and still paying off significant college debt.
According to a survey last November of 1,000 people between the ages 18 tand 34 by the Bank of America and USA Today:
- Fifty-three percent are living paycheck to paycheck;
- Thirty-three percent are paying off student loans;
- Thirty-five percent still receive regular financial support from their parents or relatives;
- Nineteen percent were still living at home and are not paying rent or expenses;
- Twenty-two percent have yet to start saving.
In its report, "Balancing Multi-Generational Retail Strategies," Synchrony Financial argues that retailers should be focusing on both Millennials and Boomers by playing up areas where they share similarities (i.e., love of savings and online browsing and the influence of women). Retailers should recognize differences, such as how the two groups use digital devices differently and Millennial’s heavy reliance on word-of-mouth.
Synchrony said that while Boomers have the most disposable income and contribute almost 50 percent of retail sales compared to about 10 percent for Millennials, retailers that don’t "fully understand and engage the Millennial customer may eventually find their strategies out of touch with their future core shoppers."
- The Future Of Shopping – Forrester Research
- Retailers Urged to Ditch Millennials in Favor of Older Shoppers – Bloomberg
- Bank of America/USA Today Release First Better Money Habits Millennial Report – Bank of America
- Millennial Customers Aren’t All They’re Cracked Up to Be – American Banker
- 6 Money Myths for Millennials to Stop Believing – The Huffington Post
- Balancing Multi-Generational Retail Strategies – Synchrony Financial
Discussion Questions
Are retailers focusing too much of their marketing resources on Millennials based on the group’s spending power? What do you see as the keys for retailers looking to balance multi-generational market opportunities?
Retailers, like most brands, constantly chase youth. The Forrester study points out the importance of Boomers, the age group that has the most disposable income. This puts retailers and brands in a bind because they have to appeal to multiple age groups with multiple tactics. That requires larger budgets and different approaches. It’s a Catch-22: Fail to pay attention to Boomers and lose immediate sales, fail to pay attention to Millennials and lose long-term sales.
I think the issue with Millennials is even bigger than that. Sucharita is, of course correct. They don’t have that much spending power YET.
But they also are just not as different as we tend to believe. There are two areas in particular that come to mind: 1. Mobile payments and 2. In-store tracking.
We seem to have the hypothesis/perception that Millennials are far more amenable to both mobile payments and in-store tracking because, well, they’re younger and hipper. Yet I have seen ZERO data to support that theory.
One of our clients, Balance Innovations, queried consumers of all different ages on both topics. While Boomers were “worse” in their openness, Millennials weren’t particularly warm to either mobile payments OR trading privacy for relevancy. The data was very unambiguous.
So, long story short, there are several questions to ask. 1. Do I really know them? 2. Do they really have purchasing power? and 3. Am I preparing for the day they DO have purchasing power?
And for all the rest, segment the customers that spend money with you today and pay the most attention to them.
As Willie Sutton said, “the reason I rob banks is that is where the money is.” So if retailers want to win they need to follow the money.
This is going to create some interesting challenges because where the money is today is not where the money will be tomorrow.
Another interesting part of the equation is the fact that one of the reasons that Millennials don’t have any savings is maybe because they are spending all of it.
I have said this for awhile, Boomers still represent 70 percent of disposable income and are being treated as if they are poor.
One-third of Millennials don’t have a driver’s license or have ever had a credit card. While they could become huge consumers in the future, many still live at home and feel no need to buy what retailers are selling, unless they use it a lot like their smartphone.
It’s not that Millennials don’t matter, I would posit the Boomers have been treated as paupers by too many in the race to shiny objects and IoT. The ones most likely to be loyal, pay full price and appreciate customer service are older. It’s time for that to be acknowledged and leveraged.
The Forrester report creates a false choice between Millennials and Boomers. Unless your business model is targeted to a specific age and lifestyle demographic, you ignore either one at your own risk.
Yes, Boomers today have more disposable income than their children, after decades in the workforce and building up home equity. But statistics also suggest inadequate savings among this age group as they head into retirement age and as their lifestyle becomes constrained by fixed income.
Meanwhile, the sheer numbers of Millennials will overtake the Boomer generation in 2015. There is a vast difference between younger members of this age group (working their way through college, renting, not awash in disposable income) and the Millennials in their early-to-mid 30s who have been in the workforce for a decade. As this population matures, has children and buys homes, its impact on spending patterns will be profound.
The other side of the equation is that Boomers have already bought a lot of what they need. Boomers are also retiring at record rates. Even if they have disposable income, how much of it will they spend?
On the Millennial side, they ultimately will buy homes and furnish them and will have families, and when they do settle down, they will have advanced careers, not entry-level positions.
Depends upon the product. For significant life events like getting married or having children some products are necessary. Millennials may not be able to afford the luxury model but need to purchase something. This generation grew up with technology so that is also likely to have a high priority. If the buying process or criteria are different, and if both groups are buying the item, then both groups need to be understood and possibly marketed to differently. There is no one-size-fits-all solution.
One thing I know about people in this country is they all have money for the things they really want. Every young generation has their sob stories but in the end we will get money if we want it. For my generation is was the President Carter issues of double digit inflation, a recession, and double digit interest/mortgage rates. We dealt with it and flourished. My first years out of college I drove tin can cars, bought cheap houses and wasn’t able to save much. But if there was something I really wanted I bought it. The key is to make people really want something.
I think it’s not either/or, it’s both or more. They should be tapping the spending potential of older shoppers, but starting to build loyalty with the younger crowd. Kohl’s might be a good example of straddling this fence.
First of all, the report is awesome. Sucherita does a great job separating the real trends from the shiny objects.
Clearly Boomers are going to have more spending power (and new spending patterns) for a significant period of time, and are going to remain the most important cohort from an economic opportunity perspective.
That doesn’t mean every brand/retailer should be exclusively focused on them. It’s entirely possible to make a great living focusing on secondary trends where competition may be lighter. IF a firm can crack the code and create a unique value prop that resonates with Millennials or Generation Z now, they have the potential to build a multi-generational revenue stream that Boomers can’t provide.
It’s not about putting all your eggs in one cohort basket, rather you need to intelligently allocate your investments across cohorts. The big takeaway from the Forrester report is that many firms are over-indexing on Millennials.
Age is not the best predictor of future purchases. Age isn’t even a particularly useful indicator for some marketing strategies.
Categorizing a shopper as “Millennial” doesn’t even tell you very much. There is a lot of difference between an 18-year-old and 34-year-old. Barkley and BCG found polar opposites within Millennials, such as the altruism-espousing “Hip-ennial” and the selfish “Gadget guru.” A quarter of Millennials reject stereotypical behavior for their generation, such as the “Anti-Millennial” busy with work and family and the “Old-school Millennial” who shuns social media.
Marketers should target other factors, such as family status, income, neighborhood, past purchases and others. Even better, marketers are better served creating their own segmentation schema specific to their categories and products rather than borrowing the off-the-shelf variety.
I agree with Dick’s “false choice” comment. If we can extend to omnichannel, why can’t we span multi-generation?
Obviously retailers should follow the money. And most of the money is not with Millennials right now. But it is important to engage them early to build loyalty that will pay off in the future. This is not deep thinking, it is just common sense.
One last time. Every shopper is important!
While I realize most Boomers, Generation Xers and even a few “Ys”—and many marketers—don’t believe the 45-and-up demographic will ever die, the truth is, we will.
And what will that leave the commercial world of the future? A bunch of consumers who have been ignored and/or treated like second-class economic citizens all their lives.
It’s not going to be pretty.
As for the second question, try treating EVERY customer like she or he really matters. It works wonders.
I think the above may be pertinent for many retail product categories, but not for food retailing. My recently-completed national research on Millennials and food retailing provided some stunning results, not the least of which is their visits, or lack thereof, to regular, full-service supermarkets. Only 56 percent shopped for groceries in regular, full-service supermarkets in the past 30 days. Compare this to 2014 FMI data that reported 89 percent of those surveyed shopped in a regular, full-service supermarket in the past 30 days.
My research included three Millennial-aged cohorts (18 to 22, 23 to 28 and 29 to 34). As expected the youngest group, for reasons noted in the article (parental support, living at home, etc.), may shop less in supermarkets, however the middle and mature Millennials are are not making regular, full-service supermarkets their first choice. Supercenters top their list and online is not too far behind regular, full-service supermarkets.
Food marketers who assume that the Millennials will start to behave like current older Americans just because they age do so at their peril.
The buying habits and consumer interest of any generation should be wooed and cultivated at the earliest point of return on investment possibilities. The timing is right for marketing to focus on Millennials not just for the current rewards, but for the potential of this fresh new generation and all of the unique opportunities they bring to retail.
This generation is the first to start maturing in the one-world market. Their size must be measured on a global scale in order to realize the immense scale of opportunity. Companies that spend marketing dollars to understand the world-wide commonalities of the one-world Millennial generation and pursue and expand Millennial interest in their products and services, will grow at unprecedented bounds.
It is necessary for the retail industry to reference what they know from the past and explore the opportunities of the present and future with a newly discovered understanding of what is needed and expected from everyone in this generation.
Both the so-called millennial generation and the boomer generation are far too large and diverse to be effectively categorized and analyzed, even though pollsters and surveys keep trying valiantly!
I grinned at the innocence of Synchrony saying “retailers that don’t ‘fully understand and engage the Millennial customer may eventually find their strategies out of touch with their future core shoppers.’” Maybe it’s smarter for retailers today to find a way to survive today by courting customers who actually do have money so they’ll still be around and in business to serve “future core shoppers.”
While it’s always nice for someone to introduce sobriety into the world, it’s going overboard to replace one simplification (obsession with Millennials) with another (focus…on consumers 45 and older).
As most of us here noted, “retailers” isn’t some homogenous group, and there are many for whom a young “paycheck-to-paycheck” demographic is exactly the one to target. OTOH, if you’re selling Depends, then clearly they aren’t. But every retailer knows that…I hope.
I think both demographics are important to cater to for different reasons. Boomers might have more disposable income, but they probably have solidified their brand loyalty over time. On the other hand, Millennials might not have as much money, but gaining them as loyal customers can be very beneficial for retailers over time.
Retailers that cater to all demographics should put in the work to target Millennials and boomers. The Millennial generation has been an obsession in retail recently and while it’s important to learn about this group of consumers, retailers shouldn’t devote too much of their marketing budget until the ROI is proven.
Let’s take a look at this from a different angle, shall we? It’s not so much about Millennials and their spending power yet. It is about the fact that the consumer is light years ahead of retail right now and if retail is going to take the much needed steps to catch up, they need to be looking at the habits of the “future” spenders.
If they focus on current spenders they will be behind before they even get started. On the other hand, because they are so focused on future spenders from an operational and cultural perspective, I’m of the opinion that the marketing spend is angling that way too and it shouldn’t be. Not yet.
It really is a balancing act and those who “get it” will be winners.
And that’s my 2 cents.
This is simple. Millennials are only unimportant if that’s not your market. If it is and you neglect them, they will find someone else to do biz with. If Millennials aren’t your market, they won’t mind if you focus on a different demographic. It’s not about following who spends more money. It’s about being successful in your market. There may be more lucrative markets than the one you’re in, but that doesn’t mean you abandon your strategy and lose the loyal customers you have.
I am not so sure that marketers are focusing too much on Millennials. While many of this group remain income constrained, much of this group is settling down and having children. Their distinct purchase patterns require new techniques that marketers are still struggling with.
At the same time, the focus on digital/mobile, word of mouth and authenticity that are typical requirements of the Millennial generation also resonate with Boomers, so all is not lost.