The term “millennials” — or Generation Y — is loosely defined as those born between the early to mid-1980s through the mid-1990s and early 2000s. Currently numbering about 75 million in the United States, they now represent the largest living generation. It’s estimated that they have over $1 trillion of spending power, and millennial spending habits, brand preferences, and values are having a transformative effect on consumer marketing.
Who is the millennial?
Millennials are currently between 18 and 35 years old. They represent 23% of the total U.S. population, 30% of voters, and 38% of the working population (Brookings). They are a diverse group, with millennials making up 27% of the minority population. When compared to people in the same age bracket from 20 years ago, millennials tend to have higher incomes. However, their wealth — taking into account all of their assets — is lower than other generations, including their own parents, at the same age. They are less likely to own a home. In fact, many millennials live with their parents and have large amounts of student loan debt.
How are they spending?
Millennials tend to be drawn to subscription-based services. While previous generations might buy a software program and load it onto their computer, millennials prefer to subscribe to a monthly service for a similar product. Instead of downloading MP3s, they are subscribing to music streaming services. They subscribe to services like meal plans, snack boxes, and personal care plans such as shaving and beauty related products. Their high disposable income provides cash flow for subscriptions but leaves little available for purchase of big-ticket items.
63% of millennials shop on their smartphones every day, but 53% of them make the actual purchase in stores. 39% make their purchases online, and of those that do, 65% are comfortable making their purchases via smartphone. When they’re shopping in-store, 84% of them are using their smartphones to research products, download coupons, and do price comparisons. They’re also using their smartphones while waiting in line at checkout.
When it comes to grocery shopping, most millennials shop no more than once a week, spending an average of about $125 per trip. 60% of millennials say they are brand-loyal, but about half say they’re also looking for good deals. About half also say they use their smartphones to help them plan their grocery shopping, downloading coupons and browsing weekly ads online.
What are they spending on?
Millennials are waiting until later in life to marry, start a family, and buy a house. 71% of millennials would rather buy a car than lease one, but 59% would rather rent a home than buy one. 61% say they can’t afford to buy a house. Those that are homeowners tend to be at the upper end of the millennial age bracket: Most millennials do own a car because even if they’re still living with their parents, they still need transportation. However, they’re also likely to rely on a car service like Uber.
Millennials tend to spend their money on experiences such as concerts and sporting events. They feel that they are defined by their experiences, and are less likely than the previous generation to define themselves by their careers. Owning the latest technology is important to them, and they also want to look good. Goldman Sachs and Teen Vogue teamed up to poll millennial women, finding that millennial women are likely to spend money on higher-end cosmetics such as MAC and Sephora. For millennials, value and product quality are important and they favor things like natural, organic ingredients.
What are they not spending money on?
Millennials are less likely than the previous generation to spend money on extravagances such as a lavish wedding. As noted in a recent Washington Post article, more millennial couples are opting for a quick stop at city hall instead of a big, expensive wedding. They use technology such as live-streaming on Facebook instead of compiling a 200-person guest list.
They’ve moved away from cable TV for less expensive alternatives. One-quarter of millennials are known as “cord cutters,” dropping cable service and turning instead to services such as Netflix, Hulu, and Amazon for entertainment.
Big investments and large purchases look different to a millennial. They are waiting longer to buy a home and have children.
What influences their purchase decisions?
Advertising has a different effect on millennials than those of previous generations. Sometimes, millennials see advertisements as inauthentic, and they might attempt to avoid it by recording their favorite TV shows to skip commercials, or blocking pop-ups on the internet. This doesn’t mean that advertising is not effective with millennials, it means that they want to be spoken to and communicated with in a different way.
Millennials spend a lot of time on social media. They have become accustomed to posting their opinions and reading the opinions of others, and often those opinions involve brands, products, and services. Many millennials say they are more likely to become a customer of brands that engage with them on social media.
In addition, millennials like to connect with people, and they tend to trust people more than brands. Product reviews and recommendations from their peers are important to them. They want to feel confident that they won’t be wasting their money and that they are getting a good deal.
What does this mean for marketers?
Knowing what millennials do and do not spend money on is essential — first, for determining if they are part of your target market, and second, to understand how to reach them. Millennials are highly connected on social media, using an average of three social media accounts. That means that maintaining an active presence on social networking platforms is critical for connecting with them. They are early adopters of the latest available technology, meaning that for brands to remain relevant to millennials, they must be engaging them on whatever the newest platform is.
42% of millennials say they want to be involved in helping companies create new products. Brands that are successful in finding ways to involve millennials in co-creating products and services will be able to connect with them in a way that other companies may not.
75% of millennials say it’s important to them that a company or brand have a focus on community, whether local or global. Millennials dislike corporate greed and companies that are solely focused on making a profit, and 57% of them report that they have been personally affected in the wake of the financial crisis. Some millennials might choose your brand over your competitors if you demonstrate support for the community.
Because millennials tend to be brand-loyal, the sooner brands establish a relationship with them, the better. Brands must embrace the reality that things that were important to Generation X are not necessarily important to millennials. By understanding how they are influenced, the way they shop, and how their lifestyles differ from that of previous generations, brands can connect with millennials and make a strong impact on their purchase behavior.