For luxury marketers, it’s no news that a Gen Y following is critical for success. But new research from Digitas says that courting Millennials is even more important than most brands and retailers know, with Gen Y spending likely to beat Baby Boomers by 2017. “This is a generation in transition,” George Scribner, Digitas' SVP/account planning, tells Marketing Daily. He fills us in on the research -- which zeros on those ages 18 to 34, living in a household that earns over $100K in annual income -- and what makes these spenders different.
Q: You’ve chosen five segments. Why zero in on young affluent consumers in this way?
A: Four years ago, Gen Y really hit the cultural map with President Obama’s election, and marketers were suddenly thinking, 'Oh my God, they’re adults. Maybe they have money!’ By 2010, we had started our research on affluence in America, which looked at Gen Y as an emerging segment, very digital and very aspirational. But it didn't tell the whole story, and so we wanted to look closer, and see what holds true. And here’s what we know: For people of all generations, a household income of $200,000 is the dividing line. Those who earn more see themselves as having a comfortable, consistently affluent life.
Q: Which segments of Gen Y are getting there fastest?
A: Career is really the sole and most important determinant of who achieves affluence -- typically white-collar jobs, especially in health, legal and financial services, and breakout careers like real-estate and technology. And I love that we’ve made a full loop with technology. It’s what Gen Y likes to spend money on, but it is also a major means of acquiring wealth.
Q: What would surprise marketers most?
A: To some extent, I think it’s how income doesn’t always match spending. A group we call affluent and aspiring children spends between two and four times their own income, due to access to their parents’ wealth. These are people who are living at home with their parents, and likely to be pursuing what we call mission or passion careers -- often in the arts, entertainment or activism. They are likely only earning $20,000 to $30,000, so they are off marketers’ maps right now.
Q: Aren’t they worried about spending so much more than they earn?
A: They are spending more cautiously, and there is a sense of insecurity, and of living from paycheck to paycheck. But they are still healthy spenders, especially in luxury brands.
Q: So how important is income in targeting Gen Y?
A: It is important. But another important vector is age. The second wave of Gen Y is actually larger than the first. So this is a good time for marketers to focus on what they’re doing, and get it right.
Q: What makes Millennials buy luxury products?
A: They like authenticity, including "ever-cool" brands, like Ray-Ban and Levi’s. And nostalgia and a sense of history, shown in brands like Chanel and BMW. And they really like utility, like Hulu, Netflix or HBO on Demand.