Early last year, Millennials became the largest generation in the U.S. labor force. As this generation starts to reach maturity, it has prompted many brands to turn their focus toward building brand loyalty and forging lifelong relationships with Millennial consumers, even those that have not reached affluence yet.
But at this point in time, a strategy focused solely on high-earning Millennials may not provide the immediate return many marketers are looking for. Yes, it's possible to build brand equity within a younger consumer group, and those high-earners who are not rich yet (or HENRYs) are certainly attractive, but that shouldn’t be the core focus of any brand built around selling a luxury good or service to affluent audiences. When targeting the affluent, consumers older than 55 are frequently the best way to go.
The number of Millennials entering the work force certainly looks appealing on the surface, but marketers need to take a deeper dive into the data. One thing they need to understand is the difference between a generation and an age group. Yes, Millennials are entering the work force in droves, but many are still young, and are therefore still in entry-level jobs, or just above that level. A large percentage of the generation is entering the workforce with student loan debt that reduces their discretionary spending.
To put it very simply, constituting the largest workforce demographic does not mean Millennials have reached their peak financial earning power. It takes time for entire generations to reach economic maturity, and this one is still young and strapped for cash. They simply don’t have the same discretionary spending power that older consumers have, period.
There are affluent Millennials right now, of course, and it makes sense to target that audience as part of your overall marketing segmentation strategy. But this generation carries different perspectives on affluence and spending, which, combined with the lower number of affluent Millennials, requires small adjustments to marketing strategies. A common Millennial strategy today is to get ahead of the curve by targeting the generation with offers on entry-level products and services. But marketers have to ask about the immediate ROI on lower-revenue generating products and loyalty.
The media landscape has changed so much over the past 10 years, and we can assume it will change again in the next decade. It is very difficult to forecast behavior and economic capacity, and we have no idea what loyalty or Millennial values will even look like in 2026.
For example, a Millennial consumer who purchases an entry-level luxury car in 2016 may appear to be a prime target for building brand loyalty and upgrading to higher-end models over time, but the manufacturer cannot make that assumption. As consumers’ spending capacity increases, they will become more attractive to competing auto brands. Other luxury car brands will target them and will compete for awareness. In 10 years the consumer’s life will look different and their needs and values will likely change as well. It’s a risky proposition for any brand to pin the future on one marketing strategy when they can’t predict what the future looks like.
Meanwhile, affluent Baby Boomers continue to have high spending capacity now and should be a core segment for at least the next three to five years. Millennial marketing will remain the focus of articles and trade shows, because marketers should look to the future, however any brand looking to grow its revenue in 2016 and 2017 would be shortsighted to completely turn away from marketing to the Boomer generation. Brands pursuing the Boomer audience aggressively will succeed today and then still be in position to aggressively market to Millennials as that generation’s economic capabilities improve.