Fifteen years ago, if you were asked to describe what it meant to have reached affluence, it is safe to assume that it would mean owning a house, as well as a car and maybe even something else – a boat, or summerhouse. But as the oldest crop of Millennials is beginning to reach affluence, I can’t help but ponder about how this definition has evolved today, and how it might morph in the future, as this younger generation of affluents’ consumer behavior appears to be much different than generations past.
We are beginning to see the paradigm shift of a buying economy to a rental economy. No longer does ownership dictate success. As covered previously, Millennials are not as willing, or likely, to move to the suburbs and actually purchase their first home. Instead, they are choosing to continue renting apartments in urban environments. This new subset of young, affluent Americans is delaying the purchase of homes, and is choosing to live in smaller, urban domiciles. While this has a significant and direct impact on the housing market (traditionally a gauge on the financial health of the country), the indirect effects are also important.
New York Magazine just ran a story about Uber, claiming that the tech start-up might be more valuable than the behemoth Facebook! (Link). Those who follow the venture capital scene know that Uber has an astronomical valuation of around $3.5 billion. Wow, how could a car service (especially a luxury car service) be worth that much money! Well, as the article explains, Uber is transitioning from simply a car service to “‘a digital mesh,’ capable of providing all kinds of transportation and logistical services to people in the cities it serves.” They have even evolved their tag line from "Everyone's private driver" to the much broader "Where lifestyle meets logistics."
If the appetite remains for companies like Uber to be able to capitalize on this rental economy that is so influential in the marketplace, how must companies shift their marketing and branding initiatives?
For one, ease and convenience may become more important than long-term value and ownership. This consumer doesn’t care about the rental car he possesses for a few days. Really, so long as you are able to return the car in a condition that appears to be the same as how you got it, you are in the clear.
While this paradigm shift is prevalent, the purchase of items is not completely abandoned. By successfully getting products into peoples’ hands, and demonstrating the value proposition of those products and their quality, there is an opportunity to turn a rental consumer into a purchaser.
Look at the success of companies like Birchbox – a subscription box company that allows men and women to “discover” new luxury products through their monthly sampling program. This program serves as a safe and unassuming way to introduce new products to a huge audience. It provides trial without a huge risk or investment. And it works; Birchbox has reported that 50% of their customers return to Birchbox to purchase full-size products of the sample. I’d say that's a success.
So, as affluents begin to shift the way they purchase – brands must continue to follow these macro trends and ensure products are relevant and in the right marketing and distribution verticals to continue to evolve with this new affluent consumer.