Luxury brand marketers must rethink their relationship with multicultural Millennials. The group represents 80% of the total growth of Millennials more broadly – the largest consumer demographic in the U.S. – who luxury marketers are already pursuing frantically. According to a report by Nielsen, the buying power of U.S. multicultural shoppers increased by 415% from 1990 to 2014. That's more than double the increase in total spending power for the country over the same period.
When it comes right down to it, luxury marketers who overlook the multicultural Millennial, do so at their own peril. Without a thoughtful and authentic approach to capturing this group’s attention, these marketers will miss out on their projected $4.1 trillion in spending power by 2019, according to Nielsen.
The multicultural Millennial differs from previous generations in how they decide which brands they covet and prioritize high-end purchases; cultural nuances impact these decisions. For instance, multicultural Millennials are influenced by status and aspirational thinking. They respond very well to brand marketing content and visuals that feel like they connect with their culture, showing people who look like them using the product in settings they’re familiar with. If marketers can’t hone in on helping this audience “envision” what they might look like using the product, then they likely won’t choose you.
Rather than accepting a brand’s exclusivity at face value – based on its long tradition of being valued – multicultural Millennials expect they can track down information about why a brand deserves the “luxury” tag. They will share information about luxury goods via digital and social channels to communicate something of their own status, but also in the role of a true brand ambassador, they believe their peers should aspire to similar status.
Given this, digital channels are the most important demand-driver for luxury goods among the multicultural Millennial set (Hispanics are the top users of Reddit, according to Pew Internet and American Life Project). Not only does this audience massively over-index in their use of digital platforms, they also use them in ways the general market consumer does not. More than three-fourths of multicultural Millennials’s purchasing habits are made based on peer-to-peer recommendations. A thoughtful approach to engaging with this audience across digital, mobile and social channels is a great place for luxury brands to build relevance. From there, it’s mostly about engaging the audience in a way that shows how your brand fits their lifestyle and culture, to build on the relationship and drive them into retail locations to deepen the engagement.
For instance, Neiman Marcus made sweeping changes in recent years to cater to a younger, inherently more diverse audience through several digital initiatives including releasing a mobile app, using beacons and up-leveling their social media presence across several digital platforms including Instagram, Twitter, Facebook and Pinterest. The company now boasts over 1.2 million followers, and $1.2 billion of the their $4.8 billion revenue now comes from online and mobile sales. While Neiman Marcus is leading the pack of luxury department stores catering to a more digitally-savvy consumer, they’re still learning this group is much more diverse, because their social platforms in particular don’t do enough to feature the diversity of this population.
Even though Multicultural Millennials’ income is trending up, it’s really their sheer size coupled with a growing interest in “mass affluent” items including fashion and accessories, travel, and jewelry, that makes them an incredibly important demographic. While there’s opportunity for luxury brands with this massive and rapidly growing population base, there is also the challenge of striking a balance between exclusivity — luxury brands are desirable because they’re hard to get— selling more product, and increasing engagement with this audience.
This presents a challenging, but not impossible to manage balance for luxury marketers. For instance, products that are perceived as scarce such as seasonal or limited-edition items, one-time offers and limited-time deals, can be a great way of perpetuating exclusivity to a larger audience without watering down the overall brand’s exclusivity or value.
As luxury marketers begin to understand the multicultural Millennial’s buying habits, smarter tactics for reaching and influencing their affluent and aspirational members, along with the less affluent members of this massive audience who will make occasional luxury purchases, intuitive and smart marketing to this group will become commonplace. But understanding their unique relationship with and view of luxury items, native digital media habits and the way they share, discuss and make decisions about brands, will most certainly be the key to driving growth of the entire luxury space going forward.
The author makes some statements about millennials that conflict with what other market observers have said and some that do not seem to be documented by research. I wonder if there is any good research that would help to better understand whether (and when) millennials will be an important market for luxury products.
It seems that a luxury marketer would want to focus on market segments that are good sources of current sales if their company's financial results (and their personal performance) are evaluated on a quarterly and annual basis. Why would they want to give a lot of focus to a market segment that may be large in numbers but 10 or 15 years away from being able to afford true luxury, if at all, given their slow start on a career due to the recession.