Why you shouldn’t underestimate this important market segment
I continue to be fascinated with the impact that Millennials are having on the economy, not only at the high-end, but at the macro level, too. A report from the Pew Research Center suggests that while earnings of Millennials are beginning to rebound, their levels of home ownership are still lagging.
As you might expect, the impact of this trend is being felt across the entire economy. Richard Fry, a senior researcher at Pew, writes in the report: “This may have important consequences for the nation’s housing market recovery, as the growing young adult population has not fueled demand for housing units and the furnishings, telecom and cable installations and other ancillary purchases that accompany newly formed households.”
Granted, the Pew research covers all Millennials, not just affluent ones, so I think of this report as the “macro” view. The median weekly earnings of young adult workers in the Pew report are estimated at $574 for the first part of 2015. That represents an equivalent annual salary of approximately $30,000. For college-educated young adults, the weekly earnings during the same period were estimated at $951, representing an equivalent annual salary of approximately $50,000.
For the “micro” view, you might argue that these income levels are irrelevant to high-end brands because they are a long way from the household income threshold of $100k to be considered “affluent.” You may have a point there, but consider this: Millennials make up 20% of affluent consumers in the U.S., according to the Mendelsohn Affluent Survey (2012). That’s a sizeable group! I asked Mr. Fry at Pew if their study looked at higher income levels among affluent Millennials – and the answer was no.
Here is my working theory: I suspect that affluent Millennials are most likely ahead of their less affluent peers in terms of buying and furnishing homes. Sure, their peers who earn less may represent a sort of long tail that may take years to fully participate in the home ownership experience. But I believe affluent Millennials are in the market. Some of my own high-end home brand clients are validating this theory.
But here’s where it gets interesting. Even if affluent Millennials are buying homes at a rate higher than their less affluent peers, I believe that their shopping and buying behavior will continue to be impacted by a few important factors:
- the slow entry to the market by their friends
- the lessons learned from their parents during the recession
- the ongoing disruptive effect of technology
- the idea that they are going to shop and buy on their terms, not yours
Twenty percent of the affluent market is made up of Millennials. They are a segment that you can’t afford to ignore. You can’t count them out. And you must adjust your marketing efforts to be in sync with the way that they shop and buy.
Get it right and great rewards await you.