There are many factors consumers consider when making a purchase decision: how much utility, value, or happiness they'll gain; what the shopping experience is like; and of course, realistically, what their budget looks like.
Consumer spending power is generally defined as the capacity of an individual or group to purchase certain amounts of goods or services. This is closely linked to income, particularly disposable income, but can also be influenced by inflation, tax rates, availability of credit, and interest rates.
Millennial Spending Power
When it comes to targeting the right consumer segment, many modern businesses have become obsessed with appealing to millennials. Tech-savvy, socially-conscious, and increasingly experience-driven, millennials are both desirable and elusive.
With 80 million U.S. millennials representing approximately $1.4 trillion in disposable income in 2020, they are currently the largest consumer demographic making up more of the workforce than any other age group. While they may not have reached their peak spending potential yet, in the coming years, millennials will become higher earners as they progress further in their careers.
So despite headlines of economic challenges — crippling student debt, low home ownership rates, and financial setbacks stemming from the 2008 recession — millennial spending power is an essential focus for marketers in a wide range of industries and will continue to be for many years to come.
What is the Millennial Generation?
So who exactly are millennials? Good question. While specific date ranges can vary somewhat, the Pew Research Center defines the millennial generation as those born between 1981 and 1996. Millennials are mostly the children of Baby Boomers and some late Gen Xers. They came to know technology from a young age, but remember a world without smartphones and know how to operate a VCR. (The same can’t be said about Gen Z.)
If you need a litmus test, ask them what their AOL Instant messenger screen name was.
How Do Millennials Make Purchase Decisions?
Now that we have established who millennials are and why they are important for your business, let’s talk about how they exercise their spending and buying power.
Where Do They Spend Their Money?
Millennial consumers value convenience. Their shopping habits reflect more money spent on restaurants and technology than previous generations. Also high on the millennial priorities list are groceries, clothing, and hobbies.
Another key distinction is an increasing focus on access rather than ownership. Millennials are keen on services that allow them to tap into a sharing economy — from Uber to Rent the Runway and Airbnb. And despite their penchant for Instagram-fueled wanderlust, they spend less on travel, taking fewer vacations than other consumer segments.
How Do They Decide Where to Spend Their Money?
Online research and comparison shopping is a key aspect of the decision-making process for millennials. Many report showrooming behavior, checking out products in store and then going online to find the best possible price.
But beyond price considerations, millennial shoppers value good customer service and socially-conscious brands. They are more willing to make purchases from brands that “do the right thing” whether that’s by their customers, their workers, their community, or the environment.
And last but not least, brands with unique experiences will be the beneficiaries of millennial spending habits. This could include creative activations, personalization options, added-value services, or exclusive events. Beyond tangible products, these consumers want memories.
When Do They Buy?
When it’s convenient. Whether it’s an easy-to-navigate mobile app, free two-day shipping, or customized selections sent to their inbox, millennials love staying connected and being able to shop with their favorite brands seamlessly across channels. Moreover, millennials shop on mobile phones and via online shopping more than any other generation before them.
When there’s a discount. Millennials are expert digital researchers and know they have options. They know a good deal when they see it and like to shop with brands that reward customers with special discounts and loyalty programs.
When there’s a good story. If you have a unique point of view, human interest story, or compelling company mission that drives your brand — especially with a socially conscious skew — make sure it’s clearly communicated. Don’t underestimate the importance of strong brand storytelling.
5 Statistics about Millennial Spending Power
How do you quantify millennial spending power? Start with these five statistics, and use them to inform your marketing and shopping experience strategies.
- The median household income for the millennial cohort was $72,500 in 2016. (Pew Research)
- Approximately two-thirds of millennial consumers reported they usually spend more than $50 per shopping trip.(WWD)
- 69% of millennials report buying clothing for reasons other than their basic needs. (Forbes)
- 88% of millennials live in urban metropolitan areas. (Pew Research)
- 95% of millennials responded to a survey saying that they want brands to actively court them. (Accenture)
Knowing the facts and how to appeal to this important demographic cohort will help you craft your marketing strategy. Despite what you may have heard, millennial spending power is a formidable force — especially in the retail industry.
Learn more about how Endear can help you start connecting with these customers and building meaningful relationships today.