The 83 million American millennials have become the country's biggest percentage of working adults, making them prime targets for consumer brands. And it's not that the generation born between 1980 and 2000 doesn't want to buy stuff. It's that, mostly, they can't.
Seventy percent of the Class of 2014 took out loans to pay for college and owe an average of $29,000, according to the Institute for College Access & Success. In 1993, graduates owed an average of less than $10,000.
"Over the next five to 10 years, they're going to drive a disproportionate share of spending, so their preferences matter," said Paula Campbell Roberts, a consumer economist at Morgan Stanley. "But sluggish wage growth, student debt and high rental costs have constrained their actual growth rate. The share of consumption driven by college-age consumers overall has been in decline since 2003."
Consumer Spending
US consumer spending in 2014 grew 3 per cent for 25- to 34-year-olds, compared with 5 per cent for the rest of the population, according to Morgan Stanley data.
Paying off debt looks increasingly daunting. Stagnant wage growth disproportionately hits this group, which mostly doesn't have other sources of wealth, Roberts said. And the money millennials make is largely spent on housing.
It's as if your parents are trying to connect with you and they're trying to do it by using the same language that your friends would.
In 2013, more than half of renters spent more than a third of their income on rent, compared with 30 percent of renters paying one-third in 2005.
Kent Paris, a 24-year-old graduate student at University of California-Riverside, says he sometimes skips meals so he can make ends meet -- and he lives with his parents. That's because he's repaying $20,000 in loans for a one-year graduate program in education.
"I have to monitor priorities-wise -- I have to be able to drive to school, I have to be able to buy my school supplies," he said.
Online Reviews
Consequently, many millennials are discerning about what they buy. They read as many as 10 online reviews before making a purchase, said Nora Ganim Barnes, professor of marketing and director of the Center for Marketing Research at the University of Massachusetts-Dartmouth.
They're sort of doing stuff at the edges to try and look like they're the kind of brand that millennials might like, but really at the core they're not making the changes they need to make to really appeal.
So the parade of targeted marketing marches on despite the chance of rain.
This summer, PepsiCo will release cans decorated with emojis, another language supposedly native to millennials; Anheuser-Busch InBev SA bought seven craft breweries in two years, a play for perceived authenticity; Chuck E. Cheese introduced Wi-Fi, an appeal to young, gadget-glued parents; McDonald's did a promotion where customers could pay with love, which might be the right price for cash-strapped millennials; Kellogg is re-purposing breakfast cereal as a snack food, presumably because wacky millennials eat it at night; and the company that makes Absolut Vodka boosted its focus on social responsibility because that's what conventional wisdom says wins the hearts and wallets of millennials.
It remains to be seen if these and other established companies can succeed where others didn't.
"They're sort of doing stuff at the edges to try and look like they're the kind of brand that millennials might like, but really at the core they're not making the changes they need to make to really appeal," said Brent Smart, chief executive officer of marketing firm Saatchi & Saatchi New York. "All these brands are like, 'We really need millennials!' It's like, OK, what are you going to do differently?"
- Bloomberg.
