Millennials: Buying Power
Estimates value the buying power of the millennial market at around $1.3 trillion in the US. That would translate to around $10 trillion globally.
When considering Millennial buying power, we need to look at the numbers in 3 ways:
- Millennials and direct spending
- Millennials and their influence on other people
- The lifetime value of the Millennial market
This article looks at these 3 aspects of Millennial buying power.
For the insights behind these facts, check out my E-Course on Millennials below.
Millennials Buying Power and Direct Spending
According to estimates, Millennials will spend $1.3 trillion annually in the US, or around $10 trillion globally in 2015.
What’s interesting about this number is which markets stand to benefit most from the consumer behavior of the Millennials:
And the industries which stand to lose the most are those that have focused solely on heavily advertising their way into the attention of Millennials in the last decade:
- traditional media
- beverages and consumer packaged goods
Millennials and Their Influence on Other People
We need to consider the impact of Millennials not just on their direct buying power but also on their indirect value. Indirect value is a measure of how much buying power is influenced by the preferences of Millennials. Consider these examples:
- Daughter shows Mom how to use Instagram so Mom can follow her daughter’s travelog around the world. Mom becomes Instagram user by default.
- Undergrad student heads to University. Parents ask him which laptop he wants. Of course, he says, it’s a Macbook Air.
- A generation of students scope out and experiment with messaging technologies. Their exploration of the medium provides marketers and product developers with case study insights, usage scenarios and data on charging models to take to the adult market.
I cover the subject of influence more extensively in my Total Youth Handbook where you will find on more about the how and why of influence.
For now, consider these facts:
- 81% of Millennials bought their mobile phones based on what their friends, not what the ad agency, said
- Millennials discover new apps (especially messenger apps) through seeing what their friends are doing
- Younger Millennials exercise influence over family purchase decisions, especially when it comes to the purchase of IT products like tablets and laptop computers.
The Lifetime Value of the Millennial Market
Apple serves as a great case study in how we should market to students. Most IT companies ignored the student market because a) they didn’t have much money and b) parents held the purse strings. But Apple knew if they focused on the lifetime value of the Millennial market, they could develop strategies with a long term focus, strategies that didn’t have to yield results in the next quarter, strategies that could take their time to grow. That helped Apple build out the hugely successful retail stores, a strategy that has been instrumental in winning the student market.
My point is that focusing on Lifetime Value of Millennials rather than their immediate return is key. Focusing on the short term value only yields short term results. Harley Davidson famously overlooked the Millennial customer, focusing only on its older, higher-paying customers. Look at where Harley is today – most customers are trading in their Harleys for Zimmer Frames.
While Millennials are “only” a $1 trillion market today, think of the long term value of building relationships with this customer now. Wall Street is already sizing up this demographic’s $30 trillion inheritance.
Any good investor will tell you they need to stay ahead of the market. You don’t buy at the peak when everyone else has jumped on board. The same applies to marketing to Millennials. You need to get on board before the market peaks, before all the short-term focused brands switch on to the value of this market.