For brands targeting millennials, it’s the best of times and, yes, the worst of times. The good news: Millennials are eager to spend on products they want and are as much or more brand loyal than their parents. The bad news: Unlike their parents, millennials are much better at saving their money.
A new study by TD Bank looking at US spending habits found that a full 49 percent of Americans described themselves as “good” when it came to saving money. This appears to contrast with reality, however. While the saving rate has inched up in the past two years, a recent study by the Pew Charitable Trusts found that discovered that most Americans “have less than one month of income available in readily accessible savings,” which is also bad news for their retirement savings.
The TD Bank survey does let out plenty of rope for face-palming marketers confounded by millennial spending habits. For instance, the study noted that millennials had the highest rates of “diligence” about their budgets. And yet 69 percent of them, compared to 50 percent of all respondents, “admitted to indulging on impulse purchases.”
A lot of them are making that impulse buy with cash, however, as another recent study found that up to a third of millennials are foregoing owning a credit card (no doubt helped by the financial aid they’ve found at home).
The idea that millennials self-report as good savers is also at odds with a 2014 survey about tax refunds. When Carnegie Mellon University asked 2,000 of them what they would do with a $1,000 tax return, the top response was “buy electronics.” In fairness, the second response was put it in savings.
“No organization can afford to ignore millennials,” says Mark Rose, Associate Director of Interbrand Canada. He’s right. It’s estimated that by 2017 millennials will be spending $200 billion annually, so the concern should not be how much is being saved but how the marketplace will shift as that $200 billion flows from some sectors to others.
For instance, there’s the fact millennials are spending less on real estate and more on dining out. Or how about teetering on the precipice of a revolution in household spending that is going to happen as millions of millennial dads take up purchasing responsibilities traditionally held by mom.
“Given that millennials engage with their finances in a very different way—both behaviorally and attitudinally—than other audiences, this requires a different strategy, which needs to be reflected in a unique customer experience,” said Rose. “What organizations must do is identify the commonalities across their strategically identified target audiences and build their brands from there.”
Some brands might look at the perplexing millennial demo and turn away altogether. TD Bank’s findings suggest targeting older Boomers and Gen Xers could yield better results—and it’s not alone. A new Forrester Research report, “The Future of Shopping,” points out that over decades the heft of consumer spending has moved from under-45 to over.
Rose says brands should forget chasing millennials just because they’re a hot commodity. “The most important thing for any brand is to have absolute clarity on its growth strategy and the customer segments that will provide the most value today and into the future. This is the principle that should inform how resources are allocated.”
Below, a recent example of how TD Bank is encouraging millennials to get more “fiscally fit”—a limited-time offer for free Fitbit Flex health trackers to new customers: