IBM Cloud Authors: Liz McMillan, Jeev Trika, Yeshim Deniz, Elizabeth White, John Esposito
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The Future of Retail and Luxury: Digitas' "Affluence in America: The Next Generation"
Research Identifies Five GEN Y Segments Wielding the Greatest Spending Power; By 2017 Could Be Outspending the Boomer Generation
|By PR Newswire
|December 11, 2012 01:05 PM EST
NEW YORK, Dec. 11, 2012 /PRNewswire/ -- What makes the high-rollers of Generation Y tick? Digitas, a digitally led global integrated brand agency, answers that question in a new proprietary study on consumer preferences and affluence: "Affluence in America: The Next Generation." The study synthesizes insights from a variety of sources, including the industry-leading Mendelsohn Affluent Survey.
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The study, which follows on previous research released last year—"Affluence in America: The New Consumer Landscape"—reveals just how crucial Generation Y has become for luxury marketers. The affluent segment of Generation Y (those ages 18-34, living in a household that earns over $100K in annual income), has both the largest current and potential spending for luxury items. Research shows that by 2017, they could be outspending the boomer generation.
"Luxury spending is increasingly becoming the domain of Generation Y" said George Scribner, SVP/Account Planning, Digitas and leading force behind the study. "It's important for luxury marketers—and really, all retail marketers—to hone in on how the millennial generation is redefining the experience of luxury. Only then can they create the bold ideas and programs that connect with the Gen Y growth engine."
"Luxury has changed significantly in the past few years, becoming more personal, more intimate, more value-focused, and more tech-savvy. Looking ahead, Gen Y will lead these and other trends in luxury – marketers must heed this generational shift, and heighten their understanding of Gen Y and its many sub-segments," said Dr. Stephen Kraus, SVP & Chief Insights Officer, Audience Measurement Group, Ipsos MediaCT.
The study broke down affluent millennials (population: 16.6 million) into five segments across Aspiring, Emerging, and Affluent.
ASPIRING: Annual HHI: $100-$199K
1. Aspiring Head of Household: Mean Age: 30/ Location: Midwest, South
- They tend to be married with children, and are likely to prioritize family (and work-life balance), which can impact future earnings. They are considered the least wealthy of the Gen Y subsets.
- Career paths: Technology or finance, but in non-metro regions.
2. Aspiring Children: Mean Age: 23/ Location: Northeast
- They live at home with their parents. They earn a modest personal income, but are spending four times that due to access to household income.
- Career paths: Retail jobs rather than careers, or pursuing "passion" careers like acting or entertainment.
EMERGING Annual HHI: $100-$199K
3. Emerging Head of Household: Mean Age: 28/ Location: South, West
- They tend to be unmarried. They spend frugally now, but many are pursuing career paths that will put them on track to become wealthy in the next decade.
- Career paths: Creative, upwardly mobile in financial services, technology, architecture, advertising and real estate.
AFFLUENT Annual HHI: $200K+
4. Affluent Children: Mean Age: 23/ Location: Northeast, South
- They live at home with their parents. They spend 3x what they earn due to access to a household income that's 10x their own earnings.
- Career paths: "Mission" careers like education, the arts, nonprofits or counseling.
5. Affluent Head of Household: Mean Age: 30/ Location: Northeast, West
- They're likely to be married with children, and say that work dominates their lives.
- Career paths: Traditional high-paying careers like medicine, legal and finance, as well as software design and engineering.
A large portion of affluent Generation Y attains their wealth from their parents—but they may not be on track for it in the future:
- Affluent and Aspiring Children spend between two and four times their own income, due to access to their parents' wealth.
- Many of these millennials choose careers that do not put them on track to become as affluent as their parents.
The takeaway for marketers: Luxury goods marketers must balance between catering to this financially dependent Gen Y subset now, and cultivating those who will eventually support themselves by building their own wealth and assets as they grow in their careers.
What makes millennials buy luxury products? Authenticity, nostalgia and utility.
- Authenticity: Unique, 'ever-cool' brands, i.e. Ray-Ban, Levi's, Volvo, and YSL.
- Nostalgia: Heritage brands with a sense of history, i.e. Louis Vuitton, Chanel, and BMW.
- Utility: Products that fit specific needs of the users, i.e. Hulu, Netflix, and HBO on Demand.
Definition of "Affluence":
- The minimum threshold for living a consistently affluent life is $200K HHI—for all generations.
- Generation Y segments are middle class in their spending habits and attitudes if their earnings are between $100-$199K.
- But the Generation Y segments that have over $200K in HHI are affluent in the brands they buy and activities they engage in.
- This correlates with last year's Affluence in America study, which showed that those 35 and older and making between $100-$199K consider themselves middle class.
Generation Y Media Habits: Affluent millennials are the most digital of all possible segments.
- Technology has become a new driver for consumer patterns of Gen Y, and also as a means to affluence.
- Media use is moving toward digital, and younger consumers are early and frequent adopters of new devices. Whereas earlier analysis found that youth was a greater indicator of digital behavior, Digitas found that affluence is a better predictor of device ownership.
- Therefore, affluent millennials are the most digital of all possible segments, with both the means to buy devices and the inclination to use them heavily.
Digitas—Leader in Research and Insights
This second "Affluence in America" study comes on the heels of a number of other research initiatives launched by Digitas. Just recently, the agency released research on holiday shopping that analyzed over 2.6 million social media conversations. And right before that, Digitas released a survey that predicted the rise of "Mobile Thursday" for the Thanksgiving holiday—and was proven right through later data from IBM and others.
The agency has also launched a series of industry predictions for 2013 on its blog, with global insights across mobile, brand content, design, and more.
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