The term ‘millennial’ is often thrown around in businesses and in the news, but a lot of people aren’t quite sure what a millennial actually is. Quite simply, a millennial is a demographic also known as Generation Y or the Net Generation, and consists of people who were born between 1982 and 2004. However, one of the things that millennials have taken a hit with recently is their spending habits, and the way that they buy products. The Net Generation are known to be very tech savvy, and because of this a lot of businesses tend to believe that they’re doing a lot of their purchasing online. The latter of the millennial generation are also nicknamed Generation Rent and Debt, but this isn’t necessarily the case. Here, we’re trying to get inside the head of the millennial generation and taking a closer look at their spending habits.
Things Millennials Are Putting Off
One of the biggest differences between millennials and their parents (Generation X) is that they are beginning to put off some of the big milestones in life. One of the biggest is marriage, with reports suggesting that an unprecedented number of millennials will remain unmarried through to age 40, and the marriage rate is predicted to drop to around 70%. Compared to the rates for boomers, 91%, late boomers 87% and Generation Xers 82%, this is a significant drop. Other milestones that millennials are said to be putting off include buying a house, a study by Elite Daily showed that 59% would rather rent a house than buy one and 61% can’t afford a house, and buying a car – although a study of 1,500 millennials aged 18-34 by Mizuho Securities showed that 64% of millennials plan on buying a car within 2 years and only 5% rely on car-sharing services like Uber and Lyft.
Millennial Spenders vs. Millennial Savers
A common misconception about millennials is that they do not save. However, research undertaken in 2015 by YouGov PLC covering a sample of 2028 adults aged 18-34 show that 16% save more than three quarters of their disposable income, and 23% save half each month. This is why the millennials demographic is starting to be split into two: millennial spenders and millennial savers. However, millennial spenders are three times more likely than savers to run out of money before payday, with 48% of spenders in the survey running out compared to 14% of savers. In addition to this, millennials are seven times more likely to have taken out a short term loan, 14%, compared to 2% of savers.
A big change in attitude between Generation Y and Generation X is brand loyalty. Consumer research showed that 60% of millennials are often or always loyal to brands that they currently purchase from, but only 1% of millennials find that a compelling advertisement will build up a trust between them and the brand. However, this tech savvy generation are also looking to change the way brands communicate with them. 33% say that they rely on blogs before making a purchase, and only 3% rely on TV news, magazines and books when it comes to finding out information about products.
What’s even more interesting, is that 62% believe that if a brand engages with them on social networks are far more likely to be a loyal customer, showing how customer service is going to have to change in order to keep millennials interested. Interestingly, 42% of the same sample group would be interested in helping customers to develop future products and services, showing just how personal people want their relationships with brands and businesses to be when it comes to making a purchase and maintaining brand loyalty.
Day To Day Spending
While the tech savvy generation of millennials is said to prefer doing everything online, research by Mizuho Securities suggests that more millennials actually prefer otherwise, with 54% doing their shopping in physical stores. However, a Hanover Research study shows that 50% of millennials use mobile devices in order to research products and reviews before they purchase.
While there is a clear divide between millennial spenders and millennial savers, when it does come to spending money, it is clear that millennials prefer the finer things in life. One study shows that millennials are most likely to spend their money on eating out (54%), Socialising (51%) and Clothes and Fashion (35%) over other activities and purchases.
However, studies from the US show that while millennials do love to spend, 8/10 are value seekers. For example, 78% of millennials are more likely to select a brand with a loyalty or reward program than without one, and a study by advertising firm Valssis and market research firm Ipsos suggests that more than 90% of millennials use coupons to plan their shopping lists. This shows that while a lot of millennials do enjoy the finer things when it comes to spending their money which may have given them their reputation, (with 52% of millennials being labelled with a buy now, deal with it later mantra of impulse buying) they do spend a lot of their time saving money too – with 51% of millennials saying that their coupon usage has increased over the past few years.
Getting inside of the mind of a millennial is a difficult task, due to the hugely different points of view that people will have regarding the demographic of 18-34 year olds. While the average millennial will have around £2931 in outstanding debt, excluding things like mortgages and student loans, they do believe that their parents are one of the biggest influences on their money management habits, with 63% believing that their parents or guardians have had a positive influence. By 2020, it is predicted that millennial spending power will reach around $1.14 trillion annually, showing just how diverse of a group this is.
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