The Generation X, more commonly referred to as Millennials, are considered to be the nation’s biggest spenders, as they move into their prime earning and spending years, and thereafter dominate conversations around product strategy, marketing, and the economy at large. This generation is different, and so businesses too see and interact with them as a distinctly opinionated consumer so as to draw their attention.
However, what is so unique about millennials and their spending patterns? Let us understand.
Millennials were roughly born between 1982 and 1996, and majorly comprise of the age group between 22 and 36 years. They have various peculiarities that make them stand apart, such as their active lifestyle, tech-savviness, taking longer to marry, etc.
Prefer to spend on experiences
However, out of these set of behaviours, one of them is especially important for businesses, and that is that three out of four millennials prefer to spend money on experiences rather than consumer goods. But the truth is that those are not just millennials, this trend started affecting everyone.
Studies show that people are more satisfied when they spend the money on living compared to possessing. It is interesting what could be a reason for such a change because previously possessing a property was a priority as it served as a safety guarantee. Today it is a lifestyle upgrade, instead.
One reason for such behaviour could be the social networks. 36 per cent of Generation X members reported that they picked a travel destination due to seeing it on social media. Today, videos of people traveling, exploring and living can be found more on your Instagram or Facebook feed compared to a fancy piece of clothing or a luxurious car.
Motivation behind buying a product has shifted
Moreover, the motivation behind buying a product has also shifted from only materialistic purposes. Gen X is quite well aware of the society and environment where they live in. So, purchasing a product or a service that in return “gives back to the society” has also become a new trend.
Millennials consider social responsibility and environmental friendliness when considering their purchases. So brands face millennials’ significant expectations in terms of shopping and investment in dollars. They typically choose to either follow their own instincts or go along with their peers but have become rather wary of financial advice given by parents and professionals in the field. They also prefer personal connections with those who manage their money, who reflect their highly held values of trust, authenticity, and choice.
Millennials focus on discounts
They value price over recommendations, the brand’s reputation, and even product quality. They follow brands online just for discount opportunities. 66% of millennials would switch brands if offered at least a 30 per cent discount, and only a third see a brand to consider trends or product updates.
Ironically, 60 per cent of the millennials state loyalty to brands they currently purchase from if treated well through customer-centric experience. To ensure allegiance, companies include loyalty programs with custom discounts as well as active courtship.
Other values that brands should center upon are authenticity, local sourcing, ethical production, a great shopping experience, and giving back to society. 75 per cent of the millennials consider it fairly or very important that brands give back to society instead of just making a profit.
What do they majorly spend on?
It has been a trend that millennials spend more on comforts and conveniences which include,
- 60% of millennials spend more than 500 rupees on a single coffee
- 70% of millennials will spend a little extra to eat at the hip restaurants in town
- 69% of millennials buy clothes for reasons beyond basic necessity
- Over 50% of millennials spend money on taxis and Ubers
Millennials spend more per year on things like,
- Cell phones as nearly all own a smartphone and comprise the highest usage as well
- Hobbies, electronics, and clothing
Millennials tend to spend less money on:
- Television—as streaming services have come online, cable is becoming a service of the past
- Travel, because they’re unable to afford regular vacations and struggle to save for them
- Furniture/building materials
How can millennial spending affect the economy?
India's millennials are the driving force behind what could well be the country's mobile economic revolution. As the largest millennial population in the world, the sheer number of India's 18- to 35-year-olds shall doubtlessly hold a significant sway over the country's immediate economic future. Their influence could far exceed their numbers. Their embrace of online shopping through mobile devices, bolstered by the rapid expansion of broadband Internet availability and reliability, is set to revolutionize the business landscape in India, and perhaps beyond. Indian Millennials could become the largest disruptive force in India for years to come, and this trend is still in its nascent stages.
The youth of this generation are better educated, better connected to information, and better connected to the world than their predecessors in prior generations. They are also part of a rising middle class.
Indeed, while India's current per capita income of $1,700 ranks well below that of other emerging markets, such as China and Brazil, its GDP is expected to increase from an estimated $2.2 trillion in 2017 to around $5 trillion in 2025, with per capita annual income also rising to $3,650 over that eight-year span.The expected increase, not only in the number of Indian Millennials and their share of the overall Indian population, but also their growing spending ability and embrace of the Internet, will make them a powerful economic force.
Overconsumption and escalating spending
The concern of overconsumption and escalating spending tendencies among millennials, however, points at a far more crucial question. Do millennials have access to emergency finances in dire times of need? Are they saving enough for their life after retirement? Are they balancing out their expenses and investments? While, some millennials think that they do not make enough money to be able to save for their retirement at present, some are absolutely indifferent about the need. Well, if they’d be prepared to come out of a financial dip successfully or not, only time is to tell.
The author is Founder, Loanwalle.com