Despite a recovering economy (albeit slowly), the demand for luxury goods is in decline. Global instability, terror, and the uncertain U.S. political situation have all combined to cause traditional luxury product buyers to cut back. However, not to fear – the Millennials are here!
If we define Millennials as consumers born between 1981 and 2000, they represent a market of about 86 million individuals. However, if we are seeking affluent Millennials then we are talking mostly about older Millennials: those who are entering their peak earning – and consuming – years. There are about 21 million affluent Millennials in the U.S. today with household incomes over $100K. They are attracting luxury marketers’ attention, especially the female affluent Millennial.
According to Jon Birger, author of Date-onomics: How Dating Became a Lopsided Numbers Game, the rise of the affluent Millennial woman is all about demographics. Increasingly, college educated women are outnumbering their male counterparts in the U.S. When women outnumber men, they tend to focus on their careers more, and for a longer period, giving rise to a new affluent segment. (In fact, according to Bain & Co., only 40% of luxury goods buyers are male.)
But the affluent Millennial female is not your father’s luxury goods buyer, and marketers must take note. For example, research with a sample of 1,250 female Millennials making an annual household income of more than $100K found these to be their top three retail brands: Target, H&M, and Gap. Not what you were expecting in an article about marketing luxury goods?
Leah Schwartz writes in LuxurySociety.com, “When it comes to Millennials, it is not about the logo or the brand; it’s about the Value, Quality, and Buzz.” Millennials are not seeking products that are covered with gold and jewels that scream, “I can afford this!” Rather, for Millennials, it is now all about how their personality and values are expressed through the brand. Instead of being seen as someone who purchases X brand, Millennials believe that X brand benefits by being purchased by them.
Millennials are unimpressed by luxury, but they are impressed with well-made goods, delivering desired benefits at a good price, about which they can talk (or post). Millennials maintain for the most part their budget shopping habits (as demonstrated in the brand list above) but splurge when they believe the value and quality are worth the higher price.
- Value: Think about Target and their strategy of partnering with high-end designers. For a Millennial, snagging a Lily Pulitzer dress at a bargain Target price creates the opportunity to get the most bang for their buck, and, for them, that is just as good as buying it at a high-end boutique. Additionally, Target’s shopping environment is inclusive, and that also appeals to Millennial values.
- Quality: Millennials have a new definition of luxury that encompasses anything of superior quality, including the traditional handbags and jewelry, but also including higher-priced farm-to-table foods, craft beers, and exclusive experiential travel. Hublot embraces that by embracing its Swiss watch-making heritage, but also featuring beautiful modern design. “The heritage of Ferrari is huge,” said company chairman Jean-Claude Biver, “but they don’t make old cars.”
- Buzz: Italian luxury brand Fendi knows that authenticity and fun are the keys to getting the attention of Millennials, especially on social media. Pietro Beccari, Fendi’s CEO, says, “You have to be real because now the internet is stripping you naked. You cannot hide. You also have to have some fun aspect of it. Because you cannot just look too serious, pompous and distant.” This philosophy resulted in Fendi’s Fendirumi campaign, featuring two blown-up bug mascots (based on the brand’s iconic furry bag) making their appearance in landmark cities such as London, Singapore, and Hong Kong.
Luxury marketers need to evolve the story of their brand from appealing to one dominant generation (i.e., Baby Boomers and Gen Xers) to the next (Millennials). Here are some suggestions for luxury brands (and any other brands) who want to appeal to the affluent Millennial woman:
- Understand their underlying values and motivations. Much has been written about the Millennials (even by us); make sure you understand the specific segment of Millennials you want to target.
- Understand how they view your brand. Consumer research is a great way to dig underneath the surface to reveal true brand perceptions. What brand attributes and values can they connect with?
- Traditional marketers have had difficulty understanding this segment and marketing efforts have been marked by missteps. For example, Tiffany introduced a line of lower-priced silver jewelry marked “Return to Tiffany’s” to appeal to Millennial females. They were not impressed and sales suffered. Test your new products and your marketing campaigns to make sure they resonate.
- Being social is important. Millennials learn about brands on social media, but they also interact with brands on social media. Your brand must have social value to appeal to affluent Millennial women.
By matching the motivations of affluent Millennial women with their brand, marketers can attract this valuable segment. But keep in mind, the Millennial female is seeking luxury goods only if they deliver Quality, Value, and Buzz.