Credit: Bentley in showroom image Olga Besnard / Shutterstock.com
High-rolling members of Gen Y will soon be the mainstay of marketers of luxury products and services, a new study shows.
The affluent segment of these millennials (those ages 18-34, living in households that earn more than $100,000 in annual income) already has the largest current spending for luxury items and the greatest potential for spending in the future. By 2017, these 1 percenters of tomorrow could even be outspending the buy-happy Baby Boomers.
Luxury has changed significantly in the past few years, becoming more personal, more value-focused and more tech-savvy, according to a study on consumer preferences and affluence conducted by Digitas, an integrated ad agency. Gen Y, a cohort 16.6 million strong, will lead these and other trends in marketing, Digitas said. Marketers must heed this generational shift and heighten their understanding of Gen Y and its many sub-segments.
The study identified three categories of affluent millennials: aspiring, emerging and affluent. Aspiring and emerging have household incomes ranging from $100,000 to $199,000; affluents have annual household incomes of $200,000 and up.
A large number of affluent members of Gen Y attain their wealth from their parents—but that may be a one-generation splurge, the study found. Many affluent and aspiring millennials spend between two and hour times their income because they have access to their parents' wealth. But many in this group choose careers that do not put them on track to become as affluent as their parents.
The trick for luxury marketers will be to balance between catering to this financially dependent Gen Y subset now while cultivating those who will eventually support themselves by building their own wealth and assets as they grow in their careers.
The qualities that they look for in their purchase of luxury goods are authenticity, nostalgia and utility, the study found.
The study also found that the threshold for entry in the Gen Y affluent lifestyle is a household income of $200,000 or more; Gen Y segments exhibited middle-class spending habits and attitudes if their earnings fell between $100,000 and $199,000 annually. This correlates with a study conducted last year that showed a similar line between middle class and affluent for those 35 and older.
"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."
Reach BusinessNewsDaily senior writer Ned Smith at firstname.lastname@example.org. Follow him on Twitter @nedbsmith.