Decoding the Millennial Mindset for Luxury Brands
By Dr. Sheetal Jain
Millennials are the next rulers of the luxury market. They are more likely to spend more on luxury items as compared to the previous generational cohorts. Millennial consumers are projected to account for 50% of the luxury market in 2025 as compared to the current 32%. They are of significant interest for luxury brands as they tend to provide better lifetime value and brand loyalties. These new-age audiences neither follow celebrity trends nor believe in mindless consuming. They are much more demanding, selective and discerning than their parents and grandparents. Since, millennials’ beliefs and core value structure are significantly different from their prior generations, therefore, it becomes imperative for the luxury marketers to understand ‘millennials’ mindset’ and develop innovative approach to entice this lucrative market segment. Here are the 5 key characteristics of millennials which will help luxury brands to establish better connect with this peculiar group:
- Purpose-driven: Traditionally people have been buyingluxury brands for its history, craftsmanship, image, exclusivity and superior quality. As per Deloitte survey, these are no longer selling points for millennials. This generation look for purpose, transparency and genuineness. Millennials show greaterconcern for people and planet. As per Nielsen report, 73% of millennials are willing to spend more on a product if it comes from a sustainable brand. They demand for sustainable options that reflect their own values and beliefs. For example, Gucci has been able to pull its sales by winning the trust of millennials through its purpose-driven, ecologically progressive program, ‘Gucci Equilibrium’. Similarly, Adidas is focusing on purpose-based brand creation with emphasis on reducing waste and environmental impact. It has created ‘sustainable sneaker’ by utilizing eco-friendly items. Therefore, luxury brands must exhibit that they stand for a purpose and not just for profits. They can create a niche for themselves by promoting sustainability and ethical business practices.
- Loves to spend: This market segment spend lavishly on discretionary items, without much consideration about their debt levels. Unlike their parents, they are less motivated to save and therefore have greater disposable income. They believe in instant gratification and ‘living in the moment’. Therefore, in 2017, young consumers accounted for 50% of Gucci’s profits.
Millennials prefers to spend more on experiences instead of products. They are willing to pay premium for comfort or services, particularly, opulent millennials who spend more for VIP experience like a gourmet private chef and golf-cart chauffeur service. They look for personalized experiences or products that are either exclusive or specially designed for them. For example, Louis Vuitton offers a monogramming or hot stamping service for their items which provides shoppers an opportunity to make their own unique product by adding their initials. Therefore, luxury brands must provide unforgettable experience or product that resonates with millennials’ self-expression.
- Open to experimentation: Millennials are likely to try something new if it reflects their personal values and passions. They are open to experiment alternative business models thathave emerged in the luxury fashion industry such as luxury renting, luxury fashion libraries, luxury resale, etc. These new concepts provides members an opportunity to try different styles and looks without having to pay full price. Young luxury consumers don’t want to bind themselves to a single product, rather they want to enjoy the flexibility to try new items more frequently. In addition, short-term rentals gives them opportunity to flaunt and express themselves. For instance, if they want to show –off their discerning taste with Rolex or Bulgari watch but they can’t afford it, they can simply rent it. Therefore, embracing new-age focused alternative business models such as luxury fashion ‘recommerce’ can provide a way forward to luxury companies.
Millennials are embracing collaborations as they consider it ‘cool’. Collaborations like Louis Vuitton with Supreme; Chanel with Pharrell Williams; Gucci with Dapper Dan, have been highly valued by millennials. Thus, to succeed, a brand needs to provide millennials an experience instead of simply a label.
- Tech-savvy: Millennials have been identified as first high-tech generation and they embrace new media much more than previous generations. Digital experiences are most important to this segment and luxury brands cannot afford to ignore this fact. They need to create emotional connect with them and build online shopping experiences to access young shoppers in their natural habitats.
Millennials appreciate personalization, interaction and co-creation. Unlike, previous generations. they are not passive consumers. Mercedes Benz’s ‘Take the wheel’ campaign is a perfect example of creating brand story by empowering and engaging millennial shoppers. A challenge was given to 5 Instagram best photographers to spend 5 days each behind the wheels of Benz CLA. Each photographer posted pictures on their account and the one with most likes was gifted the car. The campaign generated 87 million organic impressions on Instagram and more than half a million mentions on Facebook and Twitter. Therefore, luxury brands should utilize social media platforms like Instagram to provide savvy millennials a feeling of ownership over brand story.
- Signal public self-consciousness: Millennials with high propensity to spend money, combined with goal of signaling fashion consciousness and status to other people, makes them an attractive segment for luxury brand companies. They spend unduly on high-end brands and this needless spending is possibly due to their desire to own luxury items to augment their social status. From handbags to hotels, this generational cohort has keen interest in status symbols. Therefore, luxury brands should stress on social cues to attract this audience.
Luxury brands must decode ‘millennial mindset’ and accordingly create new marketing and branding strategies to allure this most significant market segment.
(This article has also been published in ET Brand Equity on May 19, 2019).