If you remember the death of Elvis Presley, you’re not a member of a demographic group that seems to be getting a disproportionate amount of attention by automotive marketers. As I mentioned in last week’s posting I gave a presentation at Google’s Think Auto Conference on October 18th. My part focused on the top 10 consumer trends affecting manufacturers. One of the hot ones was Millennials – those people born between 1977 and 1995, depending on whose definition you’re using.
There seems to be a pervasive feeling that Millennials are the single biggest group that manufacturers need to focus on in order to hit sales goals and after I presented a contrarian view to an audience who was hugely skewed toward being Millennial (lots of ad agency people), I felt somewhat like the guy who takes the punch bowl away at the party. The numbers don’t back it up.
Let’s look at the breakdown of both the US and Canadian markets by age group.
|
US Market |
Canadian Market |
|
| 18 to 35 (Millennials) |
15.7% |
17.9% |
| 36 to 55 |
35.0% |
40.6% |
| 56+ |
49.2% |
41.4% |
Looking at the market size, in 2012 Millennials account for the smallest portion of the new vehicle market lagging well behind older buyers and it really hasn’t changed a lot in the last three years. In 2009 the numbers looked like this:
|
US Market |
Canadian Market |
|
| 18 to 35 (Millennials) |
14.8% |
17.5% |
| 36 to 55 |
37.9% |
42.1% |
| 56+ |
47.2% |
40.3% |
So perhaps there’s an argument to make when we pull in a few other variables like income and vehicle transaction price.
| US Market |
18-35 |
36-55 |
56+ |
||
| Household Income | |||||
| Average (‘000s) |
$ 88.9 |
$ 128.1 |
$ 101.1 |
||
| Vehicle Price | |||||
| Average (‘000s) |
$ 29.0 |
$ 32.1 |
$ 32.1 |
||
| Canadian Market |
18-35 |
36-55 |
56+ |
||
| Household Income | |||||
| Average (‘000s) |
$ 105.7 |
$ 123.4 |
$ 87.6 |
||
| Home Ownership | |||||
| No Mortgage |
11.3% |
28.9% |
68.0% |
||
| Have Mortgage |
61.9% |
61.9% |
22.4% |
||
| Rent |
26.5% |
9.0% |
9.1% |
||
| Vehicle Price | |||||
| Average (‘000s) |
$ 34.1 |
$ 36.2 |
$ 34.4 |
||
Looks like you can’t make that argument either. In the US, Millennials make less and in both markets, don’t spend as much on a vehicle. Looking at Canada, even though they make more than those 55+ they tend to have less disposable income with only 11.3% having no mortgage compared to 68% for those 55+.
So it looks like Roger Daltry was right. Nowadays, it’s the old man who has all the money.
However, let me talk out of the other side of my mouth for a minute. Even though it’s tough to make a case based on demographics, the key takeaway with Millennials is in understanding how they use technology to communicate and shop for a car. I am fascinated when our teenage sons have friends over and they are buried in their smartphones. They pull really useful and timely information from websites that are quite obscure but incredibly valuable. I’m sure you have seen the same thing.
The other key learning is speed to response. Not that long ago dealership personnel were taught to respond to customer inquiries within 24 hours, then 4 hours, then 2 hours. Now, anything short of an instant response is not acceptable. Millennials have been leading the charge in this area.
This has obvious implications for the dealership. Realizing instant response is now price of entry, who is handling this at the store? What’s the process to ensure these inquiries and responses get logged? Who’s following up?
My point is that from a market size and potential standpoint, the old folks are where the action is for now. Looking ahead, Millennials are driving the technology bus and we need to learn, adapt, and move forward. Manufacturers who ignore this reality do so at their peril.
