MacroMonitor Market Trends Newsletter April 2018

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Segmentation and Millennials

Clients may access this month's Segment Summary, Highlights: Millennials Segmentations, and request a copy of the underlying data in an Excel spreadsheet.

Millennials either are, or are becoming, the largest cohort in the United States. The time has come for organizations that seek to serve their needs to stop treating Millennials as if they are a homogeneous group. It's time to start to figure out which of the cohort's characteristics are critical for understanding how to market your products and services. Millennials share clear differences from other cohorts: greater digital fluency, more education (and student-loan debt), and ethnic color-blindness. But for financial services, the differences in transaction preferences, credit use, and insurance, saving, and investing are vast within segments of Millennials. Many of these differences are due to where the household is along its life path—not to the age, income, education, or ethnicity of the household head.

Figure 1: Millennials' Life Stages

Following the Great Recession (2008–09), many Millennials households (households whose primary head was born after 1976) started their adulthood facing a strong headwind. The lack of well-paying jobs along with significant student debt put them in a hole that, some sociologists suggest, they will be digging out from for their entire lives. Other Millennials chose to enjoy a period of extended adolescence, when they followed their own pursuits and put off thinking about starting a career, family, or adulthood. Regardless of the reason, Millennials household formation lagged that of Gen X and Boomers households when they were the same age. In the past decade, Millennials household formation has increased steadily; Millennials households currently number 40 million—roughly comparable to 41 million Boomers households. Over half of Millennials households have dependent children; the proportion with dependent children is increasing. (Is this the "echo boom"?) During the same ten-year period, the numbers of single Millennials households and married Millennials households without children have increased. Clearly, most Millennials now pursuing their life paths have a need for all the financial products and services necessary to accomplishing their goals.

Figure 2: Millennials' Financials

Debt remains a significant impediment for Millennials, but not inappropriately so for their current Life Stages. As more Millennials have established their independent households in the past decade, their level of debt has increased on average by slightly over $10,000. However, at the same time, Millennials households' average annual incomes have increased from about $45k to over $75k, and their financial assets (which include any retirement accounts) have grown from slightly more than $20k to over $70k. In spite of these sanguine overall averages, the individual situations of specific households vary considerably: Some Millennials have too much debt with little income or assets; others have little debt and significant assets or income. For financial providers with specific objectives, identifying the optimal segments of Millennials and designing an appropriate marketing program (including channel and message) are critical to their success.

Because more than 40 million Millennials households exist, the time has come for financial providers to delve into underlying segments of Millennials in order to find, size, and understand their best opportunities. Treating Millennials as a homogeneous group, or using single variables such as age or income to identify prospects, is suboptimal at best and more likely just plain wrong.

Contact CFD today to learn more about Millennials households. Highlights: Millennials Segmentations, this month's Segment Summary population focus, explores the Life Stages of Millennials households and households with above-average income, assets, and debt. Sponsors may request trends and profiles of these or any segments of Millennials populations at any time.