This article is the second in a series about today’s luxury market and customer. If you read my first article, “Are the Roaring 20’s Back?,” you would already know that focusing on the luxury market is a key strategy for 2022 and beyond.
What’s a HENRY? Or rather, who are the HENRYs? HENRY stands for “High Earners Not Rich Yet.” What does this mean? According to the Wise Marketer, they are mostly millennials (born between 1981 and 1996, which means they would have been between 25 to 40 in 2021). Overall, they are a household under the age of 55 whose income ranges between $100 and $250k and has not yet amassed investable assets of $1 million.
Many of these HENRY customers have cleared college loans and dependency on their parents or families and are in a rising income mode; while the millennial HENRYs have not totally done so, their spending is nonetheless rising. With that rising income comes a rise in discretionary spending, moreso than the Gen X or Baby Boomer HENRYs.
Let’s look at the entire millennial generation first. According to Goldman Sachs, it is the largest population cohort — 92 million versus 61 million Gen X (1965-1980) and 77 million Baby Boomers (1946-1964) — and the first generation of digital natives. That said, its debt burden is higher than those of its predecessors, but the pandemic has started to reverse that.
So, why focus on the millennial HENRYs? First, they spend more than the other generations within the HENRY group. According to Wise Marketer, discretionary spending peaks at age 40 and begins to decline at age 50. The report cites $86K for millennial HENRYs as opposed to $67K and $60K for Gen X and Boomer HENRYs — and that number will only get bigger as younger millennial HENRYs reach their peak spending years.
What is the customer profile of millennial HENRYs? They are educated at a high level, are younger and still paying off a student loan, likely to be married, online shoppers and bookers of travel online, financially savvy and long-term investment planners, credit card users and home owners. They love authenticity, choice, the ability to attain the unique or limited, eating out at “fast casual” options, experiences and being aspirational. Ten percent of millennials meet these requirements.
Millennial HENRYs are a particular bunch with particular requirements and needs, which differ from their older HENRY cohorts. How so?
Mobile-first marketing. There have been different numbers at different times, but millennials make the majority of their purchases on their smartphones, in addition to laptops and tablets. That said, the luxury market is and always will be a sector that is oriented toward physical stores, due to the price, service and overall experience. But, digital marketing is becoming a key tool for a ROPO (Research Online, Purchase Offline) or a showrooming (the opposite of ROPO) strategy, which many luxury customers prefer. Either way, digital presence is key to success in the luxury market as well as all the others.
Millennial HENRYs are ideal luxury customers, but with their own styles and conditions. To HENRYs, brands must satisfy their aspirational selves, which is their view of who they are and who they want to be, as well as their prosocial signaling and need for uniqueness.
More, the millennial HENRYs are comfortable with new technology and adopts that as a signal of who they are.
Ethics and sustainability. These factors are important to millennial HENRYs, where they were not significant factors for their predecessors. One of the biggest differences between the millennial luxury customer and their predecessor generations is that brands must follow them and not the other way around. Even the big, iconic brands like LVMH and Kering are learning this difference.
For the millennial, the sacred “Four P’s” of marketing have now become the “Four E’s:” “product” has changed to “experience;” place has changed to “everyplace;” “price” has changed to “exchange” and “promotion has changed to “evangelism.”
OnStrategy explains:
Experience: Where marketers used to focus on their products, now we must think of the entire customer experience. What does a customer encounter related to purchasing and using your product/service?
Everyplace: Today, place has become everyplace. There are so many methods for conveying your message: IM, SMS, social media websites, video games and product placement in places like television, movies, internet video clips and more.
Exchange: With so much on the web being offered for free, pricing has become much different. Words like “freemium,” describing how premium services pay for free services offered by the same company, would have boggled marketers minds a few years ago.
Engagement and Evangelism: With so many more message channels, we can’t just bombard people with promotional messages and hope they’ll pick them up. Companies have to figure out how to get consumers to allow them into their attention spans.
Brands better pay very close attention to their entire experience, or someone else will be glad to do it for them. This is especially important, as well as difficult, in the digital space.
What happens as millennial HENRYs get old and start peak spending? Everything that they believed and their approach to spending will be geometrically multiplied by their followers, Gen Z. But that’s another subject. Watch this space.
