Millennials, set to inherit A$30 trillion over the next 30-40 years, continue to be the focus for brands everywhere. Ranging in age from 18 to 34, this demographic is responsible for the majority of purchases across a wide range of consumer goods, and have now begun to settle down with careers, homes, and kids of their own.As Millennials move into their prime spending years, traditional financial institutions have been forced to closely examine (and change) how they do business to reach a generation who, in reality, want as little to do with them as possible. It’s not to say that Millennials don’t care about their financial health; they certainly do. They care a great deal about making money and having enough cash to fund a successful future doing the things that they enjoy. However, they aren’t engaging with financial institutions in the same ways that their parents and grandparents did.
Yesterday’s approachFinancial providers have tried to attract this generation in a multitude of ways, with varying levels of success. In Australia, most are using life stage marketing (based on understanding customer life phases to determine when they might be interested in certain products and services) in an attempt to pull in new customers and drive engagement. However, this is an increasingly ineffective strategy for Millennials, who are delaying life’s major milestones like moving out of their home and getting married.
Loyalty programs, financial education, and mobile apps are also having little impact. 90% of the time that Australians spend on mobiles is limited to three to five apps1, and none of those are financially related. That’s not to say providers shouldn’t invest in developing an app. Millennials expect to access their accounts seamlessly anywhere, at any time, and judge companies on their digital capabilities. An app may satisfy a service expectation on a transactional basis, but won’t delight on an emotional level.
The unwillingness of this generation to waste their most precious commodity - time - inside a stuffy bank branch has been interpreted by financial institutions as an ask for financial planners to take on undesirable financial tasks on behalf of these customers. However, only 16% of Australians and 5%2 of Millennials engaged a financial planner to assist them with their wealth management last year. A Nielsen survey of 68 countries3 indicates that Australia is the most fiercely independent country when it comes to making financial decisions, which is unsurprising given society’s general mistrust of financial advisors in today’s market.
The trust factorThis generation of digital natives have instant access to all of the product information, peer reviews and price comparisons they need to become financially literate if they so wish. The issue is that most don’t want to spend their time this way, creating a challenging paradox of being unwilling to manage their own money, yet not trusting professional representatives to do it for them.
71% of Millennials say they would rather go to a dentist than listen to what a bank is telling them and 33% believe they don’t need a bank at all.4 In the past, banks built up trust with their direct physical presence, ensuring branches were situated in prominent locations, visible and accessible to customers. The digital age has turned this strategy firmly on its head, forcing banks to consider new ways to gain and retain customer confidence.
When it comes to trust, one of the key requests from this group is that financial providers be brutally honest with regards to the challenges of their financial futures. Most Millennials aren’t even thinking about saving, let alone retirement, but want to be treated as adults with realistic, even confrontational, messages to ensure they can transition into financially savvy, engaged retirees.
In an interesting contrast to their predecessors, Millennials do trust technology over people, especially when they understand how technology has been configured. Technical tools do not have the same biases that humans do5, and decisions can be underpinned with real data in a way that makes this group feel like they are getting a more accurate and impartial recommendation.
Innovation and social conscience matterThe age of the disruptor has arrived, and Millennials are attracted to companies that blow up traditional business models in an innovative way. In the financial sector, organisations have discovered that using automation to provide advice creates a stronger hook for the Millennial group. This has included using algorithms to work out where best to place their money, especially if those suggestions are directed to areas of customer interest or social justice.
A great example of this is The Robin Hood Co-op, a self-described ‘activist hedge fund,’ that allows anyone to join for an affordable flat rate fee and trade on the Wall Street stock exchange. Stocks are traded using suggestions from a data mining algorithm, which looks at the actions of all investors considered historically successful, and then copies the aggregated decisions of that group. Dividends are reinvested in community causes that the co-op members nominate and then vote on.
89% of Millennials6 indicate that they would be more inclined to buy a product or service from a company with a social or environmental mission, than from one that doesn’t. Contrary to popular belief, convenience, low fees, and better returns are not necessarily the primary drivers for their decision making. To truly reach them, organisations need to look at the causes that they identify with, and the things they deem significant and find a way to position products or services in a way that ties them together. It’s the original and social-minded strategies that will capture the attention of the younger masses, and reinvent the way companies engage them in the financial world.
Where you spend your time, is where you spend your moneyAs a collective, this is the generation that values social experiences over physical ‘things’, believing this to be the key to a happier and more fulfilling life. Millennials enjoy brands that can help them achieve this ‘experience factor,’ and they are willing to pay a premium for these experiences and services, more so than for products alone.
Beer giant Anheuser-Busch invited 1,000 millennials to a mystery destination where they partied with celebrities, drank Bud Light for three days straight and created a viral sensation for the company via their social media postings. This example shows that product companies are not completely out of the game, but that they do need to start thinking about different ways to make both the product and the customer’s experience an encounter worth talking about, just as Anheuser-Busch did.
This effect is amplified by tapping into the very real epidemic of FOMO - or 'Fear of Missing Out'; a phenomenon rampant in the Millennial community. By creating an adventure that customers cannot bear to miss, brands harness both their spending power and their social advocacy. The fact is that where you spend your time, is where you spend your money.
The difficulty in understanding where that time is spent is that it is likely to be different for each person. It is entirely feasible for Millennials to have absolutely nothing in common, except for their age group. The needs and interests of the 18-year-old Millennial just graduating from university, are very different to the 34-year-old Millennial starting a family. This group is not a segment in the traditional sense; they are a collection of individuals, and they must be largely considered as such when trying to determine where and how to engage with them.
Though not homogeneous, we can think about some of the broader beliefs, habits, and values that we observe in this group and consider some of the trends that help us to navigate their world and interactions.
One of the similarities we do see is that they like to spend their time with other like-minded people. ING Direct took this passion on board, opening a cafe in San Francisco where customers could socialise over coffee, use free wifi and take the opportunity to take care of their banking needs at the same time. The primary goal was always to create ‘the best internet cafe, ever’ and the banking component was positioned as unobtrusively as possible, to become an organic option for customers who happened to be in the space.
Making the Millennials a partnerSomething this group does have in common is that they are collaborators. They participate. They create. With this in mind, organisations are finding that to engage Millennials, they must think of them as partners rather than simply just customers. They want to be involved in the creation of products or services, to have a say in how they might best meet their own needs and desires.
Domino’s was among the first to take advantage of this with its ‘Pizza Mogul’ concept. Customers are encouraged to take an entrepreneurial approach to creating and promoting their own pizza designs, and then take a cut of the sale profit for themselves. In its first 11 months, the Pizza Mogul initiative resulted in 63,000 users, 130,000 pizza creations and more than 10,000 pieces of user-generated content. The customer cares about, and advocates for, the product because they are personally invested in its success. There is a huge opportunity in the financial product space to create a similar concept with the engagement of customers.
Human connection at a premiumDespite growing up in the age of digital, most Millennials still crave an authentic and personalised human interaction when it comes to customer service. The stereotype that they prefer a digital-only channel has been disproven by the high volume of those in this age bracket who call a company directly to have their issues resolved. 48% of millennials7 said they would like their banks to offer video chat on their website or mobile/tablet application, compared to only 30% of those 55 years and older.
This is a group with a low tolerance for poor service and an expectation that support will be timely, efficient, personal and meaningful. This is especially the case when the stakes are high, in a financial emergency or where there is a major financial decision to be made.
It can be difficult to create that meaningful connection with digital alone, so a hybrid approach would appear to be an effective approach-- using human touch points where digital is inefficient or obstructive. Unfortunately, this is an area where many financial organisations are failing to deliver, with customers complaining that they are dissatisfied with the levels of service received, eroding already negative sentiments toward the sector, and making brand loyalty that much more elusive.
What’s next?Companies are already reinventing themselves to accommodate the habits of Millennials, who are all too aware of the impact that their spending behaviours are having on the market. Organisations such as Uber, Airbnb, and Spotify are quickly revolutionising the traditional industries of transport, accommodation, and music, with these alpha-influencers leading the charge. Financial providers can be no exception, desperately needing to work out how to address their future customers, including Generation Z, who are hot on the heels of Millennials with their own set of challenges.
FinTech startups have begun to undermine the reach of banks, providing the authenticity, transparency and two-way dialogue that embodies what this generation demands. Financial giants must be quick to join the movement if they want to remain a relevant part of the future of finance.
The lost Millennials are waiting impatiently for a response. They are ready to be found.
1. smartinsights.com; rba.gov.au
3. Nielson Global Survey of Investment Attitudes
4. Source: Sorry Banks, Millennials Hate You, Fast Company 2013
Disclaimer: The statements and opinions expressed in this article are those of the author(s) and do not necessarily reflect the positions of Thoughtworks.