Take a look around, read the papers, use social media, surf the Web or watch commercials, and you'll see it: the quest to target the newest influential consumer segment is pervasive. The largest target market today is a specific group of consumers who have changed the rules and caused major disruption in nearly every industry. That group is made up of the all-powerful Millennials, now young adults and adults who were born anywhere from the early 1980s to the 2000s.
While the Millennial generation includes anyone from 18 to 34 years old, as a whole this group has a passion for the environment and social change. They want to make a difference in the world, and they’re certainly living up to that promise. They live differently, act differently, and shop differently than previous generations, and for obvious reason. They were the first to grow up with computers, and they can’t remember life without the Internet or a cell phone. They feel out of touch if they’re not on social media daily, and they value the recommendations of friends and celebrities over the advice of “experts” for everything from politics to purchases. Plus, they engage with brands online more than any other demographic. They “like” brands on Facebook, make and break restaurant reputations on Yelp, and Tweet about what they’re watching (The Walking Dead and Game of Thrones), what they’re eating, and what makes them tick.
This unprecedented level of “connectedness” has made them the driving force behind the success of innovative companies and brands that manage to find their ways into Millennials’ wallets are reaping the rewards. These winning companies focus the majority of their marketing dollars on Millennials for three reasons:
- Millennials connect with and recommend brands through social media.
- Millennials are highly brand loyal.
- Millennials have money to spend, and they shop…a lot.
As a result, companies are taking a completely new approach to marketing to successfully attract this important demographic. And it’s working. Some—like Amazon, Netflix, and Alphabet—have succeeded by building businesses on emerging technologies. They’ve changed how Millennials (and almost every other demographic) shop, how they relax, and how they socialize. Others (Apple, Nike, and Under Armour, just to name a few) have capitalized on the Millennial movement to “own” their retail sectors. They’ve evolved their products, their marketing strategies, and their brands to connect with Millennials on their own terms.
According to April’s US Census Bureau population estimates, Millennials have finally surpassed Baby Boomers to become America’s largest generation, numbering a stunning 75.4 million. That’s a huge amount of buying power, especially as older Millennials head into their late 30s. This means that the companies that have succeeded at marketing to this age group are reaping the benefits with increasing revenues and continued growth. And because studies have shown that Millennials are the most brand loyal generation, that growth is likely to continue as long as these companies can maintain a high level of innovation and (most importantly) maintain a strong connection with their Millennial fans over social media and other technology-based outreach.
What does all of this have to do with investing? Just as they’ve disrupted so many other industries, Millennials have unwittingly created a new sector index for investing—one that reaches beyond industry definitions to include one thing: the companies Millennials connect with, shop with, and propel toward success. Already causing a buzz in the industry, the Nasdaq Global Millennial Opportunity Index, the index behind the Principal Millennials Index ETF (symbol: GENY), is poised to provide a single-ticker solution for investors to leverage the momentum of companies in this unique category. Unlike industry-specific sectors, the Millennial index includes innovators in a variety of industries. Yes, high tech, but also apparel, travel, entertainment, and more. So it’s highly diversified. What the sector does not include are old school brick and mortar retailers who aren’t attractive to this crowd. It also steers away from many traditional S&P 500 winners like Johnson & Johnson, General Electric, or Proctor & Gamble.
Will the momentum of the older, well-respected companies continue? Perhaps. But without the attention of the all-powerful Millennials, they just may find themselves looking for tips from the new kids on the block on how to leverage the power of social media, product placement, and branding to drive their businesses—and the market—forward for years to come.
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