A new approach is needed to sell to millennials. They are better informed, have different needs, and are a target group worth understanding.
ARE MILLENNIALS STAYING AWAY from car ownership? Yes and no.
A J.D. Power and Associates study says that Gen Y bought 26 per cent of new vehicles sold in the U.S. last year, compared to 24 per cent for Gen X, although Boomers still dominated, with a 40 per cent share.
On the other hand, reasearch from University of Michigan Transportation Research Institute says that nearly a third of 19-year-olds didn’t get a driver’s licence in 2010, compared with just 17 per cent of Boomers in 1983.
But even if they’re not in showrooms now, they will be soon enough. The crucial 18-to-34 demographic isn’t going to be swayed by over-the-top styling or fancy technology, but when they need it, they will come.
“They’re a very pragmatic group,” says James Marchand, senior manager, Honda Sales and Marketing. “They’re buying because they have a need to fulfill, and they’re not as swayed by emotional reasons as older buyers. It has to appeal more to what they need and the needs of their lifestyle.”
Nineteen-year-old Lucas Teng, a first-year university student enrolled in a new media program, says that while cars played a major role in his youth — a necessity of his rural environment — he puts less emphasis on them now that he’s living in an urban core.
“I do love driving,” he says, “but now that I am downtown, there’s just no reason to have a car. It doesn’t make financial sense. The transit system is so good that I don’t miss the independence. If I won the lottery, I’d get a car, but otherwise, transit will do.”
He says not many of his friends own cars either, because the money it takes to keep a car on the road and the price of school combined simply put ownership out of reach.
Marchand says they too are finding that budget-sensitivity is pervasive, and Honda is aiming its millennial-directed marketing and advertising at what they can afford. “[Millennials] don’t have a need until there’s a changing event,” he says.
In her final year of a child- and youth-care degree, 22-year-old Pam Huffman agrees. It’s only graduation that has her on the hunt for her first car. “The vast majority of my friends still don’t have cars. It doesn’t seem like a big deal. But I will soon be working, probably in Toronto [nearly an hour’s commute east of home]. I need something that works better than transit,” she says.
Data from Highway Loss Data Institute cited in The Globe and Mail last year said that, “There was an inverse relationship between the growing unemployment spread and the falling ratio of teen drivers to prime-age drivers.” They said that while car ownership might be less attainable for the age group, it would change quickly.
Edmunds.com research also points to financial issues as the root cause of most disinclinations to buy; Gen Ys buy luxury cars “to a similar extent or more as older buyers with the same income,” according to one of its reports — but their buying choices “suggest an interest in cars that will translate into more purchases when economic conditions allow.”
Twenty-two-year-old Sam Therien, a recent nursing student in North Bay, Ont., recently acquired her first car, a 1998 VW Beetle, the old-fashioned way: she “nagged” it off her grandparents.
“I was prepared to purchase,” she says, “but my mom didn’t want me to because of my student loans. I’ve got debts to pay and she didn’t want me to have more. I just thought, ‘hey, I’m a nurse now, it’ll get paid off,’ but now I look at my budget and think, ‘wow, it’s expensive just to live!’”
Therien says incentives and financing options were swaying her towards a new car purchase, but once she got real about the numbers, it just didn’t compute. “You go in and hear you can pay so much over this many months, and it’s only so much a week and it sounds do-able, but then you really sit down and work it out, and it isn’t at all. If I had money now, I wouldn’t be driving my grandmother’s car.”
Huffman says she’s hitting the market with few preconceived ideas about which car might suit her. “I don’t have a certain car in mind,” says Huffman. “It has to be good on gas, fairly small, and all the Bluetooth stuff would be awesome.” Reliability is high up on her list, too: “I’m looking for a certified used car, and I don’t plan to look outside that.”
Young people don’t seem as caught up in the name brand or reputation associated with them as previous generations. “I don’t see cars as a status thing, personally,” she says. “I don’t care what I’m driving. My friend just bought an older used car. It’s not the best, but she loves it because it’s hers and she doesn’t have to ask her parents.”
While Huffman says she, like many of her generation, is interested in green technologies and alternative fuels, right now her budget doesn’t permit that consideration. “When I get older and have a steady income, I will definitely look into it.”
Millennials are also simply delaying most life events, from getting married and having children, to buying homes. AutoTrader research released last summer indicates that this demographic will assume a larger role in the near future: while they make up only about 12 per cent of the U.S. market now, it will grow to about 40 per cent of the new-car-buying market by 2020.
When millennials do start flocking to the showroom, dealers will have a larger role than ever to play in keeping them. Brand loyalty doesn’t seem to come down through the generations as it once did, and millennials expect to be treated well.
Honda’s Marchand cautions that to hang onto younger buyers through their buying cycle, dealers will be even more compelled to provide excellent customer service and build good relationships. “If you want them to come back and be loyal, their experience at the dealership is much more important,” he says. “You have to be honest and upfront. They’re very tech-savvy so chances are they already have the information they need. They know what they can buy, and maybe how they want to buy.”
Huffman agrees, saying her ideal dealership experience will be low-pressure. “I think car-buying could be intimidating,” she says. “I’d rather they didn’t try to upsell me. I want them to understand that I’m young and try to help me, not push something on me that I can’t afford. I definitely won’t go by myself. I think that’s asking for trouble.”
She says transparency is key. “I don’t want to haggle. I don’t want to think I’m getting a great deal and find out later that because of my inexperience, I got something less.”
As for brand loyalty, Therien says that these days she thinks most brands are similar in quality levels and her purchase will boil down to value for money. “Maybe it was a big deal back in the day to drive a Chevy or whatever, but I don’t think there’s any ‘this brand is so much better than that one’ anymore. I think they’re all pretty equal.”
For Marchand, the challenge is earning that loyalty. “They may not be as brand loyal as older buyers,” he concedes. “What loyalty you do get is more difficult to earn, but that’s where customer service versus the product itself comes in. If you have great service, that’s going to be a stronger tie to the long-term buyers in this group.”
