SINGAPORE: Over the past year, German audio firm Sennheiser has gone big on digital marketing.
Be it advertisements on social media or engaging influencers to talk about its gadgets, online campaigns have become a staple in reaching a key market - the millennials.
This is the generation born between 1980 and 1999. Also called Generation Y, the group covers more than 2.3 billion people globally, making millennials the world's largest demographic cohort.
Born in the years separating the analog and digital era, many millennials are digital natives.
This is something that companies such as Sennheiser hope to tap on.
"For the millennials, connectivity is a key essential of their daily life ... They are born into this generation of streaming, live streaming, social media, online platforms," said Mr Alex Lim, head of marketing at Sennheiser Asia.
Sennheiser is building brand awareness and product knowledge via videos and blogs to drive millennial spending. The company has increased its marketing budget for such platforms by between 20 and 30 per cent.
So far, the firm’s innovations on design, battery life and wireless technology have been a hit for this age group.
Mr Lim said: “At least five to eight hours a day, they will be constantly plugged in. They go online and they will find out exactly which are the products that suit them, suit their lifestyle. Millennials nowadays have a very strong financial capability as well. They know what to spend on, they know what is the right amount of money to be spent on very good quality products.”
The spending power of this generation is shaping business landscapes around the world.
By 2025, it is estimated that 75 per cent of the global workforce will be represented by millennials, according to Goldman Sachs Asset Management.
As their earning power increases, their spending will rise by more than 15 per cent in the next five years.
“It’s become the most powerful consumer force on the planet," said Mr David Guo, executive director, Goldman Sachs Asset Management.
"Whether you’re a corporate or an investor who’s focused on future growth, we think it certainly makes a lot of sense to align with millennials rather than some of the other generations,” he added.
In the past five years, Goldman Sachs Asset Management has formulated a portfolio strategy that draws inspiration from the lifestyle and spending patterns of millennials.
According to Mr Guo, companies that are aligning their earnings with millennials have seen better growth and outperformed their peers.
“We try to understand not just how these businesses will look like in the next one to two years, but really over the medium- to long-term, over the next five, six years. How large will that market be? What percentage of market share can that business have and what valuation should those businesses be trading?”
As of end-January, the Goldman Sachs Global Millennials Equity Portfolio had total fund assets of US$1.7 billion.
The fund’s annualised five-year net return stood at above 22 per cent.
Amazon, Alphabet and Facebook are among the fund’s top 10 holdings, accounting for more than 35 per cent of the total portfolio.
“It’s a demographic strategy. It’s not a sectorial strategy, so that means that we have the flexibility to invest across sectors and themes in search for the best growth at the best prices at any point in time," said Mr Guo.
"At the same time, this theme will evolve as millennials progress through different stages of their lives and have different demands for different types of products. In the US alone, millennials are expected to inherit over US$68 trillion in wealth by 2030,” he added.
In the next 15 years, this could translate to millennial spend growing from US$1.2 trillion to US$2.1 trillion, according to Swiss financial services firm Pictet.
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Understanding the behaviour and social media habits of this age group will be crucial for firms wanting to cash in on the millennial effect.
"The majority of millennials are now on Instagram. And because of that, they aspire to be a lot like the people that they follow," said Ms Althea Lim, group CEO and co-founder of Gushcloud International.
Gushcloud is a technology-driven digital talent and media company that provides influencer-driven solutions for companies.
The agency represents 250 influencers globally and works with brands in their digital campaigns.
It estimates that users in Singapore spend between 40 to 120 minutes on Instagram. In Indonesia, the Philippines and Thailand, usage ranges between 60 and 180 minutes a day.
From just 2 per cent of annual budget in the past, firms now allocate between 7 and 10 per cent spend on influencer marketing, said Ms Lim.
This trend is likely to continue.
“Brands will also become more strategic and more intelligent in the way that they choose their influencers to work with. When an influencer is on a social media platform, most of their audiences are now young millennials, if not Gen Z. We do think that live commerce and social commerce with influencers will be quite the way forward in the next decade,” she said.
To help retailers tap into the Asian millennial segment, fintech firms such as hoolah have come up with solutions such as instalment payment services.
Hoolah started in Singapore in 2018, and is available in more than 2,800 stores in Singapore, Hong Kong, and Malaysia.
General Manager Sean Tan explains how it works: “We allow consumers to buy upfront, have one payment and then have the rest of the payments split over a pre-defined period of time at no extra cost. There's no interest, no hidden fees, no transaction costs. On the merchant front, what we actually do for them is actually drive their business volume. We bring in new market segments that potentially they couldn't tap into.”
Over the past year, the platform has seen tremendous growth in user base, transaction volumes and topline sales.
“Our customers have seen a 20 to 40 per cent increase in their transactional volume, and also their cart sizes. If you look at millennials, we have seen a trend of them moving away from traditional credit financing to actually debit financing. They really want transparency and want to be in control both of their personal finances and also how they are spending,” said Mr Tan.
Hoolah said popular segments for millennials have shifted amid the pandemic. From fashion and fast moving consumer goods, they are now more into skincare, home decor, home electronics and sportswear.
But beyond the changing preferences, the spillover effect of millennial behaviours into other age groups will be important for businesses, industry insiders said.
“The younger generation below the millennials exhibit a lot of the same behaviours as millennials, whether that’s the use of social media, gaming or how much they care about the environment," said Mr Guo.
"So it really just demonstrates the power, the effect that they’ve had on the world, not only from a lifestyle perspective, but also economically just given how many different unique behaviours and technologies they’ve catalysed,” he added.