Embrace Millennials on Their Own Terms

Imagine 30 years ago, when the first baby boomers were in their 20s, a business sage telling his marketing team, “Don’t target that crowd. We just can’t turn a profit on them.”

His marketing team would have spluttered, “But, but — baby boomers are the future! How can we ignore them? They don’t have much money now, but they will. We need to reach them now!”

I feel like that marketing team when an otherwise wise banker makes the same dubious pronouncement about Millennials: “No, they just aren’t profitable for us.”

All I can think is, “Then don’t you think you need a fresh business model?”

After all, it’s an actuality given that the wealth of the country one day will be in Millennial hands. They and Gen Xers will inherit about $40 trillion from baby boomers over the next three or four decades. That’s an unprecedented intergenerational transfer of wealth. There are more Millennials than there ever were baby boomers, and already they hold more than $200 billion in spending power. If you’re not positioning to bank them who else will there be to bank?

Sometimes bankers explain their reluctance by pointing out that Millennials’ habits fit poorly with the bank model. That may be true, but why would Millennials have the same banking habits as Baby Boomers or Gen-Xers? They live in a different time. To paint with a broad but not inaccurate brush:

  • They have different social habits. 88% get their news from Facebook, including 44% who do so several times a day. They are comfortable conducting much of their friendships, family interactions, and working life online rather than face-to-face.
  • They have different transaction habits. If they can’t buy, bank, explore, research, dine — you name it — if they can’t do it via smartphone or tablet, they might just not do it at all.
  • They have different expectations of business. According to USA Today, “These trend-setting, if not free-spending Americans…are broadly convinced that doing the right thing isn’t just vogue, but mandatory.” They choose companies (including financial providers) that are authentically socially conscious.
  • They have a different view of advertising; they don’t trust it. They do trust referrals from friends, but they are slower to advocate for a brand than their predecessor generations — not until they experience a genuine, personal connection. They “have a seemingly innate ability to smell out manufactured kindness.”
  • They are heavily indebted. In one study, two-thirds have at least one source of long-term debt outstanding (81% among the college educated!) and 30% have more than one.
  • The same research reveals another trait, also troubling. They believe themselves to be financially astute but are mistaken. Seventy-four percent believe they are good at handling financial matters, but of the five basic questions about fundamental concepts of financial literacy, only 8% of Millennials could answer them correctly.

Now, does that sound like a group that a wise banker should ignore? Or, does it sound like a massive, educable, needy, potentially prosperous and profitable cohort to covet, understand, and appeal to on their own terms?

I say the latter, with emphasis on the last four words: on their own terms.

For 30 years and more, we baby boomers have made markets respond to us on our terms. Our demands changed the shape of cities, houses, cars, families, and yes, the shape of banks as they branched to follow us wherever we went — to our colleges, then to our suburbs, and now back again to our downsized homes, graduated care centers, and the sunny states.

In this day and age of data analytics and social media feedback loops, it is easily knowable what business model works with which customer groups and why. Other consumer industries are remaking themselves to meet Millennials needs — think healthcare, dining, travel, home and car buying, dating. (For fun, do this search: “how Millennials are changing the {blank} industry.”)

Millennials have told us in no uncertain terms what they need from their financial services providers: online instantaneity, everything on an app, genuine engagement that profits them, social consciousness, personal referrals from trusted sources, help with their debt, and so on.

Here’s the good news. Any bank or credit union can adopt such a model — today. They can get a head start on meeting the current needs of this vast youthful market. Best of all, they will put themselves in position to meet new needs as they emerge, which they surely will.

If you haven’t embraced Millennials yet, what are you waiting for?