Facing the Facts – and Misperceptions – about Gen Y
- Customers under age 30 have every desire to buy a new vehicle.
- Economics, not demographics, to blame for low Gen Y vehicle purchases.
The facts about Gen Y and vehicle purchases are not encouraging.
The lack of buyers under age 30 has been a conspicuous gap in the automotive industry’s recovery since the recession.
- Younger buyers (under 30) purchased more than 1.6 million new vehicles in 2007, some 10 percent of the 16+ million new vehicles sold that year.
- By 2013, that number had slipped to 1.2 million new vehicles – 20 percent fewer vehicles than five years before.
That trend is not likely to enamor Gen Y to many dealers.
But it should. Here’s why.
The narrative around why Gen Y consumers aren’t purchasing cars is often accompanied by the perception that most of those consumers are far more interested in iPhones and new digital technology than in new cars. That’s how they connect. They don’t need – or crave – the traditional freedom and emotional connection to vehicles that earlier generations may have looked to as a rite of passage.
The popular conclusion is: “They don’t care about cars.”
But the popular conclusion is also wrong. What’s behind the facts on Gen Y suggests those consumers do feel an emotional connection to vehicles and have every desire to buy one.
But here’s the rub: most can’t afford it. In other words, it’s economics, not demographics. Chalk this up to one more hidden cost that continues to linger from the recession.
- Consumers under the age of 30 carry more than $350 billion in student loan debt. For the 15 million borrowers in that age bracket, it amounts to an average debt load of more than $21,000 each.
- At the same time, consumers in the age range from the mid-20s to mid-30s have been declining as a share of the full-time workforce in the U.S. A large portion didn’t return to the workforce after the recession and others have never fully gained “optimal employment” due to the recession.
For those two reasons alone, it’s easy to see the types of obstacles in front of most young consumers who look at what it will take to afford a new vehicle. What are the implications for dealers?
First, the continuing lack of Gen Y consumers purchasing a new vehicle creates another pressure point for dealers to manage in their businesses. In response, dealers will need to think differently about the younger buyer, since the issue is vehicle affordability and not desirability.
Second, it also means putting more emphasis on cultivating this prospective customer set – identifying those younger consumers, reaching them effectively, and staying top of mind until the point when they do purchase. That also implies more emphasis on digital tools for social media and online reputation management, and on smart, database marketing.
Third, as the Gen Y demographic ages, dealers may want to tap “big data” more aggressively and the type of predictive analytics that will enable dealers to gain an edge in anticipating who can buy, when, and how to capture that business. It’s more than marketing to a segment or a niche: It’s marketing to an individual.
Finally, there are also implications for other areas of the dealership beyond new car sales. One additional fact we know about Gen Y is the importance they put on personalization and customization. Is your dealership prepared to offer a seamless, frictionless shopping experience around vehicle accessories at the point of sale? That is likely to be one more way for your dealership to stand out from the crowd in the eyes of Gen Y.
Experience often teaches that life’s conventional wisdom is often wrong. That holds true for the relationship between Gen Y and automotive dealerships. As industry sales begin to plateau and competition among dealerships continues to intensify, the dealers who can harness the Gen Y market will be at an advantage as those consumers eventually “take the wheel” as new vehicle owners.
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Note: Content for this column is drawn from the “New Vehicle Experience Study” by the research-based consulting firm, Strategic Vision. www.strategicvision.com.