Millennials vs Gene-X in Luxury Spending.

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Introduction

Luxury spending is a very desirable way in which people like to spend their capital. In todays society it is without a doubt that luxury spending is no longer just for the most affluent and wealthy of people, but for the everyday consumer. For modern consumers conspicuous products are no longer limited to the upper classes. As the average level of discretionary income has increased, a larger number of people have access to conspicuous products and services (Kastanakis and Balabanis, 2012). Conspicuous products have become more sophisticated and subtle, not only in terms of flashiness but also symbolic meaning. Designer bags, shoes and watches are owned and exhibited by many individuals. This presentation will look at both Generation X and the Millennial generation (Generation Y) and distinguish the differences between the two, studying their differences in attitudes and mentalities towards luxury spending and what it means to them.

What is a generation?

Generation is a notion that was initially established in sociology among the population. It consists of a subgroup within society where individuals are of similar ages or have resided at the same moment (Brillet et al, 2012). Within these individuals they usually share common practices, expectations and similar needs inside each subgroup of generation. (Crespo, 2016)

In order to understand both Generation X and Generation Y we need to define what each is. Generation Y are commonly known as the Millennial generation. This term is used to distinguish the generation born among the years of 1986 and 2005 (Eastman et al, 2012). Generation Y is the first generation to be notorious for its “high-tech” influences. (Eastman et al, 2012). People who belong to Generation Y see great importance in education and associate it with achievement and success. They like things to be quick and hold themselves highly as individuals than those of previous generations. (Heugel, 2015)

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Generation X or Gene X for short, are those belonging to the generation between 1965 to 1981. Their principles, necessities, and preferences were formed by their developmental years. These individuals today have children and homes. They were the children that were left to look after themselves, where their parents (Baby Boomers) would both work. Making this generation very independent. They are the cohort that want to provide security and special attention to their children, which they may have not experienced themselves at the same age. Generation X are involved with their parents and extended families, and describe their parents as “cool,” assisting them with large purchasing decisions (Sandeen, 2008).

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One other term that must be distinguished before the study of Gene X and Millennials is that of Luxury. This term has been difficult to characterise and many scholars have tried to determine its definition, however all believe it is somewhat different to each others. (Phau and Prendergast, 2000) believe that luxury goods are objects that the consumer sees as exclusive, including that of the brand image, the brand awareness and the excellence of the product.

(Cornell 2002), has characterises luxury goods as “A strong element of human involvement, very limited supply and the recognition of value by others are key component.”

(Vigneron and Johnson 2004) defined luxury products as goods that fulfill practical and emotional needs through the awareness of key characteristics such as quality, rareness and hedonism.

The Generation in which someone is born is believed to have great influence among each individual when it comes to luxury spending. A study produced by Gardyn described older consumers (Baby Boomers) as the greatest enthusiasts of luxury goods. A whole seventy four percent of this cohort associated luxury with elegance. The study also saw twenty two percent of this generation describe luxury as flashy or elitist. Where as thirty seven percent of the Gene X and Generation Y group described luxury as flashy or elitist. (Gardyn, 2002)

When it comes to luxury spending Gardy explains three categories of what motivates the consumer’s purchase of luxury goods. The state of mind and personality of the consumer with in each demographic determines this spending. (Gardyn, 2002)

These are the three distinctive mind-sets that motivates the majority of luxury spending.

Luxury Is Functional.

Consumers in this section are the largest purchasers of the three categories. They tend to be older and better off with more disposable income. The consumers within this category are more willing to spend large amounts of money, to achieve a lasting more enduring life span of the product. These consumers tend to buy luxury products for their superior functionality and quality (Gardyn, 2002).

Luxury Is a Reward.

These consumers tend to be younger than the first group but older than the third group. They often use luxury goods as status symbols. This desire of success motivates them to purchase luxury items to demonstrate their achievement. Widespread luxury brands are popular in the section as they contain well-known recognition. However they are also concerned about owning luxury goods, as they don’t want to appear lavish or hedonistic. (Gardyn, 2002)

Luxury Is Indulgence.

This group tends to include younger consumers with slightly more males than the other two groups. It is also the smallest of the three. These consumers believe that the owning of a luxury good is exceptionally lavish and self-indulgent. They use luxury goods to express their originality and uniqueness and are willing to pay a premium in order to acquire this appearance. They are not greatly concerned with quality or endurance of the product, or criticism from others of their purchases. They enjoy luxury due to the emotional appeals in produces. (Gardyn, 2002)

Wiedmann’s model of luxury value explains these emotional values in a more detailed way.

(Wiedmann et al., 2017)

Luxury brands express two personal beliefs derived from private and self-directed benefits, hedonism which is related to emotional responses and perfectionism which is gained from the based perceived quality of the consumer. Looking at the model firstly the consumption of luxury goods gives the consumer more than practical convenience, as it offers intrinsic pleasure and emotional satisfaction. Subsequently resulting in acquisition, ownership, and use of luxury goods (Wiedmann et al, 2007). Therfore, luxury brands have an intrinsic hedonic potential that goes beyond consumer satisfaction, since it involves a promise of pleasure with the capability to delight, which further the brands desirability (Hagtvedt & Patrick, 2009). (Roux et al., 2017)

Similarities

Considering Millennials and Gene X are in close proximity regarding demographical age there are very few similarities when it comes to luxury spending. When looking at demographics as a whole including Baby Boomers and Gene Z. Generation X and Generation Y showed slightly more favorable attitudes toward luxury restaurants. However it has been concluded that Millennials are more open to new concepts of conspicuous luxury services, as a means of self-expression or symbols of their desired lifestyle (Phau et al, 2013). (Kim and Jang, 2014). Millennials do not differ from Generation X in their attitudes towards luxury products. But do expect a different approach to the retail experience, which is evident by their frequent usage of many digital tools, that complement and enhance this process. (Stępień and Ana, 2016)

Secondly according to Gardyn (2002), older consumers (Babay Boomers) are the major consumers of luxury products, and most of them have more positive concept toward luxury than the younger consumers Gene X and Millennials (Lee and Hwang, 2011).

Differences

Differences however were with great numbers. Firstly ownership of luxury cars and all cars in general have declined. In many Western countries, the percentage of driver’s license holders has declined young people without driver’s licenses has increased by nearly 20 percent in the last ten years. Further, drivers under 35 years old use public transportation 40 percent more often and take 24 percent more bike trips than those in the same age group had a decade earlier (Trocchia et al., 2014). And the role of the car as a status symbol has been challenged by an increased interest for other products. When Generation Y came of age, the car had already been questioned for its impact on the physical environment, its contribution to traffic congestions, and the high costs it incurs for its owners (Parment, 2013).

(Louis 2002) found that younger consumers embrace luxury spending because they favour luxury items in terms of symbols of success. (Lee and Hwang, 2011). At the same time, compared to Gene X the Generation Y group has the highest level of motivation to consume for status (Eastman and Liu, 2012) (Kim and Jang, 2014). Scholars have defined an individual’s weakness to interpersonal influence as the need to identify with, or enhance one’s image in the opinion of, significant others through the acquisition and use of products and brands. (Bearden et al., 1989, p. 473). (Kim and Jang, 2014).

Generation Y was raised by “helicopter parents” who hovered over them with a greater amount of financial support (Fingerman et al., 2009). Generation Y relies on significant flexibility of disposable income from generous parents and grandparents (Fingerman et al, 2009). Kim and Jang concluded that this income source of “money or gifted money” strengthens the relationship between psychological backgrounds and status consumption for Gen Y (Kim and Jang, 2014).

Conclusion

According to Forbes (2015), Millennials represent $200 billion in annual buying power in America. They have also been realised as both setting trends in numerous industries and influencing other demographics. They contribute greatly to the economy, exceeding the previous generational expenditure. (Stępień and Ana Pinto Lima, 2016)

The face of luxury has changed and is continuing to change dramatically today. Through the use of things such as digital, Omni channel oriented service sector, emphasising personalised customer care. Despite being most influential, Millennials do not have as big purchasing power yet, than those of the older generations including Generation X. However as Millennials buy in masses a new type of luxury goods that are less expensive, with lower quality and not rare at all, has been vastly developed and continues to. (Stępień and Ana Pinto Lima, 2016).

Credits:

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