The Young Affluent: Tips to Capture Their Potential

By Lyra Hankins

Younger consumers are a valuable segment for most marketers. They offer significant opportunities for future growth, customer lifetime value, and long-term ROI. Businesses that focus on marketing to young audiences are making a strategic investment in developing new relationships. They hope these relationships will turn into long-term revenue streams.

But, not all young consumers are the same. In fact, less than 20 percent of young households control more than 80 percent of the generation’s wealth. These 20 percent are the young affluent.

When we say young affluent, who exactly are we talking about? Let’s break it down to what we mean by young, and what we mean by affluent. Young consumers include Gen Z and Millennials ages 20-39.

But, young, affluent consumers are what most would consider to be wealthy. These consumers on average hold over $250,000 in total investable assets. That figure belongs to an audience that marketers should not ignore.

The difference between young affluent consumers and young non-affluent consumers is staggering. In fact, in comparison to young non-affluent consumers, young affluent households have:

• 4x higher income – with young affluents averaging almost $150,000 in income
• 7x higher deposits – with young affluents averaging almost $250,000 in deposits
• 26x higher investments – with young affluents averaging over $1 million in investments
• 3x higher discretionary funds – with young affluents averaging over $170,000 in discretionary funds

While many young consumers are focused on paying their bills and may even be living paycheque to paycheque, the young affluent are likely to have extra funds to spend as they please, or to save for the future.

The opportunity held by young affluents is clear, but winning their business is not easy. They are often distracted by constant social media and news updates. Their buying behaviours may also be inconsistent, and they are less loyal than older generations. Since there are only about 5.8 million young affluent households, marketers need to focus on fine-tuning their strategy to find and market to this valuable audience.

1. Find and target the young affluent – and determine which can spend more

It is important to identify new, younger audiences that are good targets for your business. That being said, marketers need to reach consumers that have two key characteristics:

• An interest in your offer
• The financial ability to buy it

While life-stage segmentation can be useful, it often falls short in differentiating which younger consumers are able to afford a company’s products and services.

That’s where consumer financial insights — such as likely affluence and spending power — can help. Consumer financial insights are anonymous, aggregated measures that can help marketers better understand consumers’ financial health. These insights also help marketers spend, save, or invest.

Marketers can combine consumer financial insights with life-stage and category transaction data. This allows marketers to identify and target younger affluent prospects and feel confident. For example, one upscale travel company determined the affluence level of its existing older customer base. Then use that metric to find prospective young consumers with the same or higher affluence level for new customer acquisition programs.

Marketers can apply consumer financial insights to their current customer base to identify which of their young customers are affluent and can likely spend more.

2. Expand lending audiences to include more young affluent consumers

It’s no secret that many younger consumers have damaged, thin or non-existent credit files — even if they are affluent. Plus, credit scores may not incorporate other financial information that could be relevant to inform segmentation and lending decisions.

To overcome the limitations of relying on credit scores, credit and insurance issuers can use consumer financial insights to identify younger, affluent prospects that are likely to have the traits that will result in a profitable lending relationship. One way to do this is to boost segmentation for young audiences before pre-screening. You can do this by differentiating young households that are likely to have high affluence, income, or financial durability.

According to an Equifax analysis, among all consumers with a modest 580 credit score, 10 percent have estimated total household income over $178,000. By relying only on credit scores, this audience might have been overlooked. With enhanced insight on likely consumer finances for young affluent consumers, marketers can better identify hidden opportunity for their offers.

3. Connect with young affluent consumers through their devices

Marketers know that young consumers are digitally focused. That is why your messages and offers need to be delivered where young affluent consumers are likely to see them.

To better reach young affluents and boost targeting for mobile, display, and social acquisition campaigns, marketers can leverage financially based digital targeting segments. For example, marketers can target Millennial audiences such as:

• 6 percent of households that are likely to include Millennials that are on the road to wealth
• 5 percent of households that are likely to include Millennials with discretionary spending > $50,000
• 12 percent of households that are likely to include Millennials with income > $100,000

If your CRM system is filled with physical addresses, then consider broadening your marketing reach. You should onboard young affluent segments to deliver your ads via mobile, social, or display, or by using email.

Consumer financial insights offer marketers the data they need. These insights find young affluent consumers and incent them to spend or invest more. To learn more about the young affluent and discover more tips to grow your relationship with them, check out our eBook: 6 ways to identify and attract young affluent consumers.

 

Lyra Hankins is a Product Marketing Sr. Director for Data-driven Marketing solutions at Equifax. Her career experience in marketing roles in technology companies gives her a broad perspective on Marketing and software/data solutions. Copyright 2022 Equifax, Inc. All rights reserved Equifax and the Equifax marks used herein are trademarks of Equifax Inc. Other product and company names mentioned herein are the property of their respective owners. All statistics are based on US data.