Millennials are car shopping, and you'll want their business now and into the future. In this special guest post, Edmunds.com’s Chief Economist Lacey Plache, PhD, discusses new research on their preferences that reveals how to seal the deal:
Hurricane season is nearly over for 2015, but heading our way is another force to be reckoned with.
Millennials, currently aged 18-34, make up the largest generation in US history, with about 75 million members, and they are moving into the car market in a significant way.
This generation has made a weak showing in dealerships to date. The Millennials’ share of new car sales has languished around 12% in recent years and their share of used car sales has been just 18%. Both shares are proportionally low considering that Millennials make up 30% of the U.S. adult population. By many accounts, these lackluster sales can be attributed to a lack of interest in owning a car or even driving at all. Millennials are said to be more interested in owning an iPhone and socializing online. Edmunds’ research, however, has found that Millennials have not bought cars due to economic constraints rather than the rise of an anti-car culture. As they get a better foothold, we’re going to see more of them come to market.
Good news: The economic tide finally appears to be turning for this key age group. Employment finally returned to 2007 levels for both younger (18-24) and older (25-34) Millennials in 2015, enhancing the group’s ability to afford a car. A better job market has meant that many more Millennials are moving out from parent and roommate housing to form their own households, increasing their need to own a car. In fact, Millennials are already car shopping. An impressive 38% of visitors on Edmunds.com come from this cohort and they are showing strong interest in both new and used cars. It’s also worth noting that their share of site shopping far outpaces sales shares in both markets, signaling that stronger car buying by Millennials is on the horizon.
So, what’s the best way to attract Millennials who are in the market for a car? The first step is to find them where they’re shopping. While Millennials use desktops, tablets and smartphones to car shop, they tend to prefer their phones. On Edmunds, 60% of Millennial visitors come through the mobile site. These mobile shoppers are more active during evening and weekend hours, i.e., the times when shoppers are out and about, suggesting that they may be using their phones on the dealer lot.
Mobile shoppers are just as likely as wired site shoppers to view specific models and they consume comparable amounts of site content to wired site users. What’s more, Edmunds’ analyses reveal that mobile shoppers appear to be as serious about car buying as wired shoppers. Shoppers on both site types engage in the same key shopping activities, including reading reviews, researching pricing and viewing inventory.
Further, Edmunds finds that mobile shoppers are increasingly likely to contact dealers. The volume of customers submitting traditional price request forms has more than doubled year over year for the past two years, thanks to growing mobile traffic and to optimizing the forms for mobile usage. New ways of contacting dealers are also proving popular with mobile shoppers. For example, Edmunds introduced its Carcode texting platform last winter to facilitate shopper-dealer contact through this popular communication method. (How popular? Usage statistics find that 90% of text messages are read with the average text message read in 90 seconds. Text message open rates hover around 99%, compared to email open rates of 22%.) Carcode contacts have grown rapidly since its roll-out. Plus, “clicking to call” a dealer from the Edmunds website is gaining momentum with mobile shoppers as well.
After locating car-shopping Millennials, the next step is to know what to offer them. Edmunds’ analyses show that Millennials have champagne tastes on a beer budget. They value comfort, performance and features and they represent the largest group of shoppers on Edmunds with an affinity for luxury, according to Google Analytics. When it comes to buying, they do buy luxury vehicles when they can. Millennials buy a higher share of luxury and sports cars than other age groups at the same income levels for every income level except the highest ($150,000 and above).
But, buying luxury can be challenging for many Millennials, given their economic constraints. They also represent the largest groups of value shoppers and bargain shoppers on Edmunds and they pride themselves on being smart buyers.
Not surprisingly, they like to lease. Millennials lease a higher share of new cars (28%) than any other age group (25%).
Millennials are a huge generation, and many experts recommend sub-segmenting them to reflect the variety of lifestyle choices they are making. For dealers, the range of Millennials’ preferences means there is plenty of opportunity for both mass market and luxury brands to attract Millennials. The key strategy is to offer plenty of bang for the buck.
Lacey Plache is the Chief Economist for Edmunds.com. Follow @AutoEconomist [http://twitter.com/autoeconomist] on Twitter.