The 3 Keys to Understanding Financing for Each Generation

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Retail marketers are constantly tasked with figuring out different ways to cater to the next generation of shoppers: millennials. With over 75 million people lumped in this group, the millennials, ages 18 to 34 are the largest generation. To retailers this presents an opportunity to capture sales from the group with the largest spending power.

In adapting their strategies and services to better accommodate the millennial age group, many retailers unintentionally leave a larger chunk of the population on the table: Gen X, ages 35-54, and the baby boomers, ages 55 to 69.

The fact of the matter is that no two generations expect the same shopping experience; in fact they value dramatically different experiences when it comes to browsing, checkout and purchase. What will get millennials into a store again and again might not have the same affect on the Baby Boomers.

This is especially true when it comes to store credit. Not addressing each generation’s needs could mean lost sales and unsatisfied customers.

The real challenge comes in understanding each generation’s expectations, and creating experiences that fit their lifestyles. Recent research reveals what each generation wants out of credit, and how you can leverage it to get more of your products in the hands of shoppers.

Spending Power Differences

The biggest differentiator between the generations boils down to credit score. With an average score of 672, millennials typically have a thin credit file because they have just begun building their credit, meaning that they wouldn’t qualify for  most traditional store credit offers. Baby Boomers on the other hand have a prime credit score of 782, with Gen X following behind with 712.

With each group having a different credit make-up, retailers should be conscious that a one size fits all credit offer approach isn’t going to cut it.

Many retailers have a single store credit offer that can only support one segment of their customers, leaving everyone else with an unsatisfactory experience. In fact, data shows that 2 out of 3 consumers will purchase less or abandon their purchase if they are declined for credit at checkout.

Consumer Demand Differences

How each segment values credit is an important distinction to note. Research has proven that a retailer offering credit can make all the difference in whether a customer decides to make a purchase. In fact, millennials were the most influenced by credit:

55% of millennials are more likely to shop at a retailer that offers credit, while only 42% of Gen X and 30% of Baby Boomers are more than likely.

56% of millennials say that whether or not a retailer has financing available to them affects their purchasing decision. On the other hand only a quarter of baby boomers say financing affects whether or not they make a purchase.

Looking at the data, it becomes obvious that clearly articulating the availability of credit is an important factor in increasing participation and driving revenue. This alone though, won’t move the needle.

Inclusivity is key to optimizing customer acquisition. Retailers need to offer credit options that work for each generation of customers, regardless of their credit history. This might require advocating for new partnerships or leveraging a multi-lender platform.

Feature Differences

Beyond just simply having a credit option available for all customers, there are other important user-experience features that marketers should be aware of that can influence the customer’s purchasing decision and brand affinity.

Influence of Technology

It should come as no surprise that technology evolves as quickly as customer preferences do. How customers prefer to apply for credit varies from generation to generation; however, the differences are subtle.

All three generations prefer filling out an online application on a computer vs mobile device.

31% of millennials are most likely to apply using a mobile device, while only 25% of Gen X and a slim 10% of baby boomers prefer to do so.

This data might be shocking given the rise of mobile, however, when you dissect the numbers and look at mobile browsing vs. purchasing rates, it makes sense.

Consumers typically apply for credit when they are ready to make a purchase, which is more likely to be on a device that makes it easy to fill out designated forms. As technology advances, we are likely to see the rates of mobile application interest go up. Having accommodating technology to make credit offers available across every channel will ensure a stress-free experience for shoppers.

Power of Promotions

Retailers should also consider targeting each generation with different promotional offers.

When it comes to promotions that win over millennials, they care about credit that can get them a discount on future purchases.

On the other hand, Gen X and the Boomers prefer 0% interest for 6 months.

The fact of the matter is that there will always be an endless cycle of generations of people all with preferences and values that differ from the next. As a retail marketer, it’s important to take the time to understand each generation individually and use it as way to provide a better customer experience, credit included.

At the end of the day, your consumers want your products, and credit is simply a vehicle that helps reduce that friction on the path to purchase.

Want more insight on retail credit trends, download our latest report about growth trends in retail consumer financing in 2017.

by Veronika Clough

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