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FOMO! Millennials overspending thanks to social media

Ben Welsh | Age Fotostock | Getty Images. Overspending, undersaving and racking up credit card debt are some common offenders among 20-somethings. But they can be fixed.

Ten years ago, following someone you just met might have earned you a night in a holding cell. Today, thanks to social media, it’s apt to lead to overspending.

While it looks like voyeurism is going to be the modern world’s natural resting state for the foreseeable future, it’s having some unintended consequences – specifically on Millennials – according to a study from PR firm Citizen Relations.

The report, which examines how our fear of missing out is impacting purchasing decisions, found that 64 per cent of Canadians admit to experiencing the annoyingly acronym-ed FOMO (pause for a quick cringe).

“Usually that means spending more money because the lesser-priced products don’t have the luxury of being able to promote (on social media) as much as the expensive ones that have larger budgets and higher margins,” Steve Tissenbaum, an e-commerce expert and instructor at Ryerson University’s Ted Rogers School of Retail Management, tells Yahoo Canada Finance.

It kind of explains why the study found 56 per cent of Canadians between 18 and 30 feel driven to “live large” beyond their means.

“It becomes an instant gratification sort of thing but once you get it what do you do with it if it really isn’t fundamentally something you needed?” asks Tissenbaum.

With nearly a quarter of Millennials saying they genuinely worry about losing social status – trips are the top driver of FOMO followed by parties and events and seeing the food others are eating.

“The real downside is we are at the highest level of debt per capita in Canada in history even excluding mortgage costs and that we’re at one of the lowest level of savings rates,” adds Tissenbaum pointing to figures from credit-monitoring agency TransUnion pegging the average consumers non-mortgage debt at $28,853.

But Ceren Kolsarici, assistant professor of marketing at Queen’s University’s School of Business, says jealousy may not necessarily be the culprit.

“Increased Facebook use focusing on the strong ties (between close friends) have been shown to lead higher self-esteem resulting in less self-control after browsing the site which in turn has been associated with higher body mass index and higher credit card debts,” says Kolsarici. “This is more or less in line with the FOMO study if we focus on the behavioral outcome – increased spending, loss of self-control – rather than the underlying motivation – jealousy in the FOMO study, and heightened self-esteem here.”

Whatever the catalyst, marketers have taken notice, increasingly turning towards digital channels over traditional advertising mediums like radio, newspapers or television and adapting the way they use these channels.

“The banner ads of late 90s or early 2000s now have a miniscule response rate, nobody clicks on them,” says Kolsarici. “More and more people are cutting the cord, skipping commercials and streaming content online which means less effectiveness for TV ads.”

Besides, what could be more effecting then making the consumer feel something while being a click away from buying a product related to that feeling? The study found that 68 per cent of Millennials would make a reactive purchase, often within 24 hours of the emotional experience.

The main insight for businesses, says Kolsarici, is they don’t have to wait for consumers to find them, they can create incentives and push consumers to engage and share provided it’s genuine and makes them feel, if only for a second, that it’ll make them better people.

“That is why it’s called earned media,” he adds. “You have to achieve something that’s worth sharing – only then you can leverage the magic of social networks.”

That is, as long as Millennials still have some money left to spend.