We submit that the reason for this is that the research done by the majority of corporations on this generation was wrong. So if you are still waiting for those cataclysmic changes to consumer behaviour the Millennials were going to bring, we hope you’re not holding your breath…
In this article, we walk you through some of the errors these companies made when attempting to cater to this supposedly radical generation, and highlight the opportunities that getting it right with the next generation could present.
Generation Z is rapidly approaching that key time where their influence will begin to be felt, and by understanding that influence, we can help you identify and prioritize projects and strategies that will drive meaningful business impact.
So how do we know that we got it wrong with Millennials? Well, because of the results.
Books were written and studies were performed. Corporations spent millions on consultants. New products were released and new marketing pitches were created and delivered. But nothing changed. Consumption patterns are, in aggregate, unchanged, according to Statistics Canada.
To understand why this might be, you have to look at exactly how we mischaracterized Millennials. For instance, some infamous characteristics include:
But think of the youth movements of the past 100 years. Could these attributes not also be applied to hippies, rebels, the MTV Generation, and Gen X? Could the desire for experiences not be attributed to the rising global middle class? Once spending for food and shelter is covered, are experiences not next?
In a recent Google research report titled It’s Lit, they provide that “Teens feel that being cool is about just being yourself, embracing what you love, rejecting what you don’t, and being kind to others.” Is there any youth generation from the past that those statements would not apply to?
The error that most organizations made was attributing behaviours to Millennials that have been consistent with young people for generations. What happened then was that Millennials aged. The characteristics and preferences that defined their youth no longer applied as they settled down, bought houses, and had kids.
Had their efforts been directed at identifying the characteristics and behaviours of smaller, more homogenous groups of that generation, they might have gained a more accurate model of their customers and formed more effective strategies. With the next generation, ideally, we would like to avoid making the same mistake. However…
Gen Z is Different, Actually
Gen Z describes a generation, the oldest of which are just graduating college, that makes up a quarter of the US population. By 2020, they will account for 40% of all consumers.
This generation is different. Why? Because they are the first generation to come of age after the digital revolution.
With Millennials and Gen X, they remember a time before the internet, social media, streaming, and mobile phones. Gen Z, on the other hand, has no recollection of home phones, dial-up internet, or a world without social media.
While the disruptive technologies that have shaped Gen Z have been around for decades, their previously high costs have precluded them from having the kind of pervasive influence required to create the first truly global digital generation. With smartphones and data now available everywhere, and to everyone, the long-awaited first digitally-native generation has arrived.
Implications of Truly Digital Consumers
Understanding that Gen Z is diverse in their opinions, attitudes, and approaches, the one thing they do agree on is the real-time nature of everything. Making wide-reaching assumptions about a group of over 1 billion people is a waste of time, but one thing that is common to all members of Generation Z is that none have lived in a world without the internet or mobile phones. This has created two specific expectations:
“With that expense shrinking considerably today, expect more organizations to adopt Gen Z strategies.”
Gen Z’s digital experience expectations are not being set by specific organizations or industries. This was one of the common misunderstandings when organizations were trying to adapt to the needs of Millennials. Startups and new entrants are setting the standards that more traditional organizations are being compared to. These startups are beginning from a consumer need versus a business problem. ASOS and StitchFix in apparel, AirBnB and Hopper in travel, there are examples everywhere.
The reason these companies are able to deliver these incredible experiences is not their size, it is their ability to adopt and utilize contemporary software development infrastructure. Tools like cloud computing, event streaming, and others allow small companies to better meet the needs of Gen Z than companies a hundred-times their sizes.
What has changed over the past decade is that the costs associated with adopting these tools has fallen dramatically. They’ve also become increasingly easy to implement and adapt.
An excellent example is Apache Kafka. Traditionally, pulling large sets of data (visits, POS transactions, etc.) was a very intensive process and therefore only happened in batches. The result was that systems and experiences would be based on out-of-date information more often than they would be in sync. Delivering a real-time data experience would require companies to dramatically increase the frequency of their batch processes.
Apache Kafka is an open-source event streaming platform capable of handling trillions of events a day. What this means, practically, is that there is now a free-to-use platform that allows companies to stream every single piece of data (every purchase, every visitor, etc.), as soon as it is collected to the systems that need that information.
When setting their Millennial strategy, organizations had to make a decision about whether the benefits of that strategy outweighed the massive infrastructure expense. With that expense shrinking considerably today, expect more organizations to adopt Gen Z strategies. With everyone making infrastructure investments, those that get there first will have a strong first-mover advantage in this under-served space.
Personalization can drive huge value to retailers and businesses. A targeted message, that is relevant in both content and context, can drive revenue growth of between 10 and 30 percent, according to a recent McKinsey study. The challenge is creating a personalized experience that Gen Z will find useful, but not intrusive.
Take the classic example of an abandoned cart: A user goes online to make a purchase or reservation and does not complete the transaction. They might = then receive an email reminder and see retargeted ads everywhere they look for what they left behind. When first deployed, this approach was novel. Now,retargeting is so commonplace as to be considered annoying. Consumers have even been trained to abandon their carts in the hope that they will receive a discount.
The key to delivering personalized experiences that customers desire is to go user-first versus business-first in approach. A classic business-first problem statement would be “How can I use notifications to prevent drop off from my funnel?” A customer-first problem statement would be “I am tired of seeingproducts not available in my size when you have my size on file.”
At TribalScale, we believe that innovation has two components: the ability to spot changes relevant to your business and the ability to capitalize on those changes. Our research indicates that demographics and Gen Z are going to drive the largest change in spending behaviours we have ever seen. The companies that understand the significance of the arrival of the first digitally- native generation, while acknowledging the limits of trying to predict their behaviours, will gain significant advantages over their competitors.
Gen Z represents an unprecedented amount of purchasing power and influence. They are already forming their allegiances and rewarding brands and organizations that offer real-time experiences across devices and useful personalization.
While this opportunity is still emerging, what success looks like is clear: the organizations that get this right will win.
Jared Gordon is Head of Financial Services at TribalScale who built his career at the intersection of human need and commercial opportunity. He is a trusted advisor to global FIs on their transition from a product-centric world view to a customer-centric worldview and helping FIs create new value for their customers. Jared looks to balance his love of building things that scale, with a mediocre backswing and a love of comic books.
TribalScale is a global innovation firm that helps enterprises adapt and thrive in the digital era. We transform teams and processes, build best-in-class digital products, and create disruptive startups. Learn more about us on our website. Connect with us on Twitter, LinkedIn & Facebook!