Gen Z: Consumption and implications for companies
The youthful forms of behavior we discuss here are influencing all generations and, ultimately, attitudes toward consumption as well. Three forces are emerging in a powerful confluence of technology and behavior.
Consumption re-signified: From possession to access
This more pragmatic and realistic generation of consumers expects to access and evaluate a broad range of information before purchases. Gen Zers analyze not only what they buy but also the very act of consuming. Consumption has also gained a new meaning. For Gen Z—and increasingly for older generations as well—consumption means having access to products or services, not necessarily owning them. As access becomes the new form of consumption, unlimited access to goods and services (such as car-riding services, video streaming, and subscriptions) creates value. Products become services, and services connect consumers.
As collaborative consumption gains traction, people are also starting to view it as a way to generate additional income in the “gig economy.” Another aspect of the gig economy involves consumers who take advantage of their existing relationships with companies to generate additional income by working temporarily for them. Some companies are already embracing the implications.
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Car manufacturers, for example, are renting out vehicles directly to consumers, so that instead of selling 1,000 cars, these companies may sell one car 1,000 times. The role of sporting-goods businesses, likewise, has shifted to helping people become better athletes by providing access to equipment, technology, coaching, and communities of like-minded consumers. Similarly, traditional consumer-goods companies should consider creating platforms of products, services, and experiences that aggregate or connect customers around brands. Companies historically defined by the products they sell or consume can now rethink their value-creation models, leveraging more direct relationships with consumers and new distribution channels.
Singularity: Consumption as an expression of individual identity
The core of Gen Z is the idea of manifesting individual identity. Consumption therefore becomes a means of self-expression—as opposed, for example, to buying or wearing brands to fit in with the norms of groups. Led by Gen Z and millennials, consumers across generations are not only eager for more personalized products but also willing to pay a premium for products that highlight their individuality. Fifty-eight percent of A-class and 43 percent of C-class consumers2 say they are willing to pay more for personalized offerings. Seventy percent of A-class and 58 percent of C-class consumers are willing to pay a premium for products from brands that embrace causes those consumers identify with. And here’s another finding that stood out in our survey: 48 percent of Gen Zers—but only 38 percent of consumers in other generations—said they value brands that don’t classify items as male or female. For most brands, that is truly new territory.
Although expectations of personalization are high, consumers across generations are not yet totally comfortable about sharing their personal data with companies. Only 10 to 15 percent of them declare not to have any issues in sharing personal data with companies. If there is a clear counterpart from companies to consumers, then the number of consumers willing to share personal information with companies goes up to 35 percent—still a relatively small number.
As the on- and offline worlds converge, consumers expect more than ever to consume products and services any time and any place, so omnichannel marketing and sales must reach a new level. For consumers who are always and everywhere online, the online–offline boundary doesn’t exist. Meanwhile, we are entering the “segmentation of one” age now that companies can use advanced analytics to improve their insights from consumer data. Customer information that companies have long buried in data repositories now has strategic value, and in some cases information itself creates the value. Leading companies should therefore have a data strategy that will prepare them to develop business insights by collecting and interpreting information about individual consumers while protecting data privacy.
For decades, consumer companies and retailers have realized gains through economies of scale. Now they may have to accept a two-track model: the first for scale and mass consumption, the other for customization catering to specific groups of consumers or to the most loyal consumers. In this scenario, not only marketing but also the supply chain and manufacturing processes would require more agility and flexibility. For businesses, that kind of future raises many questions. How long will clothing collections grouped by gender continue to make sense, for example? How should companies market cars or jewelry in an inclusive, unbiased way? To what extent should the need for a two-speed business transform the internal processes and structure of companies?
Consumption anchored on ethics
Finally, consumers increasingly expect brands to “take a stand.” The point is not to have a politically correct position on a broad range of topics. It is to choose the specific topics (or causes) that make sense for a brand and its consumers and to have something clear to say about those particular issues. In a transparent world, younger consumers don’t distinguish between the ethics of a brand, the company that owns it, and its network of partners and suppliers. A company’s actions must match its ideals, and those ideals must permeate the entire stakeholder system.
Gen Z consumers are mostly well educated about brands and the realities behind them. When they are not, they know how to access information and develop a point of view quickly. If a brand advertises diversity but lacks diversity within its own ranks, for example, that contradiction will be noticed. In fact, members of the other generations we surveyed share this mind-set. Seventy percent of our respondents say they try to purchase products from companies they consider ethical. Eighty percent say they remember at least one scandal or controversy involving a company. About 65 percent try to learn the origins of anything they buy—where it is made, what it is made from, and how it is made. About 80 percent refuse to buy goods from companies involved in scandals.
All this is relevant for businesses, since 63 percent of the consumers we surveyed said that recommendations from friends are their most trusted source for learning about products and brands. The good news is that consumers—in particular Gen Zers—are tolerant of brands when they make mistakes, if the mistakes are corrected. That path is more challenging for large corporations, since a majority of our respondents believe that major brands are less ethical than small ones.
For consumers, marketing and work ethics are converging. Companies must therefore not only identify clearly the topics on which they will take positions but also ensure that everyone throughout the value chain gets on board. For the same reason, companies ought to think carefully about the marketing agents who represent their brands and products. Remember too that consumers increasingly understand that some companies subsidize their influencers. Perhaps partly for that reason, consumers tend to pay more attention to closer connections—for example, Instagram personas with 5,000 to 20,000 followers. Marketing in the digital age is posing increasingly complex challenges as channels become more fragmented and ever changing.
Young people have always embodied the zeitgeist of their societies, profoundly influencing trends and behavior alike. The influence of Gen Z—the first generation of true digital natives—is now radiating outward, with the search for truth at the center of its characteristic behavior and consumption patterns. Technology has given young people an unprecedented degree of connectivity among themselves and with the rest of the population. That makes generational shifts more important and speeds up technological trends as well. For companies, this shift will bring both challenges and equally attractive opportunities. And remember: the first step in capturing any opportunity is being open to it.
Source : https://www.mckinsey.com/industries/consumer-packaged-goods/our-insights/true-gen-generation-z-and-its-implications-for-companies