“Sorry Millennials, your time in the limelight is over. Make way for the new kids on the block – Generation Z – a generational cohort born between 1995 and 2009, and larger in size than the Millennials (1980-1994). The current fixation with Millennials makes them the most studied generation, which in turn has caused the use of this term to simplify to a label for anyone that may be young today. The irony here is that Millennials are not necessarily young anymore and we run the risk of overlooking the next cohort – Generation Z – who are now coming of age.
Survey-based research from a range of sources suggests there are fundamental differences separating Generation Z from the Millennials (Figure 1), material enough for marketplaces to take note today. And yet, even as Generation Z enter their prime, many companies have yet to prepare for their arrival. We fear they are either still trying to adapt their business models to the Millennials or hoping simply to re-use whatever strategies they’ve developed for Millennials on Generation Z. We argue that adopting such a homogenous approach will deliver unsuccessful results as it fails to identify the two generational cohorts as different.
We believe this coming of age is worth capitalising on now, with Generation Z in the US already having $200bn in direct buying power and $1tn in indirect spending power as they command significantly more influence on household purchases than prior generations (IBM, Iconoculture). By 2020, Generation Z are expected to be the largest group of consumers worldwide, making up 40% of the market in the US, Europe and BRIC countries and 10% in the rest of the world (Booz Co). " Barclays Sustainable & Thematic Investing team lead by Hiral Patel in a June 2018 report.
ource: Barclays, Patel et al (June 2018), Generation Z: Step aside Millennials
What makes Gen – Z different?
There are different ways to define a generational cohort; however, no matter how you do it, the attitudes, passions, strengths and weaknesses of each generation are moulded by the world around them. We believe there are three broad trends that shape a generational cohort: i) parenting & household dynamics, ii) world economy & international affairs and iii) technological advances
1) Parenting & household dynamics
At the root of the discrepancy between the two current generations of youth (Generation Z and the Millennials) are differences in parenting & household dynamics, or more specifically the differing generations that raised them.
Coining the phrase ‘helicopter parents’, Strauss and Howe have argued that Millennials are in part a by-product of overprotective, indulgent parents (Ipsos Mori: Millennial – Myths & Realities). Millennials were raised by encouraging Baby Boomer parents during a time of economic prosperity and opportunity. This created a new set of middle-to-upper class parents that were desperate to maintain their family’s escalated social standing (Quartz – How Baby boomers ruined parenting forever), using extra-curricular activities and hectic student schedules as a way to demonstrate their status as the parental elite.
On the other hand, Generation Z, it is argued, were raised by the more discerning Generation X, as they grew up in a recession, making them more conservative by nature. Generation Z witnessed first-hand the struggles their older siblings faced and resolved to do things differently. They are characterised as pragmatic when it comes to financial decision-making and have already shown the propensity to move back to traditional views of success (money, career, education) (Millennial Marketing).
2) World economy & international affairs
Though Millennials were raised during a time of economic prosperity, they were old enough to understand the relevance of 9/11 in 2001. Generation Z were either too young or were yet to be born, and thus relate more to the global financial crisis in 2008. This was followed by a wave of global terrorism, which has led to Generation Z growing up during a time of increased existential threat (perceived, if not actual) compared with the Millennials (Guardian).
Furthermore, the internet and social media have significantly impacted the way global news is disseminated. Generation Z appear to be more affected by world events than the previous generation thanks to a 24-hour news cycle that relentlessly pushes out information. For example, we now see widespread awareness of single-topic issues such as global warming, cancer research, the Trump presidency and the European migrant crisis. This makes Generation Z by default more aware of international affairs at a younger age, which, it is argued, is creating a more conscientious generation.
3) Technological advancements
While Millennials were digital pioneers witnessing the introduction of broadband internet, smartphones and social media, Generation Z are digital natives, not knowing a world any different to the hyperconnected one in which we live today. For example, a Millennial would remember the pain of experiencing a floppy disk error or having to experience the social pressure of maintaining an ‘online’ MSN messenger status using dial-up internet. However, Generation Z can’t remember a time without technology at their fingertips. One of the biggest worries for this generation is whether or not they have enough battery life.
Source: Barclays, Patel et al (June 2018), Generation Z: Step aside Millennials
Although all such reports have flaws and generalisations, it’s good food for thought on how Gen Z are different. In the way, Millenials are different before them.
From a business point of view, a company needs to be flexible enough (or have a business model geared to ) to accommodate the shift to Gen-Z when arguably many were late to the shift to Millenials already.
You can reach Hiral through LinkedIn for a full copy of the report.
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