Carat Australia Study: Gen Z to inherit $3.5 trillion in the next 20 years

Like every generation, Gen Z encapsulates a broad and diverse group of individuals.  Born between 1997 and 2012, Gen Z is a young generation already defined by greatness, a generation set to make history, and a generation defined by firsts, and by extremes.

Gen Z are young, but they are powerful, and with the oldest of the group aged only 23, they are just getting started.

Carat Australia’s latest report, Gen Z in View, takes a deep dive into this complex generation to better understand them on a human level and how marketers can reach them with impact. Applying the agency’s bespoke consumer connections system (CCS), Carat has been able to segment Gen Zs aged 16-23 into four key consumer types, and four distinct typologies.

Danni Wright, Carat’s national head of strategy and connections planning said: “At Carat we believe in understanding the people we are solving for beyond demographics, or even generational stereotypes. That is why we not only look at the shared experiences and traits that generations represent but also dig deeper into them by looking at the distinct typologies that exist within each.  This is just one way to cut the Gen Z cake, but as evidenced in the divergent drivers, attitudes and behaviours across these typologies, it is imperative that we scratch beneath the surface to better understand the people we are solving for.”

Money Matters

Being young children when the GFC hit in 2008 they have grown up with an outlook of global economic uncertainty leading them to be actively engaged in their finances.  They are debt averse and show strong scepticism of traditional financial services providers and products, like credit cards.  This scepticism has given rise to a new cohort of financial institutions: buy now pay later providers like Afterpay and Zip offering transparent fee and payment structures appealing to this generation.

Gen Z (and some younger Millennials) are also set to inherit an estimated $3.5 trillion over the next 20 years from Baby Boomers.  This will give them considerable spending power, making it even more essential for brands, particularly those in financial services, to break down the barriers and find a way to connect with this younger group.

COVID Context

The pandemic has disproportionately impacted the work and mental health of Gen Z in employment and mental health. Almost one in three (28 per cent) of 18-24’s lost their job.  This is much higher than the figure of approximately three per cent for the wider workforce.  This impact was due to them working in industries that were temporarily closed or unable to operate under COVID restrictions – hospitality, retail, culture and leisure.  Half were on casual contracts, a figure that rose to seventy per cent for industries most effected. This caused youth mental health being significantly impacted, affecting almost a quarter of those aged 18.24 in 2020, compared to just nine per cent in 2017.

However, Gen Z are more optimistic that life will get back to normal quicker with research showing 62 per cent are ready to rebuild society from the ground up post-COVID.

Advertising Attitudes

Gen Z are broadly less positive towards all advertising formats compared to other generations. This is counterintuitive for a digital generation, however research has shown that the formats with the highest positive receptiveness are all traditional media – OOH, Cinema, Print and TV.  When digital savvy Gen Z are targeted digitally the experience can often feel invasive.  Only a third like online ads and most actively avoid them, with 70 per cent skipping pre-roll video ads, and 52 per cent using ad blockers.  The lesson for marketers is not to rule out traditional media, and if you are advertising online, be immersive, not invasive.

So, how do advertisers make it a positive experience – Gen Z express real positivity when they are given control over whether to play an ad or not, and when there is a value exchange (a reward) for viewing advertiser content.  Research shows that 41 per cent have a positive reaction to mobile ads that offer rewards.

Rules of Engagement

  • Give them control: avoid non-skippable pre-rolls and invasive pop-ups.
  • Feed their curiosity: invest some of your budget in custom content that speaks to their unique needs.
  • Enhance their favourite new spaces: think sponsored lenses or Tik Tok challenges that authentically engage.
  • Don’t waste their time: Gen Z are particularly likely to want their ads short – ideally less than 10 seconds.  Distil your ads into bite-sized messages with impact.
  • Finally, treat them as collaborators, not consumers.  Give them more from brands than mere impressions or even products as research shows that 60 per cent of Gen Z want brands to value their opinions, not just their dollars.  They want to feel like they are a part of a campaign with the ability to make collaborative decisions, like voting for something to happen and changing the trajectory of the story.

Annika Barrett, strategy director, Carat Melbourne said: “Every generation is diverse and nuanced, full of complexity and contradiction. But what is really interesting about Gen Z is the dichotomy within the generation, between ambitious individualism and altruistic collectivism. At one end of the spectrum you have Status Seekers – the Kylie Jenners – driven by style, success, and self-fulfilment. At the other end, you have the Purposeful Progressives – the Greta Thunbergs – driven by progress, collaboration and peer empowerment.

“For a generation shaped by the same cultural context, it is incredibly compelling that there are such unique and opposing expressions of Gen Z identity. Despite their divergent values, our research demonstrates that both these segments are equally valuable to brands, when it comes to both discretionary spend and propensity to covert in categories as diverse as auto and tech.”

Carat identified four distinct Gen Z typologies who lead the pack not only in terms of spend, but also in their adoption rate of trends: Purposeful Progressives, Status Seekers, Double Taps and Swipe Rights.

The two segments that present the greatest value opportunity to brands are:

Purposeful Progressives are inherently political.  They are activists and advocates driven by their passionate beliefs on issues such as climate change and gender equality.  Engage them by communicating value and quality – they want to minimise the waste they create and choose carefully.  Free samples and discounts can convince them to test quality for themselves before they invest.  Prove your brand is one they can believe in – they value transparency from local sources, to natural ingredients, to ethnical practices.

Ensure eco-friendliness at every level.  They will invest time, dollars and voice behind brands with compelling environmental/eco-friendly credentials, but you must live and breathe these credentials because if they catch you out, expect social media backlash.

Align with their progressive passions authentically as they will support brands that protect not only the planet but also its people.  They expect brands to play an active role in social issues that are relevant to them, but as a long-term investment, rather than a marketing stunt.  This is the generation tackling issues around health, sexuality, politics, gender, race via the medium of dance on platforms like Tik Tok.  Be progressive, be purposeful, but don’t be preachy.

Status Seekers are trend-driven, and all about the aesthetic.  They have a closet full of the latest looks, and a camera feed full of selfies.  Their personal brand is everything and they are putting in the work to cultivate it, amplify it, and capitalize on it to get rich quick.  Engage them by bringing them into the brand through free samples, loyalty programs and rewards.  As an incredibly social cohort, friends are really important to them as are their friends’ opinions.  They are heavily influenced, but in turn become influential in their circles when they put their voice, and social feed, behind a brand.  Carefully consider all your brand alignments, from ambassadors and sponsorships, to media placements.  You must have status to appeal.

IRL experiences are as important as URL as they pack their social schedules with dinners, live theatre, museum trips, cocktail bars and shopping sprees.  To attract this cohort, your IRL experience must be as enticing (and instagrammable) as your digital experience.

Finally, exclusivity is key and even though they are big spenders they invest in quality over quantity, high experience, and products that have a sense of luxury and status.  Tactics like releasing limited edition products or small run collections appeal to this audience

Originally published on B&T here

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