Consumers in 2016: Generation 'swipe'

Source: WARC Trends, Toolkit 2016

Downloaded from WARC

This article, taken from the Warc Toolkit 2016 report, looks at the influence of the demographic known
as Generation Z (generally defined as those under 18), or Gen Z.

Generation Z have significant purchasing power, and are maturing into 'grown-up' product
categories more quickly than previous cohorts.
Mobile is central to the Gen Z media experience, as tablets (from an early age) and smartphones
(in teenage years) are core to their media consumption.
The rise of 'microcelebrities', on YouTube in particular, is a key development for marketing to this
age group and these 'vloggers' can wield significant influence on purchase decisions.
US examples from Mondelez International and Taco Bell show how an understanding of Gen Z
media habits and communication style can help brands engage this audience.

1. Gen Z have significant purchasing power

Generation Z (generally defined as consumers aged under 18) are being given greater financial independence
than previous cohorts of children, are maturing into 'grown-up' product categories more quickly, and are
influencing a greater share of family purchases. Euromonitor estimates that under-12s in the US alone have a
spending power of US$43 billion.

Implication: The changing nature of childhood means that the habits of under-18s are becoming important to a
wide range of product categories – fashion and tech, for example.

2. Mobile is central to the Gen Z media experience

This generation has been named the 'swipe generation' with good reason: tablets (from an early age) and
smartphones (in teenage years) are core to their media consumption. Data from the UK shows that tablets are
important in early years, but mobile becomes key in teenage years. Taco Bell's decision to use emojis to
communicate with young consumers is a reflection of their media habits and communication style.
Implication: It is important to understand mobile behaviour of this age group – not just the sites used, but the
format and features of communication (such as emojis or pictures). TV is also still widely used by Gen Z, so
planning across devices is worthwhile.

3. Online influencers are a key audience

The rise of 'microcelebrities', on YouTube in particular, is a key development for marketing to this age group.
These 'vloggers' can wield significant influence on purchase decisions. Mondelez International has responded
by developing a series of webisodes starring well-known faces from YouTube.

Implication: Given this group's love of 'authenticity', brands should avoid engagements with microcelebrities
that seem forced or opportunistic.
Just when marketers thought they were getting to grips with Millennials, along come their younger
cousins – Generation Z – to shake things up again. The past year has seen 'Gen Z' come into the
spotlight, with marketers figuring out the implications of this young demographic's characteristics and
desires.

Who are they?

As is the case with many of these age-based clusters, there is no agreed definition of who qualifies as Gen Z; it
is widely accepted, though, that they follow Millennials. Some market-watchers start this generation as early as
those born in 1990, while others start counting in the mid to late 1990s, or even at the turn of the century. What
everyone agrees on is that this generation is markedly different to that which preceded it, and that it's a big
audience – more than a billion people so far, depending where you begin counting, and growing by the day.

And, while the youngest Gen Z-ers are only just learning to walk and talk, many are already spending significant
amounts of their own money, and influencing the purchases of their parents. In the US alone, just those children
aged between 3 and 12 have an estimated spending power of US$43 billion a year, Euromonitor estimates in its
report Toddlers to Tweens.

The report points to several Generation Z trends that are relevant to brands:

Purchasing power: children are being given greater financial independence, and are influencing a greater
share of family purchases.
Age compression: children are maturing earlier, blurring the lines between tweens and teenagers. They are
shunning toys in favour of more grown-up interests, such as fashion, fragrances, cosmetics, smartphones
and social networking.
Digital technology: tweens – and, increasingly, small children – are always connected to the internet,
mainly via tablets and smartphones. Favourite online activities are 'cluster-sharing' (ie sharing YouTube
clips with friends and family), instant messaging, photo sharing and gaming.
Pop culture: children love popular icons, including animated TV, film and games characters. YouTube
artists are taking over from singers, sporting heroes and TV stars as the most influential celebrities among
tweens.

Media habits
Gen Z-ers have access not just to a second screen but to a handful or more of their own and shared connected
devices, and they flit between them all. Alison York, Research Director at Nickelodeon UK, told a conference on
Kids and Youth Research that this was the 'swipe generation'. In the company's My Media, My Ads media
consumption study, it found 73% of children say they multi-screen – particularly the 10-plus age group.

One interesting aspect of Generation Z is (relative to previous generations) consistency of experience around
the world – media experiences are arguably converging across cultures due to the rapid rise of smartphones.
Access to technology is shaping not just media consumption but friendships and entire lives. A study of 13 to
21-year-olds in Malaysia, for instance, found the vast majority of this age group had their own mobile phone and
considered it an extension of themselves. "It's vital for us to remember that Gen Z doesn't distinguish between a
digital world and a physical world they simply blend into one," said Margaret Lim, managing director of OMD
Malaysia, at the launch of the research.

And in Vietnam, only around one third of Generation Z think the most comfortable method of contact with their
friends is face-to-face, with most preferring some form of digital communication, research by Epinion has
shown; half of Gen Z-ers said they felt most comfortable communicating with chat apps or text.

The desire for authenticity

The interconnectedness of Generation Z's physical and digital lives means they demand authenticity from the
brands they deal with. Gen Z wants 'authentic' social media. This was underlined by a 2014 Youth and Online
Habits study conducted by Harris Poll on behalf of app developer Camp Mobile, which found that the youngest
social media users are using these spaces in a different way to older counterparts. Rather than broadcasting
announcements, they want more private 'meeting' places, away from parents, potential employers and the
broader public.

"There's a cultural shift underway, being driven by Generation Z," said Doyon Kim, General Manager of Camp
Mobile. "It shows a preference for online authenticity and more private group spaces to share information
selectively with various subsets of their diverse work and personal lives."

While reaching and engaging these young consumers is challenging for brands, as they divide their attention
between an ever-growing range of media, Microsoft insights into Generation Z show they can be reached via
online 'microcelebrities' who are influential on YouTube, Vine and Twitter. A single tweet in favour of a new Nike
shoe by influential vlogger TBlake, for instance, generated $600,000 in sales.

Oliver Roup, CEO of VigLink, and a former Microsoft director who oversaw media properties including the Xbox
Live Video Marketplace, Zune services and MSN Entertainment, added: "They engage in micro-slices, eight
seconds at a time. You know they'd be happy to engage today, but you have to re-convince them tomorrow. So,
if you're a marketer looking to reach this audience, you have to assemble the panel of influencers who care
about you. You have to keep them fed and interested in you. And you have to anticipate the fact that they will
change over time."

Attitudes
According to research from InSites Consulting, the views of Generation Z in many markets have been shaped
by them having seen their parents manage through economic crisis and global political volatility; they are
determined to make the world a better, safer place – and are realistic about the challenges they face.

As Gen Z-ers enter adulthood, JWT Intelligence describes them as "the ambitious, engaged, sensible child"
who wants to "create, connect and change". While the teenage years are typically seen as a time for
experimentation and reckless behaviour, that isn't the case with Generation Z, who try to link their fun with
something with a broader positive outcome. Research by InSites Consulting into emerging trends among
Generation Z found that while Millennials focused on their own achievements and their careers, Gen Z is more
interested in pursuing dreams, passions and celebrating life.
Understanding young people has always been a challenge but, as the JWT research into Gen Z shows, the
contradictory nature of their attitudes and habits is harder to negotiate than ever. For instance:

86% use their smartphone several times a day, but 79% agree that people their age spend too much time
on digital devices.
69% watch more than two hours' television a day, and 70% say they watch more than two hours of
YouTube content daily.
83% agree it's important to start saving for their future now, and 64% worry about how successful they'll be.
While 68% are as happy shopping online as offline, 67% prefer to shop in stores.

A word of caution comes from Melissa Friebe, VP at Taco Bell Insights Lab. The company's research into
Generation Z has found that long-term planning around this audience is difficult. "Five years is just too far ahead
because of how quickly culture is changing and how fast this generation is moving."
1. Size and growth of the Gen Z population
According to a Euromonitor report, there are 1.2 billion 3 to 12-year-olds globally, making up 16.9% of the global
population.

The estimated annual spending power of this group in the US is $43 billion.
The global population of 3- to 12-year-olds is expected to rise by 3% between 2014 and 2019.
Growth rates are expected to be slow due to aging populations (particularly in large markets like China)
and falling fertility rates.

Size and growth of 3–12 year-old population

Note: Size of bubble corresponds to total 3-12 year-old population

Read the full report

Source: Euromonitor

2. Media habits of Gen Z

Research by Ofcom in the UK explored how much time children spend on different media; on what devices;
number of screens and what type of content.

While TV (or films on a TV set) is still the leading medium for under-15s, the study revealed some interesting
insights about how they consume various digital media.

Tablets are widely used among the younger age groups, and are second only to TV among 5 to 7-year-
olds (69% use tablets versus 85% using TV).
Mobile usage emerges later, as children gain access to their first phones. Among the 12 to 15 age group,
86% use mobile phones, versus 91% who watch TV.
Teenage members of Gen Z also show a preference for YouTube videos over TV programmes, in contrast
with younger age groups. This shift may, in part, reflect the growing importance of mobile as children grow
up.

Smartphone ownership by age of child: 2015

Preference for watching TV programmes and YouTube videos among 8-11s and 12-15s: 2015

Read the full report

Source: Ofcom, via Warc News.
Generation Z and the regulatory landscape
Francesca Atkins, Digital Strategist, Deloitte Digital

Generation Z are defined as those aged 18 years old and younger; born in the late 1990s to
the present day. Marketing and communicating to under-18s comes with its own unique set of
challenges and complexities. Organisations cannot afford to sit back and simply adhere to
regulation; they must look to add complementary guidelines in order to embed the right practices and avoid
costly mis-steps.

In the UK, for example, there are various laws in place to enable under-18s to feel protected and in control
online – from the Minors' Contract Act of 1987 to the Consumer Rights Act of 2015 and everything in between.
Self-regulatory advertising codes specifically call upon businesses to ensure that communications do not have
an adverse effect on children, while providing them with the ability to edit and delete content they've created,
dispute online data posted about them and know who is holding or profiting from their information.

Generation Z are likely to insist these rights are respected – they are often referred to as cynical, conscious
consumers who demand that brands be open, transparent and authentic. 73% of Generation Z think that
organisations should make 'doing good' a central part of their business1.

It is often said that authenticity is key when targeting Generation Z, and Nationwide's dedicated YouTube
channel for Gen Z, 'Money Stuff', demonstrates this well. The channel speaks to Generation Z in their language,
whilst hosting educational content about complex topics such as tax.

Why it's important to give Generation Z your attention

While under-18s may not be active marketing targets for many brands today, it is crucial to understand the
influence this generation has on others, and what makes them tick as they come of age and become potential
brand advocates. The Deloitte Mobile Consumer survey found that the majority of 18-24 year olds look at their
smartphone between 25-50 times a day, and 39% will check their smartphones without being prompted by a
notification2. The survey also found that the typical 18-year-old uses social media to communicate with others as
soon as they wake up2: it's clear that online engagement comes as naturally to Generation Z as brushing their
teeth.

Treading carefully
There are two key factors for marketers to be aware of. First, they should be prepared to review and update
their marketing policy regularly to reflect the rapidly changing media and regulatory landscape, always adopting
a broad view of what 'harmful' means for children. Businesses play a vital role in respecting children's rights in
the marketplace, and those who fail to realise this leave themselves exposed to consumer backlash.

Media organisations are ahead of the curve when it comes to catering safely for Generation Z online: for
example, YouTube's policies for kids, Sky's under-18s app including a 'bedtime' feature, and Apple's Family
Sharing including an 'ask to buy' function.
Second, given Generation Z's heavy use of social media, marketers need to work hard to ensure they are not
encouraging those below the legal age to join marketing activity on these platforms. Such principles are echoed
within the 'Letting Children be Children' report penned by the UK Department For Education in 20113. Concerns
surrounding Facebook marketing to children, for example, are ever present. As one newspaper noted: "If your
child 'likes' a company that advertises on Facebook, or if she 'checks in' at a restaurant… her image may appear
next to a custom ad for the business in the News Feed"4.

Footnotes
1. The rise of the conscious consumer, LynxEye 2015
2. Mobile Consumer 2015: The UK Cut Game of phones, Deloitte 2015
3. Letting children be children, Department For Education 2011
4. Facebook made my teenager into an ad. What parent would ever 'like' that?, Guardian 2014
© Copyright Deloitte MCS limited 2015
Case study 1: Sour Patch Kids: 'Breaking Out'
The celebrities who are most influential among Generation Z are not necessarily international music or film stars
but rather vloggers and self-made celebrities from the YouTube world. Mondelez International's Sour Patch Kids
candy brand used these small-screen heroes to make a connection with today's teens.

Sour Patch Kids created a scripted series of webisodes which featured these digital mavens as actors –
even if they were not primarily famous for possessing this skill.
'Breaking Out' – a scripted series featuring six 'hero' episodes and 18 accompanying clips – premiered on
YouTube in October 2014, and humorously addressed the sour and sweet moments of high school,
echoing the flavours of its sweets.
These clips were hosted on its influencers' channels, and while the brand's distinct mix of sweet and sour
featured in the storylines, the online videos were not heavily branded.
Alongside generating millions of views, this material drove significant qualitative engagement, too.

Read the full report

Source: South by Southwest, March 2015

Case study 2: Taco Bell – A new social strategy

Fast food chain Taco Bell focused on social media to focus on what matters to its younger customers – and in
the process created a taco emoji.

With a target audience including a large cohort of content-hungry members of Generation Z, social media is
a vital channel for Taco Bell.
Rather than constructing a social 'persona', its tone of voice on sites like Facebook and Twitter aims to
capture fundamental truths about the brand.
 Social listening has been a key strategy for the firm in getting to know its customers and then formulating
the types of content they are interested in sharing.
The importance of emojis in young people's communication led to a signature campaign for a taco emoji to
be added to users' texting options.
Almost 33,000 signatures were gathered in seven months, and the brand secured approximately 350 million
impressions; in June 2015, approval for a taco emoji was granted.

Read the full report

Advertising Age Digital, April 2015
The following articles on Warc expand upon the arguments in this chapter:

1. Toddlers to Tweens: Consumption habits of global 3-12 year-olds – Executive Briefing

Euromonitor Strategy Briefings, July 2015

2. Marketing to children: understanding media literacy, consumption habits and self-image

Event Reports, Kids and Youth Research, Market Research Society, January 2015

3. Lines blur for Malaysia's Gen Z

Warc News, June 2015

4. Vietnam's Gen Z prefer a digital life

Warc News, September 2015

5. Gen Z wants 'authentic' social media

Warc News, October 2014

6. How Microsoft engages Gen Z

Event Reports, ad:tech San Francisco, May 2015

7. Gen-Surveys: taking the research time machine to a GenZ-dominated world beyond 2020
ESOMAR Congress, Dublin, September 2015

8. Gen Z is new focus for marketers

Warc News, May 2015

9. Marketing to children: the role of co-creation and humour for the LOL generation
Event Reports, Kids and Youth Research, Market Research Society, January 2015

10. YouTube rivals TV for young viewers

Warc News, November 2015

11. How Sour Patch Kids recast YouTube influencers – and engaged teens
Event Reports, South by Southwest, March 2015

12. Taco Bell serves up a new social strategy

Event Reports, Advertising Age Digital, April 2015
© Copyright Ascential Events (Europe) Limited 2015
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