7 Key Truths About Innovating for Generation Z

The rising generation always determines the next big wave of change. Many believe that Millennials have had their day in the sun, and a new cohort of young consumers, with radically different desires and beliefs, has arrived to take their place. To effectively connect with these new and influential consumers, businesses need to understand the world that this new generation inhabits.

Generation Z, the age group born between 1997 and 2008, is the first generation of true digital natives. Pivotal global events such as the Great Recession, social revolutions, persistent privacy scares and data breaches, and the democratized access to information have profoundly shaped their personalities and viewpoints. As a result, Gen Zs tend to be hands-on, productive, resourceful, and entrepreneurial.

Deciphering Gen Z is vital for businesses, because by 2020 it will make up 40 percent of all consumers. As of late, many companies with decades of experience are struggling to authentically connect with this generation, primarily because Gen Zs don’t trust them. Instead, they are drawn to startups, which have untarnished reputations, appear more human, and communicate business messages that resonate with young consumers.

To create durable bonds with this next generation, businesses must develop effective ways to refresh its offering while building on the vision that it has always embodied. Read on for seven ways that big businesses can – and should – innovate to reach Generation Z.

Opportunity 1: Don’t focus on making money, focus on saving theirs

Unlike Millennials, who prefer experiences and following dreams over things, Gen Zs would rather spend their money on tangible products and follow financial conservatism. According to a Cassandra Report, 60 percent of Gen Z prefers a “cool product” to a “cool experience” – the polar opposite to their Millennial predecessors. Research has found that the products they buy already elicit an experience, which is why they don’t feel the need to choose between both. Gen Zs are not just looking at an “investment” piece as something they are purchasing for the present but instead as something they can use in the future.

This generation constantly looks for worthwhile and functional purchases, with 57 percent preferring to save money. And who can blame them? Gen Zs were either born into or grew up during the Great Recession. Most saw their parents and other adults living in financial fear. They also witnessed their older siblings actively incorporating college debt into their college decision.

“I’m a big saver. My grandma has to tell me spend it for me to spend it. I don’t like to just buy stuff. I want the luxury to find something great.”

– Alyssia, 12, NY

Large brands should elevate products and services so they serve more than just one function. Patagonia’s Common Threads Initiative resonates with this generation’s wants and needs by creating products with longevity. Patagonia encourages consumers to be minimalist when shopping and will repair clothing malfunctions for free to extend the life of their products. Through Patagonia’s partnership with eBay, consumers can either resell their Patagonia clothing or recycle it once it reaches the point of no return. Brands should enable Gen Z prepare for its future, and they can do this by simply repurposing their resources.

Opportunity 2: Cultivate sub-brands that enhance your reputation

Only 6 percent of Gen Z trust corporations to do the right thing, compared to 60 percent of adults. They view corporations as “exploitative, arrogant, greedy, and cheating.” Many companies have tried to appeal to younger generations, but these attempts have backfired because they often miss the simple insight that Gen Zs want a space for unfiltered self-expression, not be part of something they consider to be untrustworthy. Even Facebook struggles to create a safe area for this generation through its direct brand, with more than 25 percent of 13 to 17 year olds leaving the network. (Instagram remains a popular platform with Gen Z.)

Fortunately, there is hope for large companies trying to appeal to Gen Z. Ritz Carlton’s Passport to Adventure program launched in 2010 and continues to build activities for younger travelers. The brand designed the program to give Gen Z kids a tailored, immersive vacation experience, instead of a classic hotel experience. During the day, kids can choose to participate in activities and go on excursions that match their personal interests. At night, they experience an in-room camping adventure. Ritz managed to connect with its younger visitors to form unforgettable memories, through an avenue that was created and designed solely for them. Companies can create meaningful trust by introducing an authentic space for this generation to interact with the brand creatively.

Opportunity 3: Deliver on social impact

This generation wants to help – not only in their future careers but also in terms of social justice. For example, 92 percent of Gen Zs believe that helping others in need is important. Similar to cultivating sub-brands, companies should work on incorporating sub-projects into their brand reputation. Instead of shelling out hollow contributions as a means to establish corporate social responsibility, brands should carefully pick a few causes that resonate with their customers and align themselves with those causes.

During Hurricane Matthew, Airbnb used its ability to connect people to lodging by encouraging hosts in safe spaces to offer spare rooms for evacuees. Even though the company itself did not provide housing directly, it positioned the brand as the facilitator. It connected those in need with those willing to provide assistance.

Panera’s “Pay What You Want” business model in Panera Cares locations provides another example of how brands can approach social impact initiatives. Customers will walk into select sites that feature menus without prices. Panera has found that customers will actually overpay for their meals, and the company can then use the money from these locations to feed everyone that walks through the doors of a Panera Cares location. Panera is not just handing money to food shelters but using their position in food service to align with a social cause they can directly impact.

Highly selective and well-informed, Gen Zs choose to align with brands that represent their interests and character. They are watching and learning, which means brands must take their social impact initiatives seriously.

Opportunity 4: Reflect diversity and inclusion

A striking 70 percent of Gen Zs say inequality worries them greatly and that their race, sex, parents’ economic status, and social standing will determine their future. Transgender rights are also an important issue to this generation, with 74 percent maintaining high support for this group. Companies like Zara are starting to introduce genderless clothes. Fempowerment, the belief that girls and boys should have equal opportunity, is also a growing revolution in this generation in both genders. At an early age, girls are taught their careers can be just like the boys through different games, such as GoldieBlox, which teaches girls how to code at a young age.

Aside from gender equality, this generation expects racial equality. Around 50 percent of Gen Zs are unable to check a box asking them identify themselves ethnically. The U.S. Census Bureau forecasts “that over half of kids in America will belong to a minority race or ethnic group [by 2020], so diversity in the traditional sense of the word has actually become the norm.” Cosmetics brands like Walker and Company are developing beauty products specifically for different skin tones.

Brands can also create new opportunities by embracing Gen Z groups that feel they’re not being heard or catered to. The Brexit vote in June 2016, followed by the U.S. election results in November 2016, left many Gen Zs, particularly minorities, wondering about their safety and dreams, with many turning to social media to express their concerns. Gen Z will look to brands that represent their cultural integration when they feel that their politicians are ignoring them.

Opportunity 5: Make digital the “how” not the “what”

Gen Zs are more passionate about their friends than technology: 61 percent say phones help them feel connected to friends and family. Gen Zs want screens to enhance, not overtake, their lives, and they respond to initiatives where digital complements their physical world. Brands like Tumblr and Nike have created avenues for Gen Z to create communities through their interfaces.

Nike realized that 55 percent of Gen Z spends 60 minutes or more a day texting, compared to just 13 percent who do more than 60 minutes of exercise. The Nike Soccer App encourages exercise by allowing kids to watch soccer training videos, helping them organize soccer matches with friends, and letting them discover pickup games happening nearby.

Gen Zs have embraced a DIY culture and seek tools to create their own solutions. This attitude has shaped their career goals. According to ad agency sparks & honey, 76 percent would like their hobbies to turn into jobs, and 72 percent of high school students want to start their own businesses someday.

Many companies are looking to enhance their digital platforms or to convert everything to digital. But an important distinction is that Gen Z is using digital as a bridge to take them where they want to go. They want digital to facilitate connection and productivity, so brands should leverage digital platforms to foster and grow connections and to improve productivity, rather than merely assume that a digital solution in itself will fulfill Gen Z’s needs.

Opportunity 6: Embrace and react to failure

Gen Zs are fine with failure, as long as they learn something from it. They don’t aspire to perfection but instead desire to demonstrate that they are continually improving. More than half of Gen Z, including 71 percent of 13 to 18 year olds, expect to fail several times in life before they succeed. Dave McClure, the founder of 500 Startups, commonly referred to as the “fail factory,” reminds entrepreneurs that failing is inherent in the startup world but that taking those failures and bouncing back is the key to success. Gen Zs are in touch with the simple human truth that making mistakes is a large part of learning. And because people run companies, the expectation of perfection does not resonate with this generation.

Domino’s Pizza reacted to clients’ harsh complaints about selling “cardboard” pizza by apologizing and mapping their journey to creating a better product. The company openly expressed reactions from employees who heard focus groups and reviews call out their failing pizza. Throughout their “pizza turnaround,” Domino’s was transparent with their consumers about what they heard and what steps they took to address customer grievances. As a result, Domino’s has increased sale across the board.

Brands should view their failures as an opportunity to come clean and start again, instead of covering up failures to preserve a perfect reputation. Seeing a brand acknowledge that failure is a way of achieving something better impresses Gen Z more than sweeping problems under the rug to keep them out of sight.

Opportunity 7: Become a retail confidant

Gen Zs have to see to believe. According to Gen Z Guru, 83 percent prefer face-to-face communication and want to talk to someone who is knowledgeable about the product . They are an incredibly wary generation, and knowing that there is the option to try on and feel clothes is just as important as the convenience of purchasing clothes online. A Canvas8 study found that Gen Zs prefer to receive information from authentic individuals they admire and trust rather than faceless brands. Erin Yogasandrum, the 24-year old CEO of Shop Jeen, a shopping and sharing platform for Gen Z girls, has created a strategy that mixes fashion with friends. She leverages personalization and technology to truly reach the Gen Z consumer. This doesn’t mean that brands need a young woman’s voice to make their company feel authentic. It means that they have to define what authenticity can be for them in a retail perspective. They have to define what the “friend” equivalent is for them.

Stores that have both an online and on-premise location tend to have better popularity with Gen Z. Warby Parker has done an excellent job with this. They let customers try on frames at home free of charge or go to a store to try them on, if preferred. Warby Parker caters to risk-averse consumers who appreciate the experience of trying on fashion pieces conveniently both in and out of the home. The company continues to unearth new fans by instilling trust in every consumer. This strategy can be replicated. Brands should develop touch points that Gen Z is comfortable with in order to instill confidence in the purchase.

“When you buy something in the store, you’re able to try it on and see how it looks and fits. Online you don’t know if it will actually fit or look good on you.” – Amber, 15, TX

The bottom line

Gen Z has become an “us against the world” generation. Having grown up in the midst of financial instability and becoming skeptical about the trustworthiness of governments and corporations, they have developed unique patterns and behaviors for where they spend their time and money, and where they place their loyalties. Gen Zs believe in sincerity, and they value hard work. They find honor in respecting differences and enhancing connections. They notice when brands represent their best interest, and they notice when brands try to change.

To strike a chord with this generation, traditional brands must be honest and authentic. They need to plan wisely how to connect with and be part of this new “us.”