Marketers too often bundle millennials and Gen Zers into one indistinguishable group, but, without market segmentation, retailers won’t be able to determine the precise needs and characteristics of these different consumer groups. Indeed, both segments are comprised of young, digitally savvy individuals. But while the members of one group are in their thirties (millennials), the others are teenagers or college kids (Generation Z). They are two autonomous groups, and each segment has distinct routines, buying habits, characteristics, and priorities. In fact, marketers will even discover significant distinctions within each generation, making the dissimilarities between millennials and Generation Z that much more important.
It makes sense that a 20-year-old would understand luxury differently than someone in their late thirties. If we compare streetwear trends (brands like Supreme and Off-White that are popular with Gen. Z) to the understated elegance of Hermès products, then we can grasp why generational marketing strategies help retailers understand the consumption habits of their customers.
Generation Z#
First, let’s take a look at these two cohorts and see what makes them unique. Generation Z is the demographic segment born between the mid-1990s and the early 2000s. Chinese Gen Zers are the product of the single-child policy, growing up in households without siblings and enjoying the full attention and love of their parents and grandparents. They also witnessed China’s massive economic growth and came of age in an environment full of opportunity; thus, their upbringing and lifestyle are quite different when compared to those of older relatives. A different approach to parenting and a more carefree lifestyle gave them different values and beliefs from their predecessors, which allowed them to grow up as optimistic and self-confident youngsters.
A study by OC&C Strategy Consultants shows that 41 percent of Chinese Gen-Z respondents are optimistic about the future versus only 26 percent globally. Moreover, these youngsters spend 15 percent of the household’s income. “This is a generation that has never known worry, so they spend more and save less,” says Adam Xu, a partner at OC&C. According to Xu, this segment is “willing to take on debt in order to fund their purchases,” and this partially explains why Generation Z is more likely to buy luxury brands than millennials. In fact, Bloomberg notes that a different survey conducted by OC&C Strategy Consultants shows that over 50 percent of Chinese Gen-Z buyers spent over 50,000 yuan on luxury goods in 2018, compared to just 32 percent of Chinese millennials. Likewise, a 2017 study by Retail Dive found that Gen Zers are more likely to make luxury purchases than millennials.
These well-informed digital natives are “willing to share their feelings and experiences in forms of online reviews, blog posts and other means of self-expression,” says Adam Xu. And this implies “that information sharing extends even further beyond their immediate circles for Chinese Generation Z,” a path that offers great marketing potential according to Xu. But how can marketers advertise luxury products to this optimistic, frugal, and tech-savvy consumer segment?
Influencer marketing#
This digitally native consumer base grew up in a high-tech world and took advantage of the internet, apps, and social media at an early age. They’ve been expanding their knowledge on the internet, interacting with their peers on social media sites, and making purchases online instead of offline. That’s why OC&C Strategy Consultants says that “this generation is also subject to higher levels of influence from celebrities.” As Chinese influencers “engage with their audience naturally, similar to how they talk to friends, and they recommend and review products convincingly and in a way that is less receptive to commercial interests,” their message seems more honest to Gen Zers, and the interaction between KOL and follower is cordial and benevolent. However, a one-size-fits-all approach doesn’t create a successful influencer marketing campaign, and brands must partner with KOLs who engage with Gen Z because millennials have different idols and champions.
Successful influencer marketing campaigns:#
Louis Vuitton selecting Final Fantasy character Lightning as a brand ambassador and Chloé partnering with Mr. Bags.
Transparency#
This demographic segment places great value on honesty and transparency in advertising. Gen Zers won’t fall for photoshopped images of perfect-looking models, so retailers that promote fake standards of beauty or deceitful marketing messages will be cast aside. Additionally, building their trust takes time. Therefore, righteousness, dependability, and integrity should become top priorities for the retailers who want to connect with the Gen-Z segment.
Successful marketing campaign:#
The Fenty line. Rihanna launched Fenty in China, on July 2019, however, beauty lovers already had access to tens of thousands of peer-to-peer reviews of the line on RED. By embracing a review marketing strategy, Fenty doesn’t give off the appearance of a brand that’s only interested in a fast sale.
Personalization and customization#
A 2015 Deloitte consumer review paper, titled Made-to-order: The rise of mass personalization, shows that 1 in 4 Gen Zers “is happy for businesses to use their personal information to offer them more personalized products or services.” Furthermore, OC&C Strategy Consultants mentions that 25 percent of Gen-Z consumers say “it is important to have a unique view on style and creativity.” Consequently, they suggest that retailers focus on personalized services and customized experiences and products. Bespoke experiences, made-to-order designs, and limited-edition collections will attract the Gen-Z consumer.
Successful marketing campaign:#
Longchamp’s personalized Le Pliage bag, which Chinese consumers could purchase by scanning the QR code and was available both online and offline.
Socially-conscious consumption#
Gen-Z consumers are social crusaders who celebrate individuality and diversity at their core. McKinsey & Company says that this demographic segment believes “profoundly in the efficacy of dialogue to solve conflicts and improve the world. Finally, they make decisions and relate to institutions in a highly analytical and pragmatic way.”
And these consumers know how to do their homework. “Gen Zers are willing to take extra steps to research brands’ supply chains and employment practices before making purchase decisions,” says OC&C Strategy Consultants. In China, this demographic segment is very focused on environmentally friendly consumption (25 percent versus 13 percent for Gen Zers across the globe).
It should be noted that these youngsters can invent life-saving apps (Faith Florez), come up with incredible new technologies, fight climate change (Greta Thunberg), or become entrepreneurs who can change the world around them. And retailers need to learn to cope with a generation of well-informed and socially conscious consumers that demands radical transparency and sustainability.
Successful marketing campaign:#
JD.com customers can return boxes for re-use and recycling.
Millennials#
Millennials (a.k.a. Generation Y) are born between 1981 and 1996. They are the group that will not only reshape the image of China but will also transform the country’s entire retail ecosystem. “400 million strong” sounds like a marketing slogan but this figure represents the Chinese millennial group. For China Daily, this demographic segment is the primary driver “of the country's surge in consumption, with spending by those under the age of 35 accounting for 65 percent of total consumption growth.” And according to estimations, the spending will grow by 11 percent annually until 2021.
The segment is also highly educated, with 1 in 4 holding a bachelor’s degree or higher. Additionally, they have an international outlook, and China Daily says that “two-thirds of all Chinese passport holders are millennials.” Just exactly like Generation Z, they are highly connected, with 90 percent of millennials owning a smartphone, and evidently, Chinese millennials are shaping the future of global retail: They account for over 50 percent of the luxury purchases made by Chinese, which is why marketers want to know how to engage them. As it gets harder to connect with this consumer base, marketers might benefit from implementing these strategies:
Demand for uniqueness#
While Western millennials are famous for their deal-seeking behavior, Chinese millennials are pretentious consumers who love to splurge on luxury goods. Forbes mentions that “Chinese millennials grew up during China’s economic reforms... They have only experienced good times.” Consequently, while their counterparts in the West fought economic hardship (the European banking crisis, the Great Recession), Chinese millennials enjoyed a careless lifestyle mainly because of the country’s economic reforms.
This timing has shaped their spending behavior, turning them into prodigal consumers who demand premium services and unique products. Therefore, since they are a spoiled and dominant force in luxury consumption, Chinese millennials have learned to pursue “premium products and services that could enhance a personal sense of well-being.” Original goods and services convey a sense of superiority and authenticity, which is why Chinese millennials enjoy niche brands and bespoke retail solutions.
Successful marketing campaign:#
NIKE iD — customized shoes
Women’s empowerment#
According to Swiss private bank Julius Baer, in 2017, around 1 in 3 senior management positions in the China region were held by women, and innovative companies such as Alibaba Group and Tencent are proving that Chinese women can break the glass ceiling and attain leadership positions. But in a country that promotes women in the corporate world and teaches girls to be emancipated, determined, and strong-willed leaders, a “sheng nu” stigma still exists.
China’s “leftover women” are the product of the one-child policy. They belong to a millennial generation of urban, educated, and highly skilled women who are now challenging traditional concepts and reshaping previous notions of womanhood. Luxury brands who have their eye on this consumer base and understand their spending habits will generate higher sales and stay ahead of competitors.
Successful marketing campaign:#
SKII- Marriage Market Takeover
Loyalty programs#
A study by Ernst & Young shows that 45 percent of millennials enjoy loyalty programs, and they love being rewarded for their purchases and allegiances to brands. Consequently, retailers who recompense returning customers are winning the hearts of millennial buyers. However, luxury brands should not rely on the traditional rewards approach. This segment is drawn to originality, personalization, and creative customer loyalty programs. Gamification efforts amplify engagement while modern technologies such as AR alter the customer experience and boost loyalty.