Outline
5/25/2020 Generation Z characteristics and its implications for companies | McKinsey
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Consumer Packaged Goods
The influence of Gen Z—the first generation of true digital natives—is
expanding.
L
See our latest research on Gen Z in America and Gen Z in Asia .
ong before the term “influencer” was coined, young people played that social role by
creating and interpreting trends. Now a new generation of influencers has come on the
scene. Members of Gen Z—loosely, people born from 1995 to 2010—are true digital natives:
from earliest youth, they have been exposed to the internet, to social networks, and to mobile
systems. That context has produced a hypercognitive generation very comfortable with
collecting and cross-referencing many sources of information and with integrating virtual and
offline experiences.
As global connectivity soars, generational shifts could come to play a more important role in
setting behavior than socioeconomic differences do. Young people have become a potent
influence on people of all ages and incomes, as well as on the way those people consume and
relate to brands. In Brazil, Gen Z already makes up 20 percent of the country’s population.
McKinsey recently collaborated with Box1824, a research agency specializing in consumer
trends, to conduct a survey investigating the behaviors of this new generation and its
‘True Gen’: Generation Z and its‘True Gen’: Generation Z and its implications for companiesimplications for companies November 12, 2018November 12, 2018 | Article| Article
By Tracy Francis and Fernanda Hoefel
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influence on consumption patterns in Brazil. The survey coupled qualitative insights about
Gen Z in three of the country’s major cities (Recife, Rio de Janeiro, and São Paulo) with
multigenerational quantitative data that cut across socioeconomic classes. Our goal was to
understand how this new generation’s views might affect the broader population, as well as
consumption in general.
Our study based on the survey reveals four core Gen Z behaviors, all anchored in one
element: this generation’s search for truth. Gen Zers value individual expression and avoid
labels. They mobilize themselves for a variety of causes. They believe 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. That is why, for us, Gen Z is “True
Gen.” In contrast, the previous generation— the millennials , sometimes called the “me
generation”—got its start in an era of economic prosperity and focuses on the self. Its
members are more idealistic, more confrontational, and less willing to accept diverse points of
view.
Such behaviors influence the way Gen Zers view consumption and their relationships with
brands. Companies should be attuned to three implications for this generation: consumption
as access rather than possession, consumption as an expression of individual identity, and
consumption as a matter of ethical concern. Coupled with technological advances, this
generational shift is transforming the consumer landscape in a way that cuts across all
socioeconomic brackets and extends beyond Gen Z, permeating the whole demographic
pyramid. The possibilities now emerging for companies are as transformational as they are
challenging. Businesses must rethink how they deliver value to the consumer, rebalance scale
and mass production against personalization, and—more than ever—practice what they
preach when they address marketing issues and work ethics.
Meet True Gen Generations are shaped by the context in which they emerged (Exhibit 1). Baby boomers, born
from 1940 to 1959, were immersed in the post–World War II context and are best represented
by consumption as an expression of ideology. Gen Xers (born 1960�79) consumed status,
while millennials (born 1980�94) consumed experiences. For Generation Z, as we have seen,
the main spur to consumption is the search for truth, in both a personal and a communal form
[ 1 ]
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(Exhibit 2). This generation feels comfortable not having only one way to be itself. Its search
for authenticity generates greater freedom of expression and greater openness to
understanding different kinds of people.
Exhibit 1
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‘Undefined ID’: Expressing individual truth I need to be free; I need to be myself, increasingly be myself, every day. With the internet, I
feel much more free.
—Female respondent, 22, city of São Paulo
I really like things that are unisex! I think it’s absurd that stores and brands split everything into
“male” and “female.” After all, fabric is genderless.
—Female respondent, 22, Goiânia
For Gen Zers, the key point is not to define themselves through only one stereotype but rather
for individuals to experiment with different ways of being themselves and to shape their
individual identities over time (Exhibit 3). In this respect, you might call them “identity nomads.”
Exhibit 2
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Seventy-six percent of Gen Zers say they are religious. At the same time, they are also the
generation most open to a variety of themes not necessarily aligned with the broader beliefs
of their declared religions. For example, 20 percent of them do not consider themselves
exclusively heterosexual, as opposed to 10 percent for other generations. Sixty percent of
Gen Zers think that same-sex couples should be able to adopt children—ten percentage
points more than people in other generations do.
Gender fluidity may be the most telling reflection of “undefined ID,” but it isn’t the only one.
Gen Zers are always connected. They constantly evaluate unprecedented amounts of
information and influences. For them, the self is a place to experiment, test, and change.
Seven out of ten Gen Zers say it is important to defend causes related to identity, so they are
Exhibit 3
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more interested than previous generations have been in human rights; in matters related to
race and ethnicity; in lesbian, gay, bisexual, and transgender issues; and in feminism (Exhibit
4).
‘Communaholic’: Connecting to different truths We each have our own style and way of being, but what binds us is that we accept and
understand everyone’s styles.
—Male respondent, 16, Recife
Exhibit 4
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Gen Zers are radically inclusive. They don’t distinguish between friends they meet online and
friends in the physical world. They continually flow between communities that promote their
causes by exploiting the high level of mobilization technology makes possible. Gen Zers
value online communities because they allow people of different economic circumstances to
connect and mobilize around causes and interests. (Sixty-six percent of the Gen Zers in our
survey believe that communities are created by causes and interests, not by economic
backgrounds or educational levels. That percentage is well above the corresponding one for
millennials, Gen Xers, and baby boomers.) Fifty-two percent of Gen Zers think it is natural for
every individual to belong to different groups (compared with 45 percent of the people in
other generations), and Gen Zers have no problem with moving between groups.
‘Dialoguer’: Understanding different truths We must practice tolerance, and we must learn to listen and accept differences.
—Male respondent, 20, Gioânia
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Exhibit 5
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Gen Zers believe in the importance of dialogue and accept differences of opinion with the
institutions in which they participate and with their own families (Exhibit 5). They can interact
with institutions that reject their personal values without abandoning those values. The fact
that Gen Zers feel comfortable interacting with traditional religious institutions without
abandoning personal beliefs that might not be broadly accepted by these institutions also
demonstrates their pragmatism. Rather than spurn an institution altogether, Gen Zers would
rather engage with it to extract whatever makes sense for them.
Members of this generation therefore tend to believe that change must come from dialogue:
57 percent of millennials, Gen Xers, and baby boomers think they would have to break with
the system to change the world, compared with 49 percent of Gen Zers. Gen Z is also more
willing to accommodate the failings of companies. Thirty-nine percent of the people in this
generation, for example, expect companies to answer customer complaints in the same day;
for the three earlier generations, the percentage is much higher—52 percent.
Gen Z’s belief in dialogue combines a high value for individual identity, the rejection of
stereotypes, and a considerable degree of pragmatism. That brings us to the fourth core
behavior of Gen Z.
‘Realistic’: Unveiling the truth behind all things I don’t believe this talk of investing in the dream and all that. Work is work.
—Female respondent, 22, Salvador, state of Bahia
Gen Zers, with vast amounts of information at their disposal, are more pragmatic and
analytical about their decisions than members of previous generations were. Sixty-five
percent of the Gen Zers in our survey said that they particularly value knowing what is going
on around them and being in control. This generation of self-learners is also more
comfortable absorbing knowledge online than in traditional institutions of learning.
What’s more, Gen Z was raised at a time of global economic stress—in fact, the greatest
economic downturn in Brazil’s history. These challenges made Gen Zers less idealistic than
the millennials we surveyed (Exhibit 6). Many Gen Zers are keenly aware of the need to save
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for the future and see job stability as more important than a high salary. They already show a
high preference for regular employment rather than freelance or part-time work, which may
come as a surprise compared to the attitude of millennials, for example. According to the
survey, 42 percent of Gen Zers from 17 to 23 years old are already gainfully employed in either
full- or part-time jobs or as freelance workers—a high percentage for people so young.
Gen Z: Consumption and implications for companies
Exhibit 6
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The youthful forms of behavior we discuss here are influencing all generations and, ultimately,
attitudes toward consumption as well. Three forces are emerging in a powerful confluence of
technology and behavior.
Consumption re-signified: From possession to access This more pragmatic and realistic generation of consumers expects to access and evaluate a
broad range of information before purchases. Gen Zers analyze not only what they buy but
also the very act of consuming. Consumption has also gained a new meaning. For Gen Z—and
increasingly for older generations as well—consumption means having access to products or
services, not necessarily owning them. As access becomes the new form of consumption,
unlimited access to goods and services (such as car-riding services, video streaming, and
subscriptions) creates value. Products become services, and services connect consumers.
As collaborative consumption gains traction, people are also starting to view it as a way to
generate additional income in the “ gig economy .” Another aspect of the gig economy involves
consumers who take advantage of their existing relationships with companies to generate
additional income by working temporarily for them. Some companies are already embracing
the implications.
Car manufacturers, for example, are renting out vehicles directly to consumers, so that
instead of selling 1,000 cars, these companies may sell one car 1,000 times. The role of
sporting-goods businesses, likewise, has shifted to helping people become better athletes by
providing access to equipment, technology, coaching, and communities of like-minded
consumers. Similarly, traditional consumer-goods companies should consider creating
platforms of products, services, and experiences that aggregate or connect customers
around brands. Companies historically defined by the products they sell or consume can now
rethink their value-creation models, leveraging more direct relationships with consumers and
new distribution channels.
Singularity: Consumption as an expression of individual identity
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The core of Gen Z is the idea of manifesting individual identity. Consumption therefore
becomes a means of self-expression—as opposed, for example, to buying or wearing brands
to fit in with the norms of groups. Led by Gen Z and millennials, consumers across
generations are not only eager for more personalized products but also willing to pay a
premium for products that highlight their individuality. Fifty-eight percent of A-class and 43
percent of C-class consumers say they are willing to pay more for personalized offerings.
Seventy percent of A-class and 58 percent of C-class consumers are willing to pay a premium
for products from brands that embrace causes those consumers identify with. And here’s
another finding that stood out in our survey: 48 percent of Gen Zers—but only 38 percent of
consumers in other generations—said they value brands that don’t classify items as male or
female. For most brands, that is truly new territory.
Although expectations of personalization are high, consumers across generations are not yet
totally comfortable about sharing their personal data with companies. Only 10 to 15 percent of
them declare not to have any issues in sharing personal data with companies. If there is a
clear counterpart from companies to consumers, then the number of consumers willing to
share personal information with companies goes up to 35 percent—still a relatively small
number.
As the on- and offline worlds converge, consumers expect more than ever to consume
products and services any time and any place, so omnichannel marketing and sales must
reach a new level. For consumers who are always and everywhere online, the online–offline
boundary doesn’t exist. Meanwhile, we are entering the “segmentation of one” age now that
companies can use advanced analytics to improve their insights from consumer data.
Customer information that companies have long buried in data repositories now has strategic
value, and in some cases information itself creates the value. Leading companies should
therefore have a data strategy that will prepare them to develop business insights by
collecting and interpreting information about individual consumers while protecting data
privacy.
For decades, consumer companies and retailers have realized gains through economies of
scale. Now they may have to accept a two-track model: the first for scale and mass
consumption, the other for customization catering to specific groups of consumers or to the
most loyal consumers. In this scenario, not only marketing but also the supply chain and
manufacturing processes would require more agility and flexibility. For businesses, that kind
of future raises many questions. How long will clothing collections grouped by gender
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continue to make sense, for example? How should companies market cars or jewelry in an
inclusive, unbiased way? To what extent should the need for a two-speed business transform
the internal processes and structure of companies?
Consumption anchored on ethics Finally, consumers increasingly expect brands to “take a stand.” The point is not to have a
politically correct position on a broad range of topics. It is to choose the specific topics (or
causes) that make sense for a brand and its consumers and to have something clear to say
about those particular issues. In a transparent world, younger consumers don’t distinguish
between the ethics of a brand, the company that owns it, and its network of partners and
suppliers. A company’s actions must match its ideals, and those ideals must permeate the
entire stakeholder system.
Gen Z consumers are mostly well educated about brands and the realities behind them. When
they are not, they know how to access information and develop a point of view quickly. If a
brand advertises diversity but lacks diversity within its own ranks, for example, that
contradiction will be noticed. In fact, members of the other generations we surveyed share
this mind-set. Seventy percent of our respondents say they try to purchase products from
companies they consider ethical. Eighty percent say they remember at least one scandal or
controversy involving a company. About 65 percent try to learn the origins of anything they
buy—where it is made, what it is made from, and how it is made. About 80 percent refuse to
buy goods from companies involved in scandals.
All this is relevant for businesses, since 63 percent of the consumers we surveyed said that
recommendations from friends are their most trusted source for learning about products and
brands. The good news is that consumers—in particular Gen Zers—are tolerant of brands
when they make mistakes, if the mistakes are corrected. That path is more challenging for
large corporations, since a majority of our respondents believe that major brands are less
ethical than small ones.
For consumers, marketing and work ethics are converging. Companies must therefore not
only identify clearly the topics on which they will take positions but also ensure that everyone
throughout the value chain gets on board. For the same reason, companies ought to think
carefully about the marketing agents who represent their brands and products. Remember
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too that consumers increasingly understand that some companies subsidize their influencers.
Perhaps partly for that reason, consumers tend to pay more attention to closer connections—
for example, Instagram personas with 5,000 to 20,000 followers. Marketing in the digital age
is posing increasingly complex challenges as channels become more fragmented and ever
changing.
Young people have always embodied the zeitgeist of their societies, profoundly influencing
trends and behavior alike. The influence of Gen Z—the first generation of true digital natives—
is now radiating outward, with the search for truth at the center of its characteristic behavior
and consumption patterns. Technology has given young people an unprecedented degree of
connectivity among themselves and with the rest of the population. That makes generational
shifts more important and speeds up technological trends as well. For companies, this shift
will bring both challenges and equally attractive opportunities. And remember: the first step in
capturing any opportunity is being open to it.
1. From June to October 2017, researchers, psychologists, and social scientists undertook ethnographic
field research to observe how Gen Zers communicate, what they believe in, and the choices they make
(and why). Using advanced ethnographic techniques (scenario invasion), researchers conducted 120
qualitative interviews in Recife, Rio de Janeiro, and São Paulo with influential people from this generation.
Besides the field research, 90 Gen Zers participated in focus groups in these three cities, as well as in
Florianópolis and Goiânia. From October 3 to 11, we also conducted an online survey with 2,321 men and
women from 14 to 64 years of age and various socioeconomic brackets in Brazil.
About the author(s)
Tracy Francis is a senior partner and Fernanda Hoefel is a partner in McKinsey’s São Paulo
office.
The authors wish to thank the broader team of people that contributed to this article in many
different forms.
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