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10 Things to Know About Generation Z

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Findings from SXSW Interactive

 

This year’s SXSW Interactive, which took place in March, featured all the usual high-tech suspects, from automated driver-less cars to VR headsets. There was also buzz about better ways to reach today’s set of consumers, bringing a focus to marketing that’s been somewhat absent in the past. And this year, one group got a lot of attention: Generation Z.

 

Who are Gen Zers? They’re people born after 1995 (or loosely in that age range). The most current generation (in fact, they’re still being born today), Gen Z follows Millennials. Some are teenagers, which puts them in a prime spot for marketers to analyze how their behaviors are forming.

 

Here are 10 things to note about Generation Z, based on information shared at SXSW.

 

1. Email is outdated. Gen Zers are three times more likely to open a chat message they’re alerted to via a push notification. They largely feel email is an outdated manner of communication.

 

2. If it’s not on social media, it didn’t happen. Material items are of less importance to Gen Zers than experiences they can post on Snapchat, Instagram and other social media platforms. Don’t be deceived, though – brands still matter, they just have less influence.

 

3. They’re diverse. This is the most ethnically diverse generation in our nation’s history. Almost 50 percent of Generation Z is made up of ethnic minorities, says Jaclyn Suzuki, Ziba Design’s creative director.

 

4. They experiment with who they are. It’s not uncommon for a Gen Zer to have several online personalities, bucking the traditional idea of individual identity. Some will have embarked on three different career paths before they’re 30, according to Suzuki.

 

5. Privacy has a new meaning. Gen Zers prefer to be reached through private forums as opposed to “loudspeaker” media such as Twitter and Facebook, says Jaclyn Ling, Kik’s director of fashion and retail services.

 

6. Mobile, mobile, mobile. Gen Zers as consumers are more likely by a factor of two to prefer shopping on a mobile device compared to an average Millennial, says Anna Fieler, Popsugar’s executive VP of marketing.

 

7. Move over, traditional movie stars. This generation prefers “real” celebrities made famous by Snapchat or YouTube. Only one traditional movie star – Jennifer Lawrence – made the list of top 10 influencers according to Generation Zers.

 

8. At attention…but not for long. The attention span of Gen Zers is estimated to be only eight seconds. (Millennials come in at 12 seconds.)

 

9. YouTube is in. A typical Gen Zer watches between two and four hours of YouTube a day, compared to less than an hour of traditional TV. They’re two times more likely to utilize YouTube than Millennials, and they also don’t use Facebook nearly as much.

 

10. They co-exist. This generation doesn’t define itself as doggedly by gender. Shepherd Laughlin, director of trend forecasting for JWT Intelligence, says 48 percent of Gen Z identifies as strictly heterosexual, whereas 65 percent of Millennials say the same. Gen Zers are also more likely to purchase clothes designed for the opposite gender, and they more strongly believe that societal diversity can exist in both race and religion.

Temporary Permanence: How Pop-Up Retail is Gaining Ground

From one-day store displays to tweet-for-cash rewards, some merchants are approaching retail in unexpected ways 

When an industry is worth $80 billion, you wouldn’t assume it’s commonly referred to as “temporary.” But the temporary retail model –– often referred to as pop-up retail –– is looking like it’s here to stay.

Once considered a passing trend, temporary retail has gained traction and popularity over the last several years, and it’s now considered a global mainstay of cutting-edge marketing. As consumerist culture continues to change quickly (thanks to digital retail, social media and other technological advances), brands are relying on the unexpected to capture consumers’ attention by disrupting their shopping experience.

Creative displays, quick setups and flash discounts offer retailers avenues to experiment that are less risky than making permanent, widespread changes. They can test a new product, for example, or see how customers respond to a shift in stores’ visual merchandising.

Another way that brands are exploring new ground is by blending offline and online retail experiences. Touch screens in brick-and-mortars let consumers digitally shop while physically in the store. Opt-in text messages sent to in-store customers give the scoop on deals, offers and one-day sales.

Some retailers are even entertaining cash or material rewards for consumer-generated promotional tweets. Marc Jacobs, for example, introduced the Daisy Marc Jacobs Pop-Up Tweet Shop last year, in which customers could pay for products and fragrance samples using “social currency” –– tweets and posts on Facebook and Instagram about the brand and store.

Though pop-up retail is rooted in change, some brands are toying with “temporary permanence” by dramatically changing the in-store appearance –– from merchandise to fixtures –– every 30 to 90 days. From a workload perspective, the practice is daunting, but it can allow retailers to get a better feel for what attracts new consumers and what the current market is looking for.

This more fluid, less committed approach to traditional retail isn’t something just small retailers and digital-only merchants are pursuing. Well-respected, multi-channel brands like Kate Spade, Nordstrom and Apple are finding ways to create “shops within shops” that serve up customized marketing with the goal of retaining customer loyalty.

Brand Heritage in Today’s Consumer Culture

In the fast pace of the modern market, remaining relevant is key – no matter how established the brand 

Several years ago, brand heritage was something carefully, painstakingly built over the course of many decades, sometimes even longer. The brands consumers trusted worked hard to earn that loyalty. Brick by brick, they’d committed to quality products, exemplary service, integrity and experience.

Take a look around at today’s market, though, and you’ll see a smattering of brands that have almost instantaneously captured consumers’ loyalty –– Tesla, Airbnb, Uber among them–– and many haven’t existed for even a decade. Heritage, it seems, is a thing of the past.

This is particularly a challenge for brands that have been around for a while, as they’re being forced to find new ways to remain relevant to today’s consumer. If they don’t, they risk looking dated and old-fashioned, and ultimately, they risk extinction. Remember Kodak? The product that once made them popular and propelled them to the forefront of consumers’ minds for the category was, in the end, what led to their demise. They were unable to remove the handcuffs of their roots in dated technology.

Other brands might follow. For some consumers, the reputation of Volkswagen –– a brand with heritage, to be sure –– took a nosedive when news broke that they’d cheated on emissions tests in the United States. In an increasingly environmentally conscious culture, grasping onto old technology made Volkswagen seem dated (not to mention surprisingly dishonest).

One clue for older brands looking to retain relevance might lie in the ability to connect the old with the new in a fresh, engaging way. Adidas and Jack Daniels are two good examples. They’ve capitalized on authenticity in a culture that’s obsessed with screens, but not in a stuffy way. They’ve reinterpreted old-fashioned values with a modern spin that keeps the focus on today’s consumer –– and what they’ll want later on.

A quintessential case of brand rebirth comes in the form of a favorite childhood toy: Lego. Several years ago, cheap, generic versions of the bricks were everywhere, making the real deal less appealing to some. And besides, what kid played with Lego anymore? Video games, tablets and other technology were leaping ahead and leaving youth everywhere transfixed.

In response to what could’ve led to crisis, Lego wisely chose to stop looking back, to stop trying to push its celebrated history on its current customer. Instead, it quieted the noise to one simple truth: Lego ignites children’s imaginations. This was an inherent, fundamental aspect of the toy itself, and with that realization, consumers responded positively.

For other brands, then, perhaps this is the challenge: to sift through knee-jerk reactions to unearth the human need that’s being fulfilled by the brand’s very existence.

Over 50 and Spending Strong: A Valuable Demographic

Though millennials are the most coveted segment, retailers shouldn’t overlook the 50-plus crowd

For all the buzz surrounding how aggressively advertisers are pursuing their most-coveted market, millennials, one might be surprised to learn that for the first time in history, consumers over the age of 50 comprise the majority of all consumer spending. According to recent information released by the U.S. Consumer Expenditure Survey, the over-50 set accounts for 51 percent of spending.

Though 2015 marks the year that millennials became the largest adult demographic, consumers over 50 control 70 percent of the country’s wealth. During the holiday season, this means they’ll likely spend more than their kids. The study found that the over-50 segment is responsible for about 57 percent of “big ticket” purchases and gifts, such as new cars.

Consumers older than 50 also––perhaps not surprisingly––account for most of the country’s spending on health and insurance, 63 and 68 percent respectively.

While it might be tempting to assume that the over-50 crowd tends to be less technologically inclined, the report suggests that this isn’t the case at all. The demographic is increasingly relying on mobile, including social media––research shows that more than 15 percent of them spend 11 or more hours a week on Facebook. It’s also estimated that consumers older than 55 are among the most rapidly growing segment to use mobile devices. Additionally, according to the AARP, 40 percent of that organization’s site traffic is derived from mobile.

Unlike many millennials, adults older than 50 are also still immersed in print, and they spend considerable time going to movies and watching TV. For advertisers, this means that reaching this demographic isn’t difficult, as they’re actively involved with several forms of media.

The messaging within the media is also reflecting a changing demographic. Although the average 50-plus consumer is still value-oriented––regularly searching for discounts, deals and seasonal sales––they’re also engaged in life, they’re staying physically active, and they generally maintain a positive outlook about aging.

Despite the emerging trend toward mobile, the over-50 demographic hasn’t abandoned the brick-and-mortar shopping experience. Offline retail accounts for more than 90 percent of the country’s commerce, and even behemoth online brands such as Amazon are considering establishing a transactional presence in the physical world. Adults older than 50 still enjoy the in-person shopping experience, as evidenced by Walmart, who gained 5.7 million customers over 50 in the past three years alone. This represents eight times the growth of the retailer’s younger customers.

Snapchat and P&G Pilot Star Wars-Themed Marketing Campaign

Driving sales takes a backseat to building brand awareness––with the ultimate goal of conversation in mind

To drive sales or to raise brand awareness is the great debate of many advertisers. When it comes to online commerce’s relationship to marketing, the strong preference has historically been to focus on the hard sell––both Facebook and Google have invested heavily in that strategy. The mobile app Snapchat, though, is taking a different approach, allowing marketers to take a purer look at increasing consumer awareness.

This approach, however, doesn’t accomplish much in terms of customer-driven metrics and analytics, which might prove a challenge for Proctor & Gamble. The company is in the midst of a CoverGirl campaign touting a limited-edition Star Wars collection, and it’s using Snapchat as a central marketing tool.

While raising brand awareness was one of two objectives P&G had for the ad run, the other was––of course––to sell actual product. The CoverGirl collection, a Star Wars-themed makeup line, is available only at Ulta’s brick-and-mortar stores. The challenge, then, was to drive young millennial consumers to the store, and Snapchat was viewed as the perfect marriage of building brand familiarity while remaining relevant to the target base.

Though using the app to sell product was not its primary purpose, Snapchat also threw in geo-targeting, a tool valuable to P&G. Geo-filters were incorporated into most of the nearly 870 Ulta stores selling the Star Wars product. If a customer within a fixed proximity to the store posted a Snapchat photo or video to their feed, the app was able to lay a branded filter over the post. Anyone the post was shared with through Snapchat would see the limited-edition cosmetics, in addition to CoverGirl and Ulta branding.

What’s different about this marketing approach is that it doesn’t rely on historical data or typical patterns of customer behavior. It looks more to inspiring the consumer to seek out something they see and like. But the method is only truly valuable to a brand if, at some point, it drives sales––and with Snapchat, there’s no way for brands to know whether sales (and even increased traffic in stores) are a result of the app.

Snapchat provided P&G three metrics for the CoverGirl campaign: how many views the ads got, how many times users incorporated the branded overlay, and how many times users swiped to see the branded filter as opposed to how often users actually used it.

It remains to be seen whether the Snapchat collaboration will prove successful for P&G. According to brand representatives, though, this campaign was both more cost-efficient and more impactful than a similarly themed Hunger Games campaign in 2013, which ran TV spots and included a branded Tumblr.

 

Fashion Retail’s Emerging Testing Ground: Subscription Services

Subscription services for apparel are taking off––and the benefit extends far beyond the consumer

The democratization of fashion is leading to some interesting experiments with business models that allow retailers to test new markets, styles and methods of customer acquisition. The findings could be valuable to retailers in terms of mining new data and creating long-term merchandising strategies.

Take fashion rental startups, for example, such as Rent the Runway, which lets consumers “test drive” fashion for a fee before returning it by mail. Subscription services are making a splash in ways that are potentially beneficial to both the service provider and the retail partner.

Three-year-old Le Tote recently entered an agreement to carry Levi’s new women’s denim collection, which offers a range of styles for different body shapes. The partnership is new ground for Le Tote (this is the first time they’re offering subscribers denim) as well as Levi’s, who can leverage the platform as a way to explore how consumers respond to the new assortment.

The benefit of these partnerships is apparent even before the merchandise is available for purchase. Le Tote offers users a “virtual closet” tool, which lets consumers add styles to their lineup whether they’re available for purchase yet or not. This allowed Levi’s predetermine inventory more accurately based on first demand, which also improves shipping lead times for the initial batch of buyers.

Additionally, Le Tote lets customers rate items they buy based on fit and if they feel the purchase was a good choice. The vast majority of users (between 85 and 90 percent) take the time to fill out the ratings surveys, perhaps because it works to their advantage––Le Tote then creates recommendations for each user based on individual ratings.

Typically, retail partners such as department stores don’t offer customer-specific feedback and information to the retailer, so in a sense, retailers are shooting somewhat blind. They might offer periodic performance reports, but not the laser-focused, customized data that newer models capitalize on.

In short, the data a rental or subscription startup can offer is more precise, comprehensive and trackable––a huge asset in the eyes of a retailer.

While Le Tote is a relative newcomer, the more established fashion rental site Rent the Runway has attracted somewhere around 5 million millennial shoppers. The metrics shared with its vendors includes data like color, style, fit, which outfits users paired merchandise with, which items were rented more than once per user, and how the users wore each outfit. Users are able to post photos and make comments, which anyone can see––not just subscribers.

Rent the Runway is even testing brick-and-mortar stores in markets such as New York, Chicago and Las Vegas. This puts a regional focus on their model, allowing them to see which styles perform better geographically.

Some retailers heavily rely on subscription services as a testing ground before committing to carrying certain merchandise. One high-end brand entering the plus-size space piloted styles for that market on Gwynnie Bee, a plus-size subscription service. This allowed the two businesses to work together on fit, style and assortment options before the brand felt confident enough about the merchandise to roll out its own label.

New In-Store Video Marketing Make It Hard to Look Away

Transparent door ads capture consumers’ attention at grocery and convenience stores

The typical in-store video ad is pretty easy to ignore, and it also requires the customer to make a deliberate decision to look at it. That soon might change with a new technology called the iDoor, which puts video or still ads on refrigerator and freezer doors in grocery stores, convenience markets and drug stores.

The ads themselves are transparent––at least, in varying degrees based on the colors in the ad. Since customers can still see what’s behind the doors, the advertising is more integrated, more seamless, and in a sense, more difficult to pass by. The ads can be controlled nationwide from a central location.

Equipment manufacturer Anthony International and digital signage maker Real Digital Media fashioned the iDoor, which has been tested in both Circle K and 7-Eleven stores in addition to several unnamed grocery stores. Anthony International has approximately 600,000 doors around the nation that could potentially be refurbished with the iDoor. Each installation of the new technology is about $5,250.

While a direct use of the iDoor is to advertise products in the cooler behind it, cross-merchandising is another option––marketing chips or frozen foods in a refrigerator that contains soft drinks, for example.

Part of the appeal for the customer is perhaps how unexpected and disruptive the video ads are, particularly in what would likely be a routine stop.

In an 11-week test conducted by VideoMining, a third-party analytics firm, a convenience market in Florida saw a 13 percent increase to cooler doors, a 4 percent increase in sales of products sold in coolers, a 19 percent increase in sales of advertised soft drinks, and a 3 percent increase in store traffic overall. Shoppers also reportedly stopped more frequently while shopping to look at the ads.

 

Three Ways Marketers Can Learn From Donald Trump

The politician is in a class of his own––and brands could learn a lesson

These days, Donald Trump shows up in the news quite a bit. Regardless of his politics, marketers can learn a thing or two from the way he advertises himself.

First, Trump makes certain he stands out by not watering down his message in an effort to appeal to more people. He often makes polarizing statements, but in doing so, he differentiates himself from an otherwise fragmented crowd.

The translation into marketing can be seen by a popular fast food restaurant: Arby’s. The brand’s current campaign, “We Have the Meats,” comes as something of a surprise in a culture that’s increasingly gravitating toward health-conscious cuisine––even in the quick-serve sphere, as evidenced by Subway, Panera and many others.

Arby’s, though, doesn’t aim for that audience. It’s focused on people who love to eat meat, and to that end, Arby’s same-store sales growth has been the best in the industry for 11 quarters.

Carving out a niche that entices passionate like-minded consumers might not attract a broader audience, but targeted opportunities represent a huge area of growth for marketers and brands.

Secondly, Trump taps into voters’ fears, frustrations and concerns, and answers them by promising benefits then following up with “reasons to believe.” From building back up American jobs to handling immigration issues, the politician garners massive public attention by making big statements.

Brands can do the same, given they thoroughly follow through on the follow-through. Take T-Mobile, for example, and the “Un-Carrier Revolution” it launched. The campaign emphatically told customers that T-Mobile would solve their wireless-provider woes one by one, from difficult pricing structures to high data charges. For 10 consecutive quarters, T-Mobile has increased their customer base by 1 million.

The last lesson to consider courtesy of Trump is how character affects perception, almost regardless of anything else. Trump stands out from more “standard” politicians because of his undeniably huge persona. This alone––aside from any aspect of his politics––differentiates him from the rest.

This begs to question the genuine, honest difference between most brand names and their competitors. Brands competing in the same industry might have some differences, such as specific products or selling points, but there’s more to a brand than that. Brand history, purpose and outward perspective all shape the nuances of what a brand is, as well as where it’s going. Persona comprises the fabric of how customers relate to the brand emotionally.

Digital Data in a Millennial’s Market: Here’s Why it Matters

For apparel retailers, customer acquisition and retention is a fast-paced challenge––but digital data offers a glimpse into successful strategy

Relevance, demand, and consumer tastes that are changing more quickly than ever: These are the challenges many apparel retailers are struggling to resolve as they remain determined to gain the loyalty of millennials, the largest consumer group in the United States.

For apparel retailers, the fall season is a particularly competitive and promotional period that sees the bulk of its revenue during the back-to-school cycle (typically July through September), and then also closer to Thanksgiving, when deals and promotions are heavy.

Bargains or no bargains, millennial-generated dollars are not always easy to come by. According to a recent study by America’s Research Group, nearly 60 percent of parents of millennials interviewed said they’d spend money more judiciously during the back-to-school season, and they’d perhaps consider spending more when holiday sales begin popping up.

So, how should an apparel retailer expect to secure a competitive advantage? One word: data. By analyzing facts about their target consumer base, retailers are poised to make smarter decisions. Data is derived from a variety of sources, from website traffic and social media to mobile devices and a consumer’s past spending habits and patterns.

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In 2013, just over 20% of the information in the digital space was available for analysis, according to a report by analyst firm IDC. However, that figure could jump to more than 35% by 2020, IDC says, making it increasingly viable for retailers to achieve meaningful insight.

What exactly can digital data help retailers learn? For one thing, it can offer some understanding around trends––design, colors, materials, cuts and more. This helps retailers forecast when a certain trend is picking up steam or, conversely, when an older trend is dying out. (Teen apparel retailer Abercrombie & Fitch recently did away with $27 million worth of old inventory to increase their relevance in the market.)

Digital data can also help retailers act smarter about managing inventory. Millennials typically won’t wait for a great clothing item to be re-stocked in their size or the color they want––they buy something similar elsewhere. Digital information can help retailers pinpoint what to stock, and perhaps more importantly, where to stock it, thus enriching a regional (and even sub-regional) strategy.

Perhaps one of the biggest lessons to be learned from obtaining digital data lies in the questions retail decision-makers are asking––questions that center on enticing millennials, learning more about where they come from, increasing customer loyalty, and personalizing marketing strategies.

Of course, several of these considerations are seasonal in nature, and data can help predict the cyclical patterns of shifting dollars from one particular marketing channel to a different one. This helps retailers become more flexible with where, how and exactly when any particular merchandise is given the limelight. In the end, the goal is an equilibrium of meaningful data, long-term goals, short-term expectations, support from key decision-makers, and the greater ability to adapt to an ever-changing market.

 

4 Key Trends in Digital Retail

The challenges for online merchants largely remain the same, but new trends are constantly changing the way retailers react 

The more things change, the more they stay the same. This is one takeaway from a recent study that suggests they key issues for digital retail is largely what they were 10 years ago. The report––co-conducted by Forrester, Shop.org and Bizrate Insights––found that enticing new visitors, turning them into customers, retaining their loyalty, and maximizing and customizing technology are among the challenges online retailers continue to scrutinize.

However, how different retailers address these objectives certainly isn’t a “one size fits all” approach, and the larger issues shift and undulate as new technology comes into play. Mobile, for example, has introduced a new layer of complexity to the digital market landscape, and its applications are widespread––from Facebook and display advertising to tracking consumers’ online behavior. Even for smaller retailers, the online marketplace is growing.

According to a recent report titled “The State of Retailing Online 2015,” a few broad trends have surfaced that summarize how a range of digital retailers––from small to large and fresh to seasoned––are competing in the marketplace.

Increased Spending  
While the average budget for online marketing is roughly 6 percent of revenue, medium-sized digital retailers (with a marketing budget of approximately $5.9 million) spend about 9 percent of revenue. Retailers between four and 10 years old, along with branded manufacturers, spend about 8 percent of revenue.

Large-scale retailers––with a marketing budget of roughly $127 million––spend the smallest amount, around 3 percent of revenue. This suggests that while they see some gains in customer acquisition from an online presence, they might be wiser to invest it in other initiatives, such as free shipping. Smaller retailers, though, need the online strategies to promote growth and secure consumer familiarity.

For all retailers, most of the revenue being spent is going toward search and email marketing, largely because of the comparatively low cost per order: $15 and $6, respectively. Those two tools garner approximately half of the marketing budget, and they’re also widely considered to be the most effective. Search engine marketing and search engine optimization are also where revenue dollars are being spent––58 percent and 55 percent, respectively.

Improving natural search and organic traffic has helped online retailers carve their places in the competitive online environment. Paid search is also a key component, and the winning combination for most retailers is an amalgamation of both.

The Power of Social Media
Marketing via social media channels is unquestionably gaining traction. Although SEM and SEO are considered the most effective tools for online marketing, almost 60 percent of retailers surveyed said the goal was to spend more on social media in 2015 than they did in 2014, surpassing the SEO budget. SEM, however, continues to take first place––about 63 percent of retailers said they planned to invest more on both mobile and desktop SEM.

Social media marketing is generally more costly, about $28 per order. The impact it has is undeniable, though, especially for smaller retailers––who account for just under 20 percent of marketing budgets spent on social.

Perhaps predictably, the social giant Facebook sees the largest share of these marketing dollars, ranking seventh on the list of customer acquisition techniques that have proven to be most effective.

The benefit of social marketing is more readily seen in driving customers to retailers’ websites rather than strictly driving sales. Approximately 45 percent of retailers surveyed said Facebook is increasing site visits, compared to just over 30 percent who reported more sales. Pinterest, Instagram, Twitter, YouTube and Snapchat also had more impact on traffic than conversion, the retailers said.

A Little Bit of Risk
The ever-evolving and fluid nature of the digital world means new trends are always breaking through, which leaves retailers in a constant game of catchup. However, this creates room for creativity and experimenting, and it doesn’t have to mean sacrificing budget. Most retailers interviewed said they’d rather finesse existing marketing strategies than create entirely new programs. Those who were willing to experiment were trying out advertising on podcasts, geofencing around physical stores, and placing ads on Amazon.

The Importance of Mobile and Site Merchandising
On average, about one-third of all site traffic comes from consumer smartphones. Those averages are considerably higher for large-scale retailers, store-based retailers, and brand manufacturers. It naturally follows that retailers are investing more in mobile strategies, with nearly 60 percent reporting that they’ll spend more in 2015 than 2014 in this area. The majority of that budget (52 percent) is intended to drive mobile shopping, while mobile email optimization accounted for 46 percent, and paid search to drive in-store shopping came in at 37 percent.

With all the focus on retailers’ sites, site merchandising is getting attention as well, with site redesign being the primary focus. Several merchants surveyed said they felt their sites were dated or that they wanted to develop a smoother, more cohesive experience between desktop and mobile shopping.

About 63 percent said they’ll increase site budget in 2015, and almost 50 percent said they’ll increase site staff. Product pages will be a main focus, as well as the checkout journey, content, and video on the site.