Baby Boomers, Generation X, Generation Y, Generation Z, Millennials, Digital Natives, Generation Alpha – what on earth does it all mean? And more to the point – what does it matter?
If you are a retailer, service provider or shopping centre professional how much of this generational deliberation is essential to know versus just nice to know? And how much is real, rather than superficial generalisation? What part or parts should you focus on in order to make a real difference to your business?
Let’s set out some of the (generally agreed) facts, and then come back to that question.
In broad terms, we all travel through the various life stages and can reasonably define those stages without the need for generational labels. Typically, 0 – 17 is the life stage of childhood and learning; 18 – 30 means entering the workforce, taking opportunities and establishing a career; 31 – 45 is the stage of consolidating those opportunities; 46 – 55 typically is the life stage when most in the workforce are maximising their opportunities, and are at the zenith of their earning capacities; while 55+, once the children have left home (or at least, historically this is what used to happen) is the period of reaping the rewards of many years’ hard work.
Adding the generational labels provides additional colour to what might otherwise be seen as a bland, numbers-based analysis. The generational cohort reflects a group of people who have experienced similar events at a similar age. in other words, they have more or less travelled through life together and thus we believe their views and behaviours have been shaped, to at least some extent, by some common social, economic and political influences.
Of course, by their very nature, all of these factors are subjective; so it is already apparent that the concept of generational cohorts brings with it a deal of subjective rather than objective analysis. That is one of the reasons why it needs to be treated carefully and certainly not as marketing or strategic planning gospel.
As with so many things, including income distribution, class structure and retail expenditure behaviour generally, Australia is a much more egalitarian society than just about any other country on earth.
The charts below show the proportions of the total Australian population and also total retail expenditure throughout Australia for each cohort at 2013.
At present, and for most of the past two decades, the retail expenditure pie in Australia has been dominated by Baby Boomers, who represent a much larger segment than any other. However, both Gen X and, even more so, Gen Y are very important, between them accounting for almost half of all retail spending.
Over the next two decades, we can expect to see the importance of the Baby Boomers diminish, although gradually, while Gen Y in particular, and also Gen Z in the second decade, will become more important. The changes though will occur fairly steadily, with the upshot being that all four of the main cohorts (Boomers, Gen X, Gen Y and Gen Z) will remain very important for the next two decades, at least from a total retailing perspective.
However, the manners in which they can each be effectively targeted and the types of stores which they are likely to use differ significantly. For example, Baby Boomers are great target markets for discretionary (non-retail) expenditure, including particularly services-related expenditure such as travel, adventure, holidays, restaurants, professional trainers and financial advisors. Generation X is now well and truly into middle age, with the older Gen Xs pushing towards 50. Their pre-occupation with raising their children is readily identified by their favourite brands. Gen Ys are crazy about Mexican food and are huge purchasers of fashion and fashion accessories, although not at high price points.
What will happen over the next five years or 10 years, with all of these generational cohorts? is Generation Y always going to be as keen on the same brands as it is today? Are the various generations going to continue their current expenditure behaviours into the future? Are their reactions to different marketing stimuli likely to remain constant or consistent?
The answer is almost certainly no. The reality, in my view, is life stage and affluence are the prime determinants of both economic status and, particularly, retail spending behaviour. Affluence is largely driven by income but not entirely so. One of the reasons why Gen Ys are able to spend significant amounts is because their Baby Boomer parents provide the means for them. in that sense, Gen Ys are more affluent than their income status alone would suggest.
The societal and cultural influences which have shaped our formative years also matter but in a different way. Those generational characteristics first and foremost are gross generalisations. There is, however, a significant element of truth in many of them and certainly, they offer insights into how retailers and service providers can most effectively seek to target particular generations.
Going back to the initial question as to what really matters for retailers and service providers, my recommendations are:
- An understanding of the generational cohorts can help you to build a better and stronger business but is no magic bullet
- Each of the four key generations in Australia (Baby Boomers, Gen X, Gen Y and Gen Z) is substantial and of broadly similar overall importance in the total retail market
- While there will be changes in their relative importance over time, those changes are likely to occur in a fairly slow and steady manner
- What is of greater importance is to be very clear about which generation or generations you intend to target and the reasons why.
Once you have that clarity, then there is unlimited information available based on sound data analytics to help you: Quantify; identify; and reach.