There’s a power shift in play when it comes to retail spending: the often-underestimated Generation Y has nearly three times as much spending power ($934 billion) as Baby Boomers ($392 billion), with Generation Z ($323 billion) close behind, according to new data from cultural insights and strategy agency Cassandra. The oft-forgotten Generation X currently leads all groups with a massive spending power of $1.2 trillion.
The latest spending power figures and new insights from the firm’s Generations Reportsuggest there is significant opportunity for brands to engage consumers of all ages. However, the emergence of the “attention economy”—in which loyalty is built through purposeful engagement rather than consistent purchase—makes it critical for brands to rethink traditional ways of capturing spending power.
Young consumers are driving this shift, but the research reveal their modern values and behaviors are impacting older generations—and will require brands to work differently to gain loyalty and influence in the future. Understanding consumer expectations and engaging early and often with personalized experiences can solidify loyalty and help brands future-proof their businesses.
“The growing financial influence of Gen Y and imminent rise of Gen Z have forced brands to think about their value to the consumer in terms of experience and engagement. The habits of younger consumers reveal that their support of a particular business or organization must be earned and that they’re less motivated by product, price and traditional wallet economy values,” said Melanie Shreffler, senior insights director of Cassandra, part of Engine Group, in a news release.
“This has brought an end to the era of traditional brand loyalty,” she added. “To capture the significant spending power across all four generations, brands must realize the unique opportunity to create advocates through values-based branding, meaningful experiences and by rewarding consumers for their engagement.”
To capitalize on this, brands must first understand the key trends that have ushered in this new age of brand loyalty:
Increased choice and direct-to-consumer technology
The sheer volume of brands available today and the unprecedented, direct access consumers have to them via digital and social media channels has disrupted the traditional path to brand loyalty.
Affinity for new or challenger brands
Younger generations are more inclined to try new brands than their older counterparts. The majority of Baby Boomers and Gen Xers prefer to stay with brands they know rather than try out the endless options across categories (60 percent and 55 percent respectively). While Gen Ys are practically split, with 51 percent sticking to the brands they’re already familiar with and 49 percent looking to try new ones, more than half of Gen Zs (54 percent) want to keep exploring new options.
Emergence of values-based culture and activism
Consumers are beginning to shift away from traditional wallet economy purchasing priorities, such as utility and durability, to less tangible factors, such as brand engagement on social media and involvement in social issues. Younger generations are looking for brands that align with their values as individuals and contribute to the cultural conversation.