Why Brands Need to Prepare for the Great Wealth Shift
We are on the precipice of the greatest wealth transfer in modern history. Over the next decade, Millennials and Generation Z will earn trillions of dollars from previous generations. Most businesses will need a strategy to attract young consumers, employees and investors. A brand refresh won’t be enough. Companies need to rethink their entire operating model and value proposition.
The historical relationship between brands and consumers has been transactional. Consumers bought products to meet a specific need, while brands sold goods in exchange for money. We bought cars to save time on commutes, food and drink to get nutrients and energy, and laundry detergent to keep our clothes clean.
In the 20th century, brands began to promote the emotional benefits of products to stand out from their competitors. Coca-Cola is associated with happiness, Apple with thinking differently and Nike with overcoming adversity. Today, brands must navigate a new dimension. Consumers buy products based on values and beliefs. At a time when most products perform the same function, people want to know the story of the brand and its impact on society.
Belief in mainstream brands supersedes religious faith and the decline of nation-state power. According to Gallup, rich countries rank highest in quality of life, while low-GDP countries rank highest in meaning. In Western countries, individualism is the dominant idea – further aggravated by virtual interactions and social isolation – young people seek a sense of collective belonging.
The search for meaning explains the explosion of brand communities. Young people no longer want to consume products. They want to actively participate in the creative process. Brands that can nurture a sense of collective ownership and self-expression will appeal to the next generation of consumers. However, most brands are designed for mass production and broadcast marketing. Building community requires a shift in mindset, letting go of creative control, and embracing agile methodologies.
Maintain your core audience
Most traditional brands walk a tightrope between retaining their target audience and attracting the next generation of consumers. Baby boomers and older generations control the majority of wealth and hold key positions in most organizations. On the other hand, Gen Z is now the largest generation in the world, with the fastest growing income of all generations. It’s a tricky puzzle.
Businesses need to connect with new audiences to build brand loyalty and lifetime customer value. But changing too quickly could alienate existing customers, especially when groups have differing needs and values. Young people want to know where brands stand on the causes that matter most to them. Just being too political could alienate baby boomers with considerable purchasing power. Meanwhile, playing it safe means you won’t appeal either.
The level of change will depend on the category, market share and target audience. It’s crucial for brands to conduct in-depth research on emerging audiences to determine the pace of change required. But for most brands, evolution is better than revolution. You don’t have to change everything overnight and risk eroding brand equity.
Brands can experiment at the periphery with new products and business models without disrupting the core proposition or primary revenue stream. For example, in the UK, John Lewis announced its intention to become a landlord following the decline of department stores. The world’s largest jeweler, Pandora, has launched a collection of sustainable lab-grown diamonds. And Gucci accepts cryptocurrencies to attract Gen-Z consumers. The key is to expand the brand into new territories without harming the core business.
Explore new value propositions
The average age of an S&P 500 company is under 20, down from 60 in the 1950s. Only 28 of the original 100 companies remain listed on the FTSE 100. In a post-pandemic world, the survival of brands depends on the ability to translate emerging trends and consumer insights into business opportunities. A good question would be: what would your brand look like if it were invented today?
The first step in the journey is to break down barriers to innovation. Launching a pilot project is a great, low-risk and highly rewarding way to get started, unconstrained by legacy thinking and habitual protocols. Brands should embrace a test and learn culture where the primary goal is to learn from experience. There are many ways for brands to future-proof their business. Like launching sub-brands or new products based on changing consumer behavior. Others include working with new agencies, consultants, and non-convention startups. After all, new thinking requires new partnerships.
One of the most powerful methods is to co-create with your audience and build a community of brand advocates. Another option is to form a youth advisory board to provide new outside perspectives to complement your existing board of directors. Creating a youth advisory council cannot be a public relations exercise. It means listening to young and diverse voices and having uncomfortable conversations. But as a result, your business will be more future-ready and relevant to younger generations.
The Great Wealth Transfer represents a unique opportunity for brands to capture the hearts and minds of young consumers, employees and investors. On the other hand, it poses a substantial existential risk for brands that fail to adapt to the speed of change. In business, as in life, change is difficult but doesn’t have to be painful. The future belongs to companies that can build communities, co-create with new audiences, and innovate at the periphery before scaling up.