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Your Guide To Generation Z: The Frugal, Brand-Wary, Determined Anti-Millennials

The generation forged during the Great Recession is entering college and the workforce. Here's what companies need to know about them.

Your Guide To Generation Z: The Frugal, Brand-Wary, Determined Anti-Millennials

[Photo: Flickr user University of Rhode Island]

It's a crisp late-summer day in Tacoma, Washington, and Maya Makino has just started her sophomore year at the University of Puget Sound. She's 19, which puts her at the upper end of generation Z, whose members currently range in age from 5 to 20. Like many of her peers, she doesn't think of college as a relaxing period for self-discovery and navel gazing. She was 10 years old when the recession hit—just old enough to be aware of what was going on—and that has shaped her feelings about higher education.

"There's a lot of stress about finding a job after college and being able to support yourself," Makino says. "My friends and I are really focused on finishing up in four years and having a good career path. There's less time for reflection because there's that worry about whether you're going to be able to survive in the economy if you're not really directed."

For the past several years, the media has been obsessed with millennials, the most studied group ever. But as Makino's generation grows up and gets ready to enter the workforce, corporations are paying more attention to this crop of young people born between 1996 and 2011. At 60 million strong in the United States, they outnumber millennials by 1 million. It would be easy to assume that they are just an exaggerated version of the generation that came before them, spending even more of their lives on social media, doing even more of their shopping online, and demonstrating an ever greater collaborative nicer nature. But generation Z grew up in a starkly different historical context than millennials, which has given them a distinct outlook on the world.

Millennials were internet pioneers. They invented Facebook, shopped from their smartphones, and smoothly transitioned from satellite TV to Hulu and Netflix. Generation Z, meanwhile, doesn't remember life without these basics of 21st century life. Millennials helped elect a black president and legalize gay marriage; many generation Zers see these milestones as the norm. Millennials came of age during a time of economic expansion and were shocked to find a diminished, unwelcoming job market after college; generation Z has been shaped by the recession and is prepared to fight hard to create a stable future for themselves.

Makino is fairly typical in this regard. She grew up in a solidly middle-class family in Arcata, California, with a professor father and an artist mother. At 19, she is responsible, mature, and financially savvy; she's taken on a work-study job at her college alumni magazine to help pay the bills and is always mindful of the cost of her education. "I was thinking about taking a gap semester to have a life outside of being a good student," she says. "But if you step off the treadmill for even a minute, you start accruing [interest] on your student loans. So I decided against it."

Since many members of gen Z have not even entered elementary school yet, it's impossible to draw definitive conclusions about what their habits, lifestyles, and world views will be. But as the oldest among them flood into colleges and start their careers, we're beginning to see trends emerge. Here's what we know.

The Occupy Movement And The Rejection Of Big Brands

Marketers have been carefully studying generation Z for many years now, observing their preferences as children and teenagers, and finding that they have a very different relationship with companies than their elders. "Compared to any generation that has come before, they are less trusting of brands," says Emerson Spartz, CEO of the digital media company Dose. "They have the strongest bullshit filter because they've grown up in an era where information was available at all times."

For decades, brands communicated through advertisements, so corporations with the biggest budgets could make the biggest impact on billboards, magazine spreads, TV, and radio ads. But with the internet, now people can dig into what brands really stand for, beyond the heavily photoshopped visions they try to project. Online reviews have made shoddy products easy to spot. Consumers immediately find out when a company has lied to them, such as when Volkswagen installed software that cheated on emissions tests or when the Honest Company included chemicals in its laundry detergent that it had previously denied using. Blogs regularly dissect—and skewer—companies with ugly corporate culture or poor working conditions.

Spartz believes that because generation Z grew up amid the Occupy Wall Street movement, which portrayed big banking and corporate greed as public enemy No. 1, this has further aggravated their distrust of the behemoths. "Some of the anti-establishment sentiment has penetrated this generation," he says. "Big brands are the establishment and having a recognizable animal on the top right-hand corner of your shirt signals that you are part of the establishment."

There was a time when young people aspired to wear flashy labels conspicuously: Think the enormous polo player logo on Ralph Lauren shirts or the prominent label on Calvin Klein jeans. Millennials flocked to Hollister and Abercrombie and Fitch. But kids are now showing some resistance to serving as walking advertisements, and as a result, many of the major apparel companies are faring poorly. "They're less brand-conscious and they are not spending as much as millennials do," says Kyle Andrew, chief marketing officer of American Eagle Outfitters, another brand that targets teens. (Unlike some of its competitors, American Eagle has seen sales and profits rise.)

According to Makino, this label-wariness is a part of everyday life on campus. "People here mostly dress in ill-fitting thrift store clothes," she says. "Even the few people who wear really nice clothes don't wear big logos plastered across the front."

Still, gen Z is hardly a lost cause for major companies. Spartz says that brands that are able to communicate with customers in an open, unfiltered way tend to do better with young people. Everlane and Cuyana, for instance, proactively offer insight into how products are made, and Warby Parker and Tom's make a point of explaining how they are trying to promote social good. "Authenticity and transparency are two ideals that they value highly," he says.

Gen-Zers also tend to trust individuals more than big institutions. As a result, many brands focused on them are partnering with social media influencers in an effort to appear more relatable. Companies might collaborate with an Instagram user who has a massive following, like Kaitlin Keegan or Susie Lau, paying them to feature a product or outfit on their account. "Generation Z is more willing to hear a brand's story when it is part of a narrative their peer is already telling," says Steven Lammertink, the founder and CEO of the Cirqle, a platform that connects brands with influencers. "This approach is not obtrusive."

Related Video: Just Who Is Generation Z? And Why Should We Care?

Today's teens and young adults are not naive: Many are aware that Instagram, Snapchat, and YouTube stars are paid to endorse products. (In fact, the FTC now requires influencers to disclose when they have been paid to endorse a product.) By and large, they trust that the people they follow on social media and respect are making a conscious decision about the brands they will work with. Lammertink says that he built his company so that influencers had to opt in to work with a brand, choosing to work only with brands they like. "We try and safeguard that authenticity," he says. "This is very different than the traditional method of brands reaching out to models or spokespeople and negotiating rates before agreeing to do a campaign."

Careful Spenders

Generation Z doesn't just stand out in terms of how they relate to brands; they're also spending their money differently. Today's teens and college students grew up hearing horror stories about how many millennials ended up living at home after college, sitting on a mountain of debt. So they tend to be financially cautious.

A survey by Lincoln Financial Group of 400 members of generation Z aged 15 to 19 found that they are saving far earlier than than older generations: 60% of them already have savings accounts and 71% say they are focused on saving for the future. Their top three priorities are getting a job, finishing college, and safeguarding money for the years to come. They rate these goals above spending time with friends and family, working out, or traveling. Jamie Ohl, president of retirement plan services at Lincoln Financial, says that we're seeing similarities between this young generation and the one that emerged in the years following the Great Depression. "When I think about the 'greatest generation' having gone through the Depression and how they taught their children, the boomers, to save, that's what this generation of parents is teaching generation Z," she says.

But while generation Z is realistic about the challenges ahead, 89% of them remain optimistic about their futures, which is higher than any other generation on record. "Part of this has to do with the natural optimism of youth," Ohl says. "But I also think it is important that they watched their parents come through the most recent financial crisis."

Companies have also noticed that young adults put a premium on getting good value for their money. Spirit Airlines, for instance, is preparing for gen Z to become the dominant group of travelers by rebranding itself as an ultra-low-cost carrier. The airline offers rock-bottom fares: It can cost as little as $151 to travel from New York to San Francisco, one way. But the ride comes with zero frills—no free checked bags or complimentary beverages on board. Spirit has found that this generation of college students, who are beginning to buy their own tickets for the very first time, is comfortable paying only for what they are using. "We're finding that generation Z is much more pragmatic around thinking about value," says Rana Ghosh, a revenue executive at Spirit. "It's not so much that they are price-conscious; it's about what they are getting for the money they are spending. As an airline, the draw is to get them from point A to point B safely and on time, so providing the same service for a fraction of the price appeals to them."

Cheryl Rosner, the CEO of Stayful, an app that helps people get competitive rates on boutique hotels by booking close to travel dates, has made similar observations. Rosner points out that younger consumers want to know what they are getting for the price, so they pay close attention to reviews of other people's experience and the extent of the discount. "You've got a group of people who have completely grown up on technology from the day they were born," she says. "They are very comfortable doing their research and finding things out for themselves, so if you're going to sell them on value, you really need to have your shit together. You can't just say that this hotel has the best prices, because that is not what value means."

And when it comes to technology, gen Z tends to be savvy about their approach to consuming electronics, resisting the allure of snatching up the latest, priciest products when there is a constant stream of new, inexpensive options. "Technological innovation is no longer an exciting, celebrated thing, as much as it is an expectation," says Sam Paschel, chief commercial officer of the headphone brand Skullcandy, which targets younger consumers. "Generation Z relates to technology as a tool, as opposed to an obsession." To keep up with the demands of today's teens, the company has invested heavily in scientists and researchers who work to improve the quality of sound. Skullcandy also just launched a line of wireless headphones to pre-empt the demise of the headphone jack in phones. At the same time, Skullcandy has avoided trotting these new products in an elaborate dog and pony show or even charging a premium for them. It strives for a subtler messaging that will speak to young consumers.

Ultra-Competitive, But Very Accepting

Given their focus on financial security, it's not surprising that generation Z is poised to be cutthroat when it comes to getting jobs and establishing careers. Jonah Stillman, a 17-year old from Minneapolis who, with his father David, wrote GenZ@Work, a book (due in March) about how his generation will fare as members of the workforce. The pair conducted two national studies of 4,000 teens about workplace attitudes and preferences. They've discovered that these young people are in "survival mode" and believe they will have to fight for what they want. They would feel lucky to get a job, which contrasts with the common perception of millennials as feeling entitled to a job. Sixty-six percent of gen-Zers say their number one concern is drowning in college debt, and 75% say there are ways of getting a good education besides going to college.

"Millennials are the most collaborative generation, launching applications like Facebook and sharing everything with everybody," Stillman says. "But gen Z is completely different: They are a very independent and competitive generation, having been taught by our parents that there are definitely winners and losers at life. Millennials, on the other hand, were told that if you work together, everybody can be a winner."

But even though they see the workplace as a battlefield, they are inclusive and tolerant of difference. They grew up with a black man as the leader of the free world, with women in positions of power in the workplace, and with openly gay celebrities like Ellen DeGeneres, Anderson Cooper, and Neil Patrick Harris. "As a whole, gen Z is a very accepting generation," Stillman says.

American Eagle Outfitters drew the same conclusion from in-depth market research of preteens and teenagers. "I felt really excited when we got some of this most recent data back," says Kyle Andrew, the CMO. "Honestly, they seem to be a lot nicer than other generations: They are not judgmental, they don't put people in boxes, and they don't seem to care as much about what you do, who you love, or what you look like. At least that is what they're telling us." As a result, the company has tried to incorporate these ideals into its marketing, with an e-commerce website and ad campaigns that are diverse, featuring models from a wide range of ethnicities, with a variety of hair textures and body types. "Generation Z seems to really care about engaging with brands that have values that align with their own," Andrew says. "You can't just make stuff: You have to stand for something. As a brand, we want to support and enable the freedom to be yourself."

Which, she acknowledges, is not easy when teens no longer rely so heavily on mass-market brands to help them express their identity to the world. In the past, kids wore labels that channelled that they were preppy or rebellious or sporty. But the internet has multiplied the number of clothing companies they can choose from, which has had a part in making them less brand-loyal; social media also offers them another platform to craft a public persona. "They are creating their own personal brand," Andrew says.

Volcom, an apparel company associated with the skater and surfer kids of the 1990s and early 2000s, says that it has to evolve to keep up with generation Z. "When Volcom was founded in 1991, there was more of a united counterculture," says Ryan Immegart, the company's marketing VP. "Punk and action sports was a really cool movement, and people felt that our brand was a way for them to be part of that. Our brand represented rebellion and nonconformity from what was happening around young people at the time."

But today's teens no longer need a company to create a community. On the internet, they can befriend like-minded people and join social movements. "There are so many different countercultures today," Immegart says. "For us, we have to grow and figure out the next chapter in our story." What that looks like, he's not ready to say.

Volcom isn't the only brand with millennial appeal that's now rethinking its strategies. Two years ago, for instance, Skullcandy launched a line of headphones that came in a range of "feminine" colors and were specifically designed to accommodate the physiological differences in women's ears. They were a hit among millennials who felt that the consumer electronic industry tended to focus on men's needs, but the response from teens was lukewarm. "Generation Z is much more gender-neutral when it comes to everything—clothing, style, conversation, bathroom choice," says Sam Paschel, the company's chief commercial officer. "Launching gender-specific products in the face of a generation that is thinking more gender-neutral is fascinating to observe."

It's one of the many ways companies are trying to keep up with the demands of generation Z. "The rate of change in society is increasing exponentially," Spartz says. "The world is changing more in 10 years now than it used to change in 100 years. So that means that the difference between someone who is born 20 years after someone else is going to seem like oceans of separation when it comes to shared experiences."

Good thing there's the internet to help bridge the gulf.

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