The Great Wealth Transfer - GETTY
Article by Kian Bakhtiari, Founder and Director of The People
We are standing on the precipice of the greatest transfer of wealth in modern history. In the next decade, Millennials and Gen-Z will gain trillions of dollars from previous generations. Most companies will need a strategy to attract younger 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 fulfill a specific need, while brands sold goods in exchange for money. We purchased cars to save time commuting, food and drinks to gain nutrients and energy and laundry detergent to keep our clothes clean.
In the 20th century, brands started promoting the emotional benefits of products to stand out against competitors. Coca-Cola associated itself with happiness, Apple with thinking differently and Nike with overcoming adversity. Today, brands have to navigate a new dimension. Consumers are buying products based on values and beliefs. In an age when most products perform the same function, people want to know the brand story and its impact on society.
Belief in consumer brands is replacing religious faith and the declining power of the nation-state. According to Gallup, wealthy nations rank high on quality of life, whereas countries with low GDP ranked higher on meaning. In Western countries, individualism is the dominant ideology—further compounded by virtual interactions and social isolation—young people seek a collective sense of 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. The brands that can nurture a feeling of collective ownership and self-expression will win over the next generation of consumers. However, most brands are built for mass production and broadcast marketing. Building a community requires a change in mindset, relinquishing creative control and embracing agile methodologies.
Maintain Your Core Audience
Most legacy brands walk a tightrope between maintaining their core audience and attracting the next generation of consumers. Baby Boomers and the 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 globally, with the fastest-growing income of any generation. This is a tricky conundrum.
Companies need to connect with new audiences to build brand loyalty and lifetime customer value. But changing too quickly could alienate existing customers, especially when the groups have divergent needs and values. Young people want to know where brands stand on the causes that matter most to them. While being too political could alienate Baby Boomers with considerable purchasing power. Meanwhile, playing it safe means, you won’t appeal to either.
The level of change will depend on the category, market share and core 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. There’s no need to change everything overnight and risk eroding brand equity.
Brands can experiment on the periphery with new products and business models without disrupting the core proposition or main source of revenue. For example, in the U.K, John Lewis has announced plans to become a landlord following the decline in department stores. The world’s biggest jeweller Pandora has launched a sustainable lab-grown diamond collection. And Gucci is accepting cryptocurrencies to attract Gen-Z consumers. The key is extending the brand into new territories without damaging the core business.
Explore New Value Propositions
The average age of an S&P 500 company is under 20 years, down from 60 years in the 1950s. Only 28 of the original 100 companies remain listed on the FTSE 100. In a post-pandemic world, brand survival 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 was invented today?
The first step on the journey is removing the barriers to innovation. Launching a pilot project is a great, low-risk and high-reward way to get started, unconstrained from legacy thinking and business as usual protocols. Brands should embrace a test and learn culture where the main objective is to learn from the experience. There are numerous ways for brands to future-proof their business. Such as launching sub-brands or new products based on changing consumer behaviour. Others include working with new agencies, consultancies and startups free from convention. After all, new thinking requires new partnerships.
One of the most powerful methods is co-creating with your audience and building a community of brand advocates. Another option is forming a youth advisory board to offer fresh outside-in perspectives to complement your existing Board of Directors. Building a youth advisory board can’t be a PR exercise. It means listening to young, diverse voices and having uncomfortable conversations. But as a result, your company will be more future-ready and relevant to younger generations.
The great wealth transfer represents a once-in-a-lifetime opportunity for brands to capture the hearts and minds of young consumers, employees and investors. On the flip side, it poses a substantial existential risk for brands that fail to adapt at the speed of change. In business, as in life, change is hard but doesn’t have to be painful. The future belongs to companies that can build communities, co-create with new audiences and innovate on the periphery before scaling.