America’s Next Commercial Revolution: Influence vs. Affluence
A.T. Kearney Consumers@250 Study
How influence, personalization, and trust will drive the future of consumer goods and retail
By Michael Brown, Greg Portell, and Hana Ben-Shabat
Prelude to a Commercial Revolution
America’s business landscape is being dramatically transformed as a series of dynamic tensions emerges from the collision of two radically different principles of commercial and social organization. Affluence, the traditional approach to growing markets and establishing social status—based on mass production, distribution, and media models—is being successfully challenged by Influence, the ability to instantly move markets through the amplification and reach of an individual voice or a community of voices.
This paradigm shift is the cornerstone of America’s Next Commercial Revolution: Influence vs. Affluence, A.T. Kearney’s study of US consumers, their changing attitudes, and the likely impact they will have on all consumer-facing industries. The study is part of A.T. Kearney’s ongoing Consumers@250 research, which seeks to describe what American consumers and the businesses serving them will look like in 2026, when the nation celebrates its 250th birthday.
Consumers@250 answers CEOs’ toughest questions entering an era of personalization and total connectivity.
As this report demonstrates, retailers and branded consumer goods manufacturers now face a historic challenge. Those that accept the challenge and adopt new ways of thinking about their brands, organizations, customers, employees, and even vendor relationships, will prosper. Those that do not will continue to suffer declining returns.
Three themes emerged from America’s Next Commercial Revolution:
- The shift from Affluence to Influence—arising from a perfect storm of demographic shifts, changing values, and hyper-connectivity—is permanently rewriting the rules of global consumer consumption patterns.
- As a result, the mass market of the future will thrive on three fundamentally different principles: influence, personalization, and trust.
- Consumer brands and retailers can appeal to future consumers and take advantage of new technology-enabled ways to influence and sell, with their ability to engage consumers in the digital world becoming more crucial than ever.
From Affluence to Influence: The Three Drivers of Change
Under the Affluence Model, capital both directs and controls markets. Capital is also how businesses keep score. Success is defined by market share, gross and net profits, and quarter-over-quarter and year-over-year financial performance. Change is driven top-down. Significant resources are expended on mass media marketing vehicles deployed to lead consumers to believe their self-worth exists in direct relationship to what they buy. If Affluence Model shoppers had a mantra it would be “I am what I own.”
In contrast, America’s Next Commercial Revolution found that individual consumers sit at the center of the Influence Model, which sees market development in terms of one person’s ability to create change and build community by influencing her or his peers, retailers, CPG manufacturers, the media, and governments. Influencers rely on social media and social networks to amplify the power of their voices, facilitating the formation of ad hoc coalitions to address a variety of causes. Under the Influence Model, she or he who can enact the greatest behavioral change wins, regardless of his or her financial position (see figure 1).
As noted earlier, the study traces this tsunami of change to three forces: demographic shifts, changing values, and hyper-connectivity.
Demographic shifts: major generational and economic trends
The study notes that in 2026 the American market for consumer goods will—for the first time in history—include six unique generations (see figure 2). We call two of them—the Silent Generation (born between 1928 and 1945) and the Alpha Generation (2017 to 2023)—the Bookend Generations, because of their limited purchasing impact in 2026, when the youngest “Silent” will be 81 and the oldest “Alpha” will be only 9.
That leaves four high-commercial-impact generations: Baby Boomers (1946 to 1964); Gen X (1965 to 1980); Millennials (1981 to 1997); and Gen Z (1998 to 2016), the last age cohort to have members born in the 20th century.
When it looks across these generations, the report sees an American population that is bigger, older, less traditional, more diverse, more urban, and certainly more unequal than at any other point in history.
The size of the US population will explode from about 140 million in 1945 to an expected 350 million by 2026. By then, Americans’ median age will have risen from 29 in 1945 to 37.3.
We also are becoming far more diverse. Between 2016 and 2026, the US population will add an additional 13.7 million Hispanics, 4.7 million Asians, 3.6 million African-Americans, and 2.6 million “others,” but only 1.3 million more Whites (see figure 3).
While “minorities” are already statistical majorities in cities such as Detroit, Miami, Houston, and Los Angeles, Gen Z will be the first age cohort in American history to fully experience the death of a “majority” at the conceptual level. Simply put, fragmentation will make the idea of a majority irrelevant on any dimension.
America’s Next Commercial Revolution also found that new households are increasingly nontraditional.
In 1945, only 10 percent of children 18 years old and younger were being raised by a single parent, and that statistic considers factors including war deaths and the number of people serving in the military. By 2016, that figure had jumped to 28 percent.
By 2026, the traditional Silent Era household—two married, heterosexual parents with at least one child—will account for fewer than 20 percent of all US households. Instead, we will see a wide variety of living arrangements and domestic identities, including households of one, LGBTQ households, genderfluid and agender households, seniors living together to share costs, multigenerational households, domestic partnerships, and almost any and every other living arrangement one can think of. The implications for marketers conditioned to household marketing are seismic.
Where these households will be located is also changing.
According to the study, by 2026 American cities will be 10 percent more densely populated than they are today. Urban density for the top 50 metropolitan areas will reach 4,687 people per square mile, and 84 percent of all Americans will live in urban areas.1 To put this into perspective, 4,687 people per square mile is roughly equivalent to the entire population of California living in New Hampshire.
Of course, not all households will be well off financially. Income inequality, the political lightning rod of recent elections for both the right and left, will continue to define the American consumer experience in 2026, with an increasing share of available wealth flowing to the top 1 percent of US earners, while the gap between these earners and the bottom 90 percent continues to grow (see figure 4).
Values versus value
As figure 4 demonstrates, since 1998 the American economic landscape has been significantly reshaped. This is especially important in terms of its impact on how people relate to society, business, and each other. 1998 was also significant because it witnessed the births of the first members of Gen Z, a generation born into a world their grandparents could not have imagined.
Gen Z, the largest age cohort in this country, was born into a society where more and more wealth was controlled by fewer and fewer Americans and where the majority of Americans had the potential to communicate with each other on the Internet and social networks.
Finally, it is important to note that the Great Recession of 2007–2009 fell almost directly in the middle of Gen Z’s birth years (1998–2016) and that the values of the generation as a whole were shaped during the Recession and in its aftermath.
As we have seen, Gen Z has demonstrated outsized influence, and not just because of its numbers. Thanks to the tools at their disposal, their ability to broadly influence the society around them has been reduced to the time it takes to click a “Send” button. As a result, their values are mirrored, to greater and lesser degrees, by other generations.
America’s Next Commercial Revolution defines value as the relationship between an object or service and its price. Some value assessments tend to be fixed and are based on quasi-objective criteria, such as weight and clarity standards for diamonds. But for most consumer-packaged goods, market forces—usually competitive pricing—traditionally establish the standards for accepted value.
Under the Affluence Model, consumers were taught that some brands had a greater value than others and, therefore, possessed the right to command a higher price. A status was associated with owning “things of value,” and finding “a great deal” was a well-recognized source of personal pride. Consumers were defined by what they bought and how they bought it.
Where “Affluents” bought (and sold) on the basis of value, “Influencers” make and break markets over how much the markets match—or offend—their values. Under the Influence Model, consumers focus on values, looking beyond a product or offering itself to a variety of factors associated with it, factors that may or may not include such things as the ethics of a company and its trading partners, the source of raw materials, the political position of board members of public companies, a company’s social responsibility, and even production technologies.
Influence Model consumers prioritize access to functionality and having experiences over ownership, and they prize both convenience and community. Gen Zers will rent or share across multiple categories. Why own a car when what you really want is mobility, the ability to get from place to place on demand? This focus on utility rather than ownership explains the rapid success of Uber, Airbnb, Spotify, Netflix, and dozens of other companies leveraging the NOwnership Model.
Today, the access versus ownership model generates about $15 billion annually in the United States. By 2026, according to a report released in late 2016 by The Brookings Institution, the market for accessed goods and services is expected to explode, increasing by a multiple of 22 and reaching $335 billion.2
In 2015, experiences and experiential products accounted for approximately $1.9 trillion of spend, or nearly half of all discretionary consumer spending (see figure 5). America’s Next Commercial Revolution indicates this pattern will continue for the foreseeable future, with this emphasis on experience significantly spiking spending through 2026 and beyond.
Influence Model consumers are directly challenging brands to engage on issues they see as important.
The report found that 25 percent of Gen Zers actively look for brands and retailers that do good for the world. An additional 26 percent of respondents indicated they would avoid brands or retailers if they discovered they did something that violated their moral or ethical code.
When it comes to consumer activism, Gen Z continues to raise the bar, both in terms of the number of people willing to challenge corporations and the effectiveness of their protest. Their willingness to call out the need for change is only matched by their ability to spark it. While hippy Baby Boomers whispered their unhappiness with “The Man,” they weren’t really in a position to do much about it until they themselves became “The Man.” Gen Zers are much more likely than Boomers to take direct action against companies they disagree with. And, thanks to social media, Gen Z can mobilize local, national, and even global coalitions.
Asked if they believed the best way to enact change is by capturing real-life photos or video of a problem and sharing it publicly, 14 percent of Gen Z and 13 percent of Millennial respondents said yes. But so did 9 percent of Gen X, 5 percent of Boomers, and even 5 percent of Silent Generation respondents (see figure 6).
Hyper-connectivity: the rise of the influence model
Forty-nine million of Gen Z’s 82.4 million members will reach adulthood by 2026.
Gen Zers grew up amid almost continuous digital innovation and technological disruption. America’s Next Commercial Revolution revealed that 94 percent of Gen Zers never disconnect from the Internet. Eighty percent use the Internet for purchases, and 70 percent report having changed a purchase decision based on something they read, heard, or saw online.
This hyper-connectivity is a precondition and enabler for the rise of the Influence Model, where markets are moved through the amplified power of an individual voice. Combine this hyper-connectivity with the demographic shifts and changing values, and the future consumer landscape becomes dramatically altered.
The New (De-)Mass(ed) Market
The truth is that the consumer market has always been fragmented—by gender, income, ethnicity, religious belief, age, and dozens of other factors. Until now, none of that seemed to matter because from a retail and manufacturing point of view, those fragments somehow could be molded together to form one general mass market. So, despite real, significant differences between the generations, marketers came to believe consumers were, in the end, predictable— and, perhaps more importantly, easily directed.
That belief worked well for the Affluence Model, but for the Influence Model, with its emphasis on the individual, it is simply a non-starter. Influencers are well connected to sources of information, and their skepticism is paired with a belief that no one, and certainly no company, has the right to presume to define their identity.
With this in mind, it may be inaccurate to speak in terms of a mass market, at least in the traditional sense. Branders and retailers will have to conquer markets one Influencer segment at a time. Perhaps they will need to think in terms of “de-massed” markets, in which it is still possible to attract a critical mass of consumers, even as mass markets begin to disappear.
Regardless of what you call them, future markets will be defined by three factors: influence, personalization, and trust.
Influence
Influence, as noted earlier, is the ability to move markets through the outsized power of an individual voice.
Gen Xers such as 37-year-old Vani Deva Hari, aka The Food Babe, were early Influence Model poster children. Hari launched her Food Babe blog in 2011, and four years later Time magazine included her on a list of “The 30 Most Influential People on the Internet,” no doubt based on her ability to attract more than 50 million blog visitors a year.
As shown in America’s Next Commercial Revolution, the power of the Influence Model continues to grow. There is little doubt that as Gen Z begins to achieve critical mass as America’s largest population cohort and starts flexing its purchasing muscle, it will resonate more with the Haris of the world than with the Harrods.
Personalization
Affluence Model consumers bought the fiction that “one size fits all.” Alternately, Influence Model shoppers believe “one size fits nobody—except possibly by accident.” They demand personalization from the products and services they buy. Societal fragmentation, the Affluence Model’s dirty little secret, will be celebrated as personalization in the Influence Model.
Believing “I am what I do,” these new consumers search out brands and retailers they can relate to and view commercial exchanges in terms of trust-based relationships. America’s Next Commercial Revolution indicates that at every stage along their commercial journey these consumers will demand the right to be recognized, respected, and always treated as individuals. The report also leads one to believe this demand will have profound implications for branders—whether retailers, manufacturers, or suppliers.
Aging Boomers may still see the little jockey on their shirts as a status symbol and be willing to pay a premium for it. Some diehard Gen Xers may still proudly cut the jockey off their shirts to show their disdain for brands. Millennials may comb thrift shops in search of vintage Polo shirts they can list on eBay. But Gen Zers embroider their own shirts and hoodies with a whole digital Noah’s Ark of creatures of their own creation. And, they will broadcast those personal design concepts more effectively, and less expensively, than Ralph Lauren could have ever dreamed.
Food and beverage companies are among the earliest and most successful adopters and beneficiaries of this personalization model.
The number of US farmers markets featuring locally grown produce is growing, and four out of 10 school districts now participate in farm-to-school programs.3 Craft breweries in the US once again enjoyed double-digit growth in 2016 and produce one out of every 10 beers sold.4 And, while the landscape is still over-stored by chain foodservice operators, sales in the independent end of the foodservice business have doubled over the past five years. Today, companies with fewer than 50 employees own nine out of every 10 restaurants.5
While chain book and music stores were the commercial canaries in the so-called Retail Apocalypse coal mine, independent bookstores now comprise 10 percent of the American bookstore market. Independent music stores are almost single-handedly responsible for the resurrection of vinyl and are the darling of indie bands and their Gen Z and Millennial fans. And we shouldn’t forget the whole personalized nutrition movement that uses the most individual quality of any consumer—his or her DNA—as the basis for selecting a broad range of goods from supplements to cosmetics.
Of course, the move to personalization signals a major change in how marketers think about their customers. Savvy retailers and manufacturers will quickly learn to focus more on “who” a consumer is rather than on what she or he “does.”
Consumers are rapidly becoming critical data feeds, with information on individual diets, activity levels, goals, and social network participation replacing traditional demographics and buying and browsing histories (see figure 7). Under the Affluence Model, media companies would aggregate this information and sell access to marketers. The new Influence Model sees consumers monetizing their personal data in ways that make ad units such as CPMs look quaint.
Trust
In fact, according to the study, data—and granting access to data—will become the new consumer currency in the Influence Model, a currency whose value will be entirely dependent on how much the buyer trusts the seller.
Under the right model, consumers will increasingly trade their personal data for what they perceive as value-added personalization, which makes trust table stakes for earning consumer access. An A.T. Kearney/NPD Group study found 93 percent to 99 percent of consumers surveyed, across all generations, feel it is important for them to have control over how their data is used.
In A.T. Kearney’s Global Future Consumer Study: The Consumers of the Future, which examined the global shift from Affluence to Influence across seven countries, two questions illustrate how trust is rapidly becoming the universal, global standard for future commerce and exactly how difficult it will be for branders to clear the trust hurdle.
The first question compared changes in the percentage of respondents in several countries expressing “Little or No Confidence” in brands between 2012 and 2017. The results are shown in figure 8.
Significantly, trust had declined in every country. But there is hope. The second question of the global study asked consumers if they would be willing to share personal data if they received “the right reward” in return, something they deemed as significant. Under the Affluence Model the “right” reward generally meant a price discount or availability of a “special deal.” Under the Influence Model that reward is more likely to involve some form of personal recognition or engagement.
Here, the results were overwhelmingly positive as shown in figure 9.
While the danger to branders unable to establish trust is clear, so too is the potential for branders who learn how to build trust under the Influence Model. For some, the research contained in these reports raises as many questions as it answers.
Next Steps to the Future
Over decades of success, retailers and manufacturers came to accept the idea of mass market supremacy as an article of commercial faith. They were comforted by the belief that there are no commercial problems scale cannot address and no demographic cohorts immune from the seductive lure of carefully designed advertising, marketing, merchandising, and promotion. While still important, the concept of scale has shifted, requiring companies to become more agile in how they find scale advantage.
For the retail and consumer-packaged goods industries, this belief in the power of mass marketing has led to an inward focus on what made sense to the corporation and has blinded many companies from recognizing the emergence of the changing consumer.
Historically, the proof has been in the profit statement—truth found on the bottom line. Now, that myopic view of the world is failing, and failing fast. Just as markets are caught up in the war between the established Affluence order and the new Influencer consumer spirit, so too are the companies that compete in those markets. Many organizations find themselves wrestling with a series of dynamic tensions of their own.
For example, as a result of the dynamic tension between decision agility and process certainty, organizations must find ways to strike a balance between execution excellence and on-the-fly adjustments with increased risk. Internally, the dynamic tension between culture and control is causing companies to build teams that focus on consistent objectives, while enabling individual talent to contribute in personalized ways.
Based on the research behind America’s Next Commercial Revolution, A.T. Kearney believes the transition from Affluence to Influence represents a new commercial and social reality—not an economic hiccup, but a change that must be addressed by all consumer-facing businesses that plan on having a future.
Preparing for that future requires a fundamental and radical rethinking of every aspect of commercial functions from product development, sales, and marketing, through customer service, IT, HR, and beyond. It is crucial to remember that Influencers aren’t just customers. They are employees, trading partners, and competitors as well.
As employees, Influencers eschew traditional business hierarchies, preferring to focus their attention on activities and organizations they see as authentic.
As active participants on blogs and social networks, they prefer work environments that provide them with platforms for self-expression and with bosses skilled in active listening.
So, how does a company begin wrestling with all this apparent complexity? Based on the findings of America’s Next Commercial Revolution, here are five suggestions about where to start:
- Step one: Use data to understand your customers on their own terms. Capturing proprietary consumer data in the least-intrusive manner will be the defining trait of successful companies as consumers expect companies to use their data in ways that enhance their interaction with the companies’ goods, services, and brands.
- Step two: Create new models and metrics to describe your target market.Demographics, as we know them, are no longer sufficient. “Personagraphics”—or the use of psychographics, anthropology, and sociology to understand the individual needs and desires common across emerging subgroups—will take root in corporate decision-making models and eventually replace traditional demographics. The result will be the death of the idea of “the majority” and the emergence of a new set of consumer cohorts around which consumer decision models will be built.
- Step three: Redefine scale. Retailers and manufacturers need to find ways to redefine scale. It may no longer be possible to create a mass market offering attractive to 100 million customers, but it is more than possible to create 20 micro-market offers attractive to 5 million shoppers aligned by shared psychographic profiles or belonging to communities of interest. Branders need to utilize membership models and event-driven marketing to build a sense of community within the cohorts that creates a network effect for Influencers.
- Step four: Think about trust as your customers do. In fact, try to think about everything you do from the customer’s perspective. Stop resting on comfortable assumptions about the strength of your brand, your customer, your market, and your competition. When it comes to building a successful future, complacency is the real enemy.
- Step five: Maximize the value of your workforce. Evaluate every aspect of employee engagement and the organizational model to ensure the business is poised for success. This includes creating an environment that nurtures and affirms innovation. You can ensure cutting-edge innovation only by creating an environment in which the best idea wins and employees can impact decision processes regardless of their age, title, or seniority.
America’s Next Commercial Revolution repeatedly touches on the transition from a value-based commercial model to one based on values. Appealing to values-minded Influence Model consumers requires you understand their ethical concerns and then determine how, or if, you can incorporate those concerns and values into your product offerings while keeping an eye on the margin implications.
The authors would like to thank Hana Ben-Shabat (New York), Abby Klanecky (Chicago), Matt Lubelczyk (New York), and Adam Pressman (Chicago).
The authors would like to thank Hana Ben-Shabat (New York), Abby Klanecky (Chicago), Matt Lubelczyk (New York), and Adam Pressman (Chicago).
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