By 2030, Generation Z (Gen Z) will account for a quarter of global income, seeing a fivefold earnings increase to a staggering $33tn, according to the Bank of America’s predictions. By the following year, their income will surpass millennials’, turning their purchasing power into the fastest growing across all generational cohorts. This trend brings the importance of tapping into the needs of a younger target audience into the spotlight, compelling business owners from across industries — from FMCG to fashion and luxury goods — to reckon with it.
On top of the projections of their enormous spending power ten years from now, Gen Z-ers are set to become the most disruptive generation ever. They have never known life without the Internet and are becoming early adopters of new technologies, including augmented and virtual reality (AR and VR). Gen Z representatives expect their interaction with a brand to be fun, engaging and entertaining. It’s hard to think of a more powerful tool than AR to allow businesses to meet these needs.
So why should business owners consider AR-powered solutions to woo the digitally native generation and how exactly can brands attract younger audiences using the power of AR?
Gen Z, also known as zoomers, comprise a cohort of a generation born between the mid-to-late 1990s and the early 2010s. Media frequently refer to them as digital natives, the iGeneration, the camera-native generation or generation AR.
According to the Bank of America, they make up the largest segment of the population worldwide at 2.5bn and are expected to show a 140% growth in economic power over the next five years. In the US alone, Gen Z-ers represent 20.35% of the population, according to Statista. And with the oldest zoomer turning 23 in 2021, more and more enter the consumer marketplace every day.
Source: BofA Global Research
The US and China are projected to become the largest Gen Z markets by income with the expected earnings of zoomers at $1.2tn and $1.1tn respectively. The influence of this generation on the consumer marketplace is about to grow, requiring brands to adapt to the habits of digital natives.
A recent study from Uswitch revealed that zoomers spend a shocking nine hours a day on screens. While spending most of that time on social media, Gen Z-ers also use their smartphones to shop more than any generation before.
When polled by Global Web Index, 72% of Gen Z representatives said they had made an online purchase in the last month. Over 61% of Gen Z-ers said that a purchase was made via mobile.
What’s more, around 61% of zoomers follow their favorite brands on social media, compared to 34% of consumers from previous generations, according to a Survey Monkey report. This is one of the marketing channels opening up an opportunity for brands to reach a younger target audience by leveraging the power of AR.
Gen Z sees social media as a field for self-expression, gravitating toward Instagram and TikTok, which provide a platform for creative experiments. Tech-savvy brands that know how to engage a younger audience are already boosting their presence on these platforms.
AR-powered filters are one of the more effective tools to raise the level of customer interaction with the brand. Such brands as Kylie Cosmetics, Off-white, Adidas, Gucci and many more have joined the AR filter fray to win over the youngsters.
These efforts will pay off. Industry research shows that people using AR filters spend on average 75 seconds interacting with them, which is four times longer than with mobile video. This is a legitimate reason for a brand to invest in the feature.
Another powerful tool is AR try-ons, which allow customers to virtually try on any product through a dedicated AR-powered app. This has become ‘a thing’ in the beauty industry. Sephora, Estée Lauder, YSL Beauty, Lancôme, and Urban Decay were among the first to start selling products that people could try out online before buying. They used Pinterest’s AR feature, which was developed to provide users with a more interactive experience while surfing the social platform looking for inspiration. The majority have launched their own AR apps since then.
Source: SEPHORA – Beauty Shopping App
The sunglasses producer Goodr reported a 32% increase in conversion rates among mobile shoppers who used AR try-on features.
If there’s anything more fun than playing with the filters on Instagram stories, it’s gaming. The findings of a recent report from Tapjoy reveal that 53% of Gen Z representatives prefer engaging with playable ads — compared to search and social media advertising at 38% on Instagram, 23% on TikTok, 22% on Facebook, and 17% on Twitter. Some 86% use mobile as a gaming platform.
AR technology enables a gamified experience throughout the entire customer journey — from the first contact with a product through playable ads to trying it on in a virtual fitting room. In a bid to meet the interests of the camera-native generation, brands invest in playable ads and an AR-powered gamified social experience. And it pays off.
Burger King is at the forefront in this domain. The company has launched several successful AR-powered promotional campaigns worldwide, taking a swipe at their direct competitor McDonald’s. The Burn That Ad campaign ran in Brazil using a marker-based AR filter that let app users virtually burn competitors’ ads to win a free burger. The promo generated a billion impressions, raising in-app sales by 54.6%, according to the food chain, and scooped a prestigious Cannes Lions award.
The Escape the Clown campaign offered a burger for just one cent to the users of the AR app by scanning a specific page on McDonald’s leaflet and getting to the nearest Burger King within a specified timeframe. The campaign garnered a 180% increase in downloads of their app.
Although some might argue that LEGO is for kids, many grown-ups can’t resist the temptation to dive into its magical world, so Gen Z might also be considered a target audience for their fully-fledged AR gaming experience offered with one of its products. Its Hidden Side toy allows users to build a multi-layered model, and then hunt down ghosts with the help of a free AR app, bridging the gap between physical and virtual worlds.
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Another innovation that has emerged — partly due to the impact of COVID-19 on retail and the lack of in-store traffic due to lockdowns — is virtual stores. This novel approach to online shopping can be accessed via desktop or mobile devices allowing customers to see products in 3D, interact with them and possibly customize them on the go. It’s something especially enjoyed by younger audiences who appreciate engaging customer experiences and enjoy spending time online. Leaning on technology while shopping is becoming second nature to a younger generation. So why not give them the opportunity to shop in their preferred manner by diving into the world of immersive shopping experiences?
A number of brands, including Farfetch, Clarins, Tommy Hilfiger, and Charlotte Tilbury are trying out virtual store technology in some form in a bid to both entertain customers and then push them toward making a purchase.
Tommy Hilfiger’s virtual store, for example, enabled shoppers to navigate a 3D digital space creating an experience similar to Google Street View. Launched especially for the holiday season, it allowed visitors to check out clothes and various color-themed rooms while listening to festive music. An extra special touch is a snow room with virtual snow falling and settling on the floor — something you won’t see in a mall, especially when it’s closed due to a lockdown.
The clothing brand evaluates customer engagement with the help of a special table containing details on product clicks, conversion rates, and prospects to turn store-only shoppers into multichannel shoppers.
Besides tapping into the needs of Gen Z-ers, virtual stores also help brands collect customer behavior data and optimize customer journeys in a more effective manner. So, it’s a win-win business opportunity on both ends.
Digitally native Gen Z-ers are gradually acquiring immense purchasing power and so will soon define patterns in the marketplace. Retailers and brands should pay attention and be ready to adjust to the needs of younger audiences to build brand awareness and preserve loyalty.
Integrating AR into a marketing strategy is an effective solution for businesses considering growing their younger target audience. Postindustria offers a full range of AR development services that help brands to gain a competitive advantage. Just leave us your contact information and we’ll be in touch to discuss your custom solution.
