Generational Surfing: The new normal for everyone

With extending life stages, drifting life events and new events emerging, riding the waves between generations isn’t as predictable as it once was. Across generations, companies have relied on assumptions about life stages, using age as a proxy, to identify when and how people will purchase certain products or services.

In our inaugural edition of Me, my life, my wallet, we explored generational surfing, with a focus on baby boomers, born between the mid-1940s and the mid-1960s, and millennials, born between 1980 and the turn of the millennium. In this edition, we turn the spotlight on Generation X, the demographic grouping born between the mid-1960s and 1980, following the baby boomers and preceding the millennials. Traditionally, the analysis of baby boomers and millennials has been defined by their experience in North America and Europe. Yet, globally, the experience of these generations has been extraordinarily diverse. In the US, for example, boomers grew up in a post-war era of increasing affluence, consumerization and optimism.

In China, they were born into a planned economy where such everyday commodities as paper, sugar, oil and pork were rationed. In India, boomers grew up in a newly independent nation, with a sluggish, socialist-style economy that limited their economic options. In Brazil, boomers were so scarred by rampant hyperinflation in the 1980s that even now this demographic prefers to spend rather than save. In Japan, their journey was even more remarkable; born at a time when food was in short supply, they matured, as their country became an economic superpower.

 With globalization, millennials in different countries have shared some experiences, but not others. In the West, their wallets have been squeezed by the great recession of 2008 and its protracted, painful aftermath. In China and India, where 47 percent of the world’s millennials live, they have more opportunities and resources at their disposal than their parents. Yet, globally, they are considered the first truly digital generation, growing up in an era of widely available and rapidly advancing computing, technology and mobile communication, although the scale and pace of this revolution has varied from country to country.

Sandwiched between these two cohorts lies a group that is often overlooked or, particularly in North America and Europe, ignored: Generation X. Do they offer any less potential than baby boomers or millennials? Or could they represent a new opportunity for organizations to target new consumers in new ways?

Gen X: Looking beyond generalizations

To understand the forces impacting Gen X’s customer wallet, it’s important to appreciate the life events that have brought them here. Consider the life stages of Karen, a typical American Gen Xer born in the late-1960s. As she joined the workforce, the 1987 Black Monday crash dented business confidence, with economies softening and deflationary pressures mounting. In 2000, as Karen entered her peak earning years, the 2000 dot-com crash brought further economic pressure. Having bought a home at the height of the housing market, the 2008 financial crisis hit, affecting employment, investments and home ownership. Between 2007 and 2010, US Gen Xers alone collectively lost approximately 38 percent of their wealth, an average of US$24,000 per person, and suffered an average 27 percent decline in home equity. With widespread layoffs and poor job prospects, in part due to the rise of outsourcing and offshoring, 15 percent of Gen Xers dipped into savings to cover everyday living, while almost a quarter stopped contributing to retirement accounts and many never restarted due to the protracted nature of the economic recovery. The consequences of this unfortunate timing have had a real and lasting impact. According to our global survey, 45 percent of Gen Xers feel anxious about retirement; only 9 percent say they have adequate savings to retire; and a worrying 25 percent say they have not started saving for retirement but plan to. “In Western economies, Gen Xers have a record of unfortunate timing,” said Colleen Drummond, Head of Innovation Labs, KPMG in the US. “Each of their pivotal life events coincided with major economic shocks that have left a profound and lasting impact on their assets, wealth and outlook. Yet they are also in their prime earning and spending years, which make them attractive targets as customers.” But contrast Karen’s history with the experience of Liu, a typical Gen Xer in China, born in the mid-1960s. Growing up with multiple siblings, his early years would have been characterized by scarcity; chicken was regarded as an annual treat. However, from the age of 13, his opportunities would have increased exponentially as then-leader Deng Xiaoping began reforming China’s economy. As Liu grew up, he might have felt pride that his generation was transforming society — Jack Ma (Alibaba), Pony Ma (Tencent), Robin Li (Baidu) are all Gen Xers. More prosperous than his parents, Liu is generally optimistic about the future, though concerned by talk of a housing bubble and the need to help his children financially through university and to make a down payment on a first home. Or look further in Asia to Avi, a member of India’s Generation X, born and spending his formative years in an era of economic malaise and a protectionist culture that only dissipated in his early-30s, as the country embraced foreign domestic investment and relaxed industry, commerce and trade policies. Disposable incomes among the middle and upper-middle classes increased dramatically, driving a consumption economy previously unfamiliar to the nation, and both economic and purchasing opportunity swelled rapidly. Many of his generation began to travel overseas for employment and returned demanding the same quality of products and experiences from Indian manufacturers and the multinational corporations swiftly entering the market. Home ownership became more accessible, a previously stagnant real estate market began to grow in value, and Avi and his peers began to stand apart from their predecessors as a more literate, globally aware and quality-conscious generation — and one armed with a relatively higher net worth than their parents.

Sandwich generation

 One experience that Karen, Liu and Avi, alongside other members of Generation X, share is a new life stage we refer to as the ‘sandwich generation’. Caught between caring for and supporting both younger children and aging parents, they are timestarved, thanks, in large part, to the sharp rise in women’s participation in the labor force, their parents’ extended life spans and, particularly in China, the consequences of the one-child policy on birth rates. Being sandwiched can manifest pressures on the watch, as Gen Xers are forced to make sacrifices or compromises in how to allocate their time. And it can create pressures on the wallet, in how they marshal their financial resources to support their elderly parents and accommodate their Gen Z children, who are typically spending more time with their parents than previous generations.

Basis for new opportunity

Though the past and present have been full of challenges for Generation X, the future outlook is positive. While many Gen Xers in the West are not as wealthy as their parents were at the same age, they are currently at the peak of their earning years and have a strong work ethic. As our survey shows, by virtue of their life stage, this overlooked Generation is earning more and spending more than at any other time in their lives. Despite not being digitally native, like millennials, they are technologically savvy. What’s more, in part due to a looming wealth transfer from their parents, they are expected to become tens of trillions of dollars wealthier over the next two decades. In China and India, Gen Xers are already more prosperous than their parents, benefiting from economic reforms made over the past 40 years. So how can organizations respond to the watch-wallet dynamic of Generation X, and tap into their increasing wealth and affluence? “This generation needs help and increasingly will be able to pay for it,” said Julio Hernandez, Customer Advisory Lead, KPMG in the US. “Their wallets are under pressure, their watches are under pressure, but Gen Xers may be more likely to spend money to save time as we move into a period of wealth transfer and increased earnings.” Companies are already building products and experiences tailored to the watch and wallet of this timestarved generation. The accelerating adoption of subscription services, automated reminders, digital personal assistants and time-management tools powered by artificial intelligence (AI) has begun to address this time crunch. The battle to engage Gen Xers will play out in smart homes connected to the internet of things, voice platforms that emerge as a cutting-edge alternative to handheld devices and AI-powered virtual assistants that help manage all aspects of our lives, not just our diaries. Gen Xers will invest in technologies to make their lives smarter, while baby boomers primarily spend to make their lives easier. Organizations that can harness data, analytics and technology to become, in part, a program manager for consumers’ lives can bring balance to the watch-wallet dynamic of Gen Xers and create tangible value. By aggregating and simplifying the complexities of Gen Xers’ lives, those organizations will be well placed to tap into the growing wealth of this at times overlooked, yet important, group of consumers over the next few decades.

To learn more about reaching your future customer, download the complete report, Me, My Life, My Wallet.