Generation Z could disrupt marketing and advertising

Luke Graham, special to CNBC

While companies race to sell to the latest market segment, the Millennials, advertisers should be getting ready for the next group, Generation Z, experts warn. According to one of the creators of a report into Generation Z, defined as those born after 1998, the advertising rulebook will need to be rewritten as traditional demographics become irrelevant.

The report, titled "Generation Z 2025: The Final Generation" examines the group and forecasts their buying habits over the next 10 years. Sean Mahoney, vice president and editorial director at media company Sparks & Honey, who produced the report, argues that in the future advertisers will have to stop relying on narrow demographics of people such as age, race or location.

"Everybody (will start) to exhibit lots of different traits that will dissolve the sense of traditional demographics," Mahoney told CNBC in a phone interview. "It's not going to be about your race and your age and your location; it's going to be about your mood and the connectivity between people who are not necessarily outwardly the same."

Image Source | Getty Images

By mood and connectivity, Mahoney is referring to emotional states. "We're left to focus on moments and how they make us feel. Happy, sad, alone or connected – these are states that we all experience as human beings."

The report by Sparks and Honey will allow businesses to better understand and prepare for this next generation, says Mahoney.

"In order to ready for something like that, rather than play catch up like everybody did with Millennials, we think it's really important for you to start to understand what is going to happen in the very near future and prepare yourself as a brand, as an industry, as a government and as individuals."

Read MoreNo job security, no problem for Generation Z

If advertisers cannot use demographics to create generalized messages, they will instead attempt to develop more targeted, personalized messages. However, this approach will also face difficulties, according to Mahoney.

"Generation Z will still have their individual preferences and affinities, and marketers will try to personalize messages in increasingly sophisticated ways," he explains.

"But we've identified a strong trend toward privacy that will make focusing 'personalized' content more and more difficult. Gen Z will be more engaged with the curated than the personalized, as they hide from programming in search of choice."

Read MoreGen Z: redefining the workplace?

But the next generation will face challenges of their own.

"Generation Z are entering a global labor market with whom they will have to cooperate and compete," explained Professor Chris Rowley from Cass Business School to CNBC in an email.

"They will have to compete with others that 'do more for less' ie work harder, longer and better and will expect less as they come from cultures where age and experience are valued and even venerated."

Follow Luke on Twitter: @LukeWGraham