How Loyalty Marketing Can Survive in a Gen Z World

We’re going deeper into 2018, which means the predictions, trends and what’s-in-store-isms of marketers everywhere are fading in favor of actual outcomes. But there is a sleeping giant amongst us that will have an ever-increasing role in almost every facet of our lives—from the economy to politics to how we consume goods and services. We’re talking about Generation Z, or people born between 1996 and 2011, who are projected to account for almost half of all U.S. consumers by 2020. That’s why it’s crucial for marketers to grasp the demands of the fresh-to-market generation who, like millennials before them, are poised to significantly shape consumer behavior and expectations for years to come.

Gen Z is as nuanced and complex as every generation before them. There is no catchall bucket to lump them into or single strategy to engage with them. In fact, they are considered to be the most diverse and multicultural generation ever.

Below are five things consumer-oriented organizations need to thrive in the “kudos economy,” our term for a marketplace that increasingly values social capital and peer validation over points and status.

Rethink your approach to loyalty

According to a report published by Ernst & Young, only 30 percent of Gen Z consumers see loyalty programs as a positive thing. In other words, having a loyalty program is not a differentiator. In the kudos economy, peer-to-peer relationships play a vital role in serving as the vehicle through which brands are served, shared, mentioned and experienced. The traditional relationship between the brand and the loyalty program, with the consumer occupying the space in the middle, is rapidly becoming esoteric.

A study by Lab42 found that less than half of Gen Z shoppers were influenced to purchase based on a loyalty program compared to nearly three-quarters of millennials. Brand loyalty for Gen Z is less about a “program” and more about how the brand experience aligns directly with their lives. So, now more than ever, marketers need to pinpoint how they add value to individual Gen Zers.

Forget about channels

Gen Z doesn’t care about channels and, frankly, neither should you. If you ask someone from Gen Z what they’re doing as they stream content from a device, they’ll likely answer, “watching TV.” They don’t say, “I’m streaming the latest episode of [blank] on Hulu from my [device].” The lines of distinction between email, digital, desktop, TV, device, app, etc., aren’t nearly as defined—or meaningful—as current-state marketers tend to view them in. The significance and consumption of channels as stand-alone paths are becoming deconstructed and homogeneous.

Real-world brand interactions are becoming increasingly important as well. In fact, a report by PwC found that 81 percent of Gen Z respondents preferred to shop in stores. And a separate study by Adyen found that this soft spot for brick-and-mortar is dependent on retailers providing preferred in-store tech and an engaging, fluid brand interaction. For marketers, that means tying in-store and digital experiences together, an item at the very top of Gen Z’s list of demands. Marketers can get ahead of this fundamental consumer shift, or at least keep pace, by providing a cohesive experience across all channels.

Reframe social from a form of media to a form of language

The term “social media” fails to capture the entirety of today’s peer-to-peer or brand-to-consumer digital experience. The fact that Facebook’s profits in the fourth quarter soared 61 percent, despite users spending less time on the platform, makes the case that things are changing rapidly. Further, the saturation of social platforms, like Snapchat, Instagram, Facebook and Twitter, used by millions of Gen Zers (and millennials), has led to the transformation of each one into an important form of communication.

Simultaneously, consumption, along with communication, on these platforms is on the rise. For example, a study by Awesomeness found that Gen Z consumes an average of 68 videos a day. On its face, that means Gen Zers are able to digest and sort through more fragmented content than any previous generation. What and how Gen Zers share and consume is particular and native to each platform. Marketers need to understand these nuances and employ them accordingly.

Your value and mission matter

For Gen Z, transparency, authenticity and purpose are paramount in attracting them and building trust. A study by Google found that 70 percent of Gen Zers favor YouTube influencers that are relatable and real versus traditional celebrities. In general, Gen Z are more altruistic and egalitarian than previous generations. Brands that strive to meet their cause-related goals will benefit from incremental organic publicity and attract the attention of Gen Z. The majority of Gen Zers also believe that movements like transgender rights, #MeToo and Black Lives Matter should be socially embraced. For marketers, strategically and carefully tapping into relevant social movements that resonate with your brand is key to reaching Gen Z.

It’s more than money back

At a macro level, consumer expectations of loyalty programs and brand experiences in terms of benefits and rewards has been shifting for some time. A study by Oracle shows that 69 percent of consumers who regularly participate in one or several loyalty programs state that receiving different treatment than others is important and that consumers will pay an added premium for additional convenience. This resonates particularly true for Gen Z.

The impact of Gen Z on marketers will have businesses reevaluate their methods wholesale. For customer marketers trained on bringing loyalty and CRM programs to life, Gen Z’s fundamental individuality presents the biggest challenge and opportunity to conquer markets over the next few years. Ultimately, points and rewards alone won’t foster brand loyalty. Instead, in the post-millennial economy, things like exclusivity, reciprocity, social responsibility and instant gratification will trump traditional loyalty marketing.

Andrew Kelly

@andrescalo

Andrew Kelly is the vice president of sales and marketing at ICF Olson 1to1.

Guy Cierzan

@Olson1to1

Guy Cierzan is the managing director of ICF Olson 1to1.