Loyalty and the Rise of Gen Z

Generation Z is growing up and it’s time to start taking notice.

By 2020, Gen Z is projected to account for 40% of all consumers in the U.S. at a population of 84.7 million. Gen Z recognizes its own value and has higher expectations for brand relationships. Four out of five Gen Zers feel that retailers think their age group is important. To put that into perspective, two of three people in the general population felt the same.

With the oldest members turning 21 this year, they will soon be graduating college, entering the workforce and gaining financial power. They have already started taking over the 18-34-year-old age range for marketers. If this shift in customer demographics does not cause you to start rethinking your approach to loyalty, it should.

Digital Natives

There is more than just a year that separates Gen Z from Millennials. The majority of Gen Z missed the first dramatic evolution of technology. The oldest Gen Zers were only 10 years old when the first iPhone came out in 2007. As they grew up, their main form of connection was through mobile devices at an age that made that behavior native. That came with the use and development of mainstream social media, and the need and accessibility of constant connectivity and communication.

There has never been a generation that is so natively digital to its core. Older generations stereotype Gen Zers as being completely attached to their phones, but is their attachment to the phone itself, or is it an attachment to the never-ending flow of information that is available at their fingertips? Given these factors, brands need to adapt in order to connect. They must embrace Gen Z and make changes to their loyalty programs that allow them to keep up with the fast-paced lives of the first digitally-native generation.

Recognize Diversity

In the past, brands have relied on the allure of exclusivity to promote their loyalty programs. But Gen Zers are exceptionally diverse and focused on individualism. “One size fits all” programs won’t resonate with them as well as programs that develop a personal relationship between the brand and the customer.

Connecting with Gen Z requires developing loyalty that recognizes their diversity and makes the brand more relatable. They don’t settle with traditional concepts of beauty or idolized imagery of the perfect life. They idolize people like 19-year-old James Charles, who has gained millions of followers on Instagram and YouTube for helping break gender-based beauty standards by posting his own makeup tutorials. His following caught the attention of many brands, resulting in the signing of a contract with CoverGirl that made headlines.

Companies that can show they are relatable to Gen Z’s sense of self and unique lifestyle will have more success at forming long-term relationships with their customers in this generation.

Your best loyalty ambassadors are your own customers, not celebrities.  They’re unique and they control their own futures, just like James Charles and just like all of us.  If Gen Z values honesty and individuality, it’s sitting in our customer files—so let’s give it to them. Harness your best customers to drive influencer content and convert them into loyal brand ambassadors in the process. The total reach may be smaller, but the impact and conversion will see lifts. After all, who cares about impressions? They’re meaningless. Let’s focus on the metrics that matter.

Personalization is Key

For Gen Z, constant digital accessibility is not just an addition to life, it’s an essential part of it. To achieve personalization for Gen Z in loyalty, first we need to understand the way they interact with the world on a day-to-day basis. Most brands think that means simply creating a mobile app. For a generation that has an app for almost everything, simply having one is not enough.

In order for your mobile app to be successful in this generation, you must prove to Gen Zers that it adds value to their lives. Provide a user experience that is more than just buying a product. Create a community that Gen Zers can feel a part of— one that they can trust to support their unique lifestyle and experiences.

Developing a personalized experience for each individual customer sounds time consuming, but the first step is easy—listen to your customers. Use available feedback and previous purchase behavior to create tailored suggestions and personalized offers for each customer.

Don’t stop there. Include visual elements in your app that make it stand out from others. Use graphics and lifestyle images that mimic the user experience of apps and social channels that are already used by Gen Z. The familiarity of the app provides the customer with a feeling of comfort and, ultimately, an increase in their trust for the brand.

Channel Distribution

Contact Gen Z the way they want to be contacted, not the way that’s easier for you. They anticipate convenience more than any other generation in history. They have an expectation for everything to be instant because that’s all they have ever known. The key to connect with them is using the quick and efficient ways that are native to them.

Rewards in loyalty today are typically sent out to customers by email or direct mail. Brands must take a step further from those tried-and-true tactics and invest more in SMS. Not because Gen Z won’t use email, but because a text message has a sense of immediacy that they expect. SMS is more accessible and convenient to Gen Zers than any other channel of communication. And perhaps more importantly, they use SMS they way previous generations use email—storing SMS chains for later use and archiving messages. We can think of SMS as the next evolution of email for Gen Z.

Don’t Repeat Mistakes

It’s essential for marketers to avoid the sins of the past. Retail struggled for a decade because of the economy, technologies, and increased competition, but the most understated reason was that marketers did not know how to connect with Millennials.  They missed the opportunity for change and many brands are still playing catch-up.  We need to learn from where we went wrong with Millennials to realize how we can connect with Gen Z before it is too late. When the importance of forming relationships is ignored, brands are doomed to failure. Every new generation becomes your core customer at some point.  Generation Z is no longer the future, they’re our current customer–whether marketers are ready or not.

Allison Novak is Marketing Associate, Baesman Insights & Marketing