Three reasons why Gen Z ignores your loyalty program

Discussion
Aug 20, 2018

Lanndon Lindsay, a Reporter for The Wise Marketer

Through a special arrangement, presented here for discussion is a summary of a current article from The Wise Marketer, a website and newsletter serving the global loyalty industry.

Gen Z is less likely than other generations to join loyalty programs, according to research from loyalty experience firm Kobie. Perhaps even more worrisome, the latest “Deloitte Millennial Survey” describes Gen Z as experiencing a disenfranchisement with contemporary businesses and brands.

Here’s a look at three loyalty missteps you might be making in the face of Gen Z.

Reason 1: In the age of instant gratification, you take too long.

From smartphones to social media, Gen Z’s every move is influenced by a digital context that feeds them information immediately and is ready to interact with them instantaneously. So, when your loyalty program makes collecting points or stacking up purchases a longwinded process, there’s little chance Gen Z shoppers are going to wait patiently for their reward. According to research by Kobie, 40 percent of Gen Z’s agree that programs require too many purchases to earn rewards or redeem points.

Reason 2: Is your tech really that cool?

Deloitte reports that 67 percent of Gen Z survey participants are interested in discovering, exploring and buying new products with the help of emerging interfaces such as voice-based virtual assistants and virtual reality. Gen Z lives in a technological wonderland. To them, tech isn’t just a means to an end (such as when checking a bank account or ordering a pizza), it can be a form of entertainment in its own right or even a window through which to form deeper connections to the real world.

Reason 3: Gen Z is have a tough time trusting you.

Issues such as data misuse and a near constant threat of hacks prevail; politics and business collide; it’s an era in which a reputation can evaporate in mere moments. The general turbulence has led to an overall disillusionment with brands from the perspective of Gen Z. This also has the side effect of making Gen Z notoriously difficult to market to. Tapping into the psyche of this intelligent, self-aware generation with the loyalty ploys of the past simply won’t yield positive results. That’s why Gen Z responds best to tactics such as influencer involvement, social engagements and pop-culture integrations — these are all ways of building genuine authenticity by creating a transparent brand with an understandable voice.

DISCUSSION QUESTIONS: What characteristics of Gen Z clash with typical drivers of loyalty engagement? How might loyalty programs be reinvented for the generation?

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Braintrust
"The direction loyalty programs look to be moving is less cut and dry than the tit-for-tat programs we are all so familiar with."

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16 Comments on "Three reasons why Gen Z ignores your loyalty program"


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Nikki Baird
BrainTrust
So, I know I don’t have access to a “normal” pool of Gen Z, but for the ones that I spend a lot of time with (about 30 robotics kids), I find this to be completely off base. Gen Z doesn’t have the disposable income to care about loyalty programs because they’re not spending enough yet to hit any of the benefits with any regularity. I guess you could argue that applies to #1: you’re taking too long. But the reality is, are you going to reward a small incremental spend or invest in someone else who is spending a lot more? I know plenty of kids who are hooked into the Starbucks reward program and like it just fine. I don’t think these challenges identified are really emblematic of “Gen Z” — I think these come from the fact that we’re talking about kids here, who have highly limited budget, and more free time on their hands than other generations. So a better question is, where will they go when they grow out of… Read more »
Camille P. Schuster, PhD.
BrainTrust

Good points about age budget, and use of the Starbucks loyalty program.

David Weinand
BrainTrust

While my personal experience straddles the fence between Gen Z and Millennial, there are plenty that are doing it right. Sephora, Ulta and Starbucks all have captured the mindshare of my daughters and the engagement they provide has equated to loyalty. Our own research does back up point #2 — younger generations will choose a retailer that offers next-gen engagement technologies over one that doesn’t. That can equate to loyalty but it has to be measurable and an ROI has to be part of the equation (not a big stretch for retailers).

Like everything we discuss in this forum, retailers need to adapt processes and programs to the behaviors of their shoppers. Loyalty isn’t just a program, it’s the entire essence of the brand and the majority of the decisions made in a given day need to have the end goal of customer engagement in mind. That leads to loyalty.

Lyle Bunn (Ph.D. Hon)
Guest

These three top reasons with the addition of a few others could apply to many demographic groups. The brand assumption is that loyalty is good and everyone should want to be part of it. In a world of options and special deals and purchases from a range of retailers, loyalty program engagement may not be worth the effort past initial sign-on and transactions that require virtually no effort by the consumer.

Brandon Rael
BrainTrust

I do not believe that Generation Z is so unique that retailers need to come up with a specific strategy just to address their needs. Engaging and value-added loyalty programs are a critical part of any retail/brand-customer relationship. Loyalty programs, fully integrated with mobile shopping, payment and social capabilities are a winner, as demonstrated by Starbucks and others.

The world is changing rapidly. We are all becoming digital natives so to speak. So isolating your loyalty program strategies to just simply Generation Z is a strategic mistake. Plenty of Boomers and Generation X and so on segments are on board, and the majority of those groups have evolved with the times.

Evan Snively
BrainTrust
It’s not just Gen Z whom loyalty programs need to change for. It’s everyone. Gen Z just doesn’t have as much exposure to the old design and tactics, so it is easier for them to adapt or imagine a different future state. The direction loyalty programs look to be moving is less cut and dry than the tit-for-tat programs we are all so familiar with. The back-end will still look like a loyalty program to the brand — with behavior tracking, tiers and levers to pull for enticing behaviors. But to the consumer a lot less focus will be put on the formal program structure — rules, points, rewards, and more will be put on a fulfilling and meaningful brand experience. The key is still building a relationships between consumer and brand and companies positioning themselves so their brand helps consumers grow relationships with their peers. Gen Z, like Millennials, is a very self-conscious cohort. Your brand has to help give social status, and if your loyalty program is able to help you deliver that… Read more »
Jennifer McDermott
BrainTrust

The gamification of loyalty programs make them appear a great fit for Gen Z. Yet I think the “taking too long” point could have an addendum “and you ask for too much.” The oldest Gen Zers are 22 and don’t yet have a high disposable income. When achieving a level of perk requires them to have spent a significant amount, it is not going to look achievable to them from the outset and so won’t garner their loyalty.

Joanna Rutter
BrainTrust
3 months 20 days ago

To echo Nikki and focus mostly on the second question — Gen Z doesn’t have the ability to care about being loyal to your brand, and even if they did have the income to care, why would they? Speaking for Millennials, I was part of a generation entering college and the workforce just as all of our parents were getting fired from their jobs during the recession — jobs they had held for years. We all understood clearly that unwavering corporate loyalty isn’t ultimately rewarded, that every worker and consumer can eventually be considered disposable. We all took notes. Gen Z followed. Loyalty is a two-way relationship for digital natives. We don’t trust your leaders. We don’t trust the ethics of your supply chain. Therefore, you can’t buy our loyalty with a punch card. Try harder to be a good business and show us how you’re doing that. That’s all the secret is.

Ralph Jacobson
BrainTrust

Much of this has to do with shortening attention spans. Younger people don’t have the interest in learning your loyalty program’s rules. You need to cater to their interests so they naturally select your stores to shop.

Seth Nagle
BrainTrust

The biggest issue with loyalty programs isn’t the lack of instant gratification but the lack of value/substance. Loyalty programs are responsible for so much noise and retailers send out e-blasts and texts with what feels like little to no rhyme or reason that Gen Z would rather just avoid them completely.

Traditional loyalty programs are dead. Brands and retailers that understand this have moved away from them and towards social media channels. They are creating niche social networks that tap into their consumer base. Instead of pushing out content they are creating it and the shoppers/consumers are searching/coming to them.

Susan O'Neal
BrainTrust
3 months 20 days ago

The three reasons Gen Z ignores your loyalty program are also your three opportunities for competitive advantage. When you tap into customers’ current smartphone habits (which includes goofing around for 3 to 5 hrs a day), deliver a light, interesting experience (that makes exploration and discovery fun and fruitful) and partner with them to co-create your relationship advantages — your digital customer engagement is broader (15 percent+), younger (18 to 44), more frequent (4.6 times per week) and economically beneficial (18.4 percent increase in weekly spend).

Phil Rubin
BrainTrust
3 months 20 days ago
Some wonderful comments here, and I’ll echo Nikki’s, Evan’s and some others: the “problem” that Gen Z has with most loyalty programs are not any different than the rest of the population, aside from the fact that they have relatively little capacity for incremental spend. The problem as others have referenced, is that the majority of brands offering loyalty programs are not practicing loyalty (customer) marketing. For most, loyalty programs are nothing more than another avenue for promotion and are almost solely focused on transactions rather than delivering a better customer experience and building relationships. Related, before brands should expect loyalty from Gen Z or any other, they have to remember that once a customer buys something — or even considers doing so and reveals him-/her-self to the brand — it’s up to the brand to demonstrate loyalty to the customer. This rarely happens. Rather, the brand says “sign up for my undifferentiated transactional promo program” and expects something magical to happen. It won’t. Transactional loyalty drives neither, whether we are taking about Gen Z,… Read more »
Ken Wyker
Guest

There’s a great quote from an article about 15 years ago by Michael Shostak on the true value of loyalty programs where he said: “The quickest path to building customer loyalty – and ultimately customer value – is by making it as easy as possible for your customers to do business with you repeatedly.”

That is still true today, but I might add that you also need to make it “fun and interesting” to account for the development of technology and the desires of Gen Z. Amazon’s Alexa and the Starbucks app are great examples of making it easy and fun to do repeat business.

Shelley E. Kohan
BrainTrust

The most significant way to engage Gen Z in a loyalty program is to link the interactions to social media. Gen Z needs to be able to EASILY and quickly participate in the program so minimal effort to engage is essential. Additionally, “reacting” to or responding to feedback from Gen Z on social media will create higher loyalty. For example, responding to a Gen Z post on Instagram will demonstrate the company’s commitment to the customer. Gen Z looks for immediate reaction to social media posts. The loyalty points mean less than getting positive affirmation on social media posts.

Ricardo Belmar
BrainTrust
I’m not so sure it’s as simple as these three reasons make it seem. I’d like to know what the survey questions were to derive the first reason. Frankly, if you ask any demographic group if they’d like rewards at a faster pace than current loyalty programs, who wouldn’t answer with a resounding “yes!”? Also, I think the key for retailers is a sense of immediacy in how they interact with Gen Z. While you might confuse this with a short attention span, I don’t believe that’s the issue — it’s a desire to be recognized, responded to, and interacted with immediately because that’s the social media experience this generation is accustomed to. This is where a good gamification-based experience is crucial to the loyalty program. Starbucks does this well by regularly introducing games with a sense of competition to earn higher levels of points and rewards. This creates that sense of immediacy for Gen Z (and others!) that keeps them coming back for more. At the end of the day, retailers need to remember… Read more »
Susan Viamari
BrainTrust

Research has shown that the digitally-minded Gen Z wants brand authenticity, personalized products and advertising, and to be part of the feedback loop in developing these products and campaigns. Loyalty programs will have a greater chance of succeeding with Gen Z if the programs and rewards are tailored to shoppers’ preferences, buying habits and budgets. Social listening and creating a digital community are strategies that can help open the feedback loop and create an authentic experience.

wpDiscuz
Braintrust
"The direction loyalty programs look to be moving is less cut and dry than the tit-for-tat programs we are all so familiar with."

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