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What kind of Loyalty Program Does GenZ Actually Want?

Young people are discount and mobile natives, but shun loyalty programs and reward programs, according to a new report from Kobie Marketing.

Thirty-six percent (36%) of Gen Zers above age 18 reported participating in one or zero loyalty programs, while 22% of millennials fall into the same category. This means the current loyalty experiences don’t suit their tastes, preferences and customer journeys.

The Young Consumer is the Most Digitally Immersed Generation in History

When we think of GenZ and how they live and play online we think of new trends online:

  • Video centric mobile apps (YouTube, musical.ly, Tik Tok)
  • Interactive social display (Instagram Stories, Snapchat Stories, Snapchat Streaks). They are “visual-storytelling natives”.
  • Influencer and peer ecosystems; they value peers more than brands. Trust is paramount, authenticity is a necessity.
  • Cryptocurrency adoption and decentralization advocacy
  • Reduced attention spans and more prone to gamification embedded products

Loyalty Primed for Disruption

Here Gen Z as those born in 1996 or after, while millennials were born between 1980 and 1995 have some common traits in their relationship to the existing loyalty ecosystem. Namely, they are ready for a new system. They are ready for a word-of-mouth driven product customized for GenZ that empowers them instead of teasing them with deals.

According to Fast Company, Generation Z makes up a quarter of the U.S. population and will account for 40% of all consumers by 2020.

GenZ is the Key Demographic for the Future of Loyalty in Retail & Crypto

GenZ will be in their prime as consumers just as the token economy is beginning to mature, circa 2021. This means loyalty programs as whole are already pivoting in preparation for the inevitable.

According to the study as described by Business Insider: These are a few of Gen Z and millennial consumers’ top reasons for not joining loyalty programs:

GenZ Seek More Unique Experiences and Early Discounts

  • Programs require too many purchases to earn rewards.This is the leading reason for both groups, with 40% of Gen Zers and 45% of millennials selecting it. Brands and retailers need to make sure their loyalty programs offer perks, like discounts, unique experiences, or gifts, early and often. Brands can offer small rewards soon after consumers join to make them happy with the program, potentially hooking them for years to come.

GenZ Seek Free & Accessible Loyalty Programs

  • There’s a cost associated with joining. Having to pay some kind of fee to become a member scares off 33% of Gen Zers and 39% of millennials, so programs should strive to be accessible and free. At the very least, retailers should offer both a free and paid program, even if the free one has fewer perks.

GenZ Needs Immediate Gratification and Convenience

  • The enrollment process takes too long.Young consumers will abandon websites if they take too long to load, so it’s not surprising that long enrollment processes are a problem for 28% of Gen Zers and 34% of millennials. Programs should require as little information as possible upfront to draw in these shoppers; this should also help with their concerns about sharing too much information, which 28% of Gen Zers and 25% of millennials cite as a deterrent.

For retailers, brands and even the utility token economy; you need to embed certain basic princples to get their interest and adopt your loyalty program.

How to Build Loyalty for GenZ

Loyalty marketing techniques will need to change to catch Gen Z’s attention. Image: Getty
  • Embed gamification (rankings, vanity metrics, etc..)
  • Embed community (peer orientated, viral adoption, etc…)
  • Must be convenient, seamless and easy (omnichannel, QR codes, in-store and online, etc…)
  • Must ideally be a token (cryptocurrency, blockchain, digital wallet, etc..)
  • Must use AI to personalize the experience. (product recommendations, predictive analytics, algorithms to optimize their use of the app, etc…)

The Trust Epidemic is Real

In America trust in institutions including corporate brands is in decline. This is nowhere more true than with young people in general. Young people need to change their spending patterns since they are saddled with more student debt, housing is more expensive and the cities with opportunities are becoming unaffordable to them.

In the most recent Deloitte Millennial Survey released May 15, 2018 — where the firm surveyed 10,455 millennials and 1,844 Gen Z youth from around the globe — brand mistrust is on the rise.

Therefore any loyalty solution that taps into GenZ and Millennials need to establish both convenience, speed, discounts and trust. This cohort has different values from GenX and Baby Boomers that may have trouble empathizing with their value-system. These include corporate social responsibility, environmentalism, inclusion and peer-to-peer and community advocacy.

GenZ Perceive Corporate Brands Differently

This cohort is more realistic, pragmatic, price conscious, discount hungry and skeptical of the real motives of brands:

Note the following changes in perception:

  • Do businesses behave ethically? (48% in 2018 vs. 65% in 2017)
  • Are business leaders committed to helping improve society? (47% in 2018 vs. 62% in 2017)
  • 75% believe leaders/business focus on their own agendas rather than considering the wider society
  • 62% think leaders/business have no ambition beyond wanting to make money.

Characteristics of the Ideal Loyalty Program

GenZ therefore needs a loyalty program that puts power back into the people (their digital wallets), is democratic, highly transparent and preferably decentralized.

They need brands on board and leadership that understand their consumer preferences on a very deep and holistic level.

Such a loyalty program needs to mirror their values and shopping preferences. The user experience must be social and highlight their personalized preferences, while adding value back into the retail ecosystem that is physical store-centric, and not simply for E-commerce shopping.

According to a report published by Ernst & Young, only 30 percent of Gen Z consumers see loyalty programs as a positive thing.

Loyalty programs, rewards, coupons and discounts therefore needs to be reinvented with positive technology. Tokens have a decent chance of being part of the solution on the blockchain. As cryptocurrency adoption is high among young males, such a loyalty program would have to be engineered to be interesting to young women as well.