GEN Z VS MILLENNIALS: THE CHANGING LANDSCAPE OF LOYALTY

Transcription

1 GENERATION Z VS. MILLENNIALS: THE CHANGING LANDSCAPE OF LOYALTY GEN Z VS MILLENNIALS: THE CHANGING LANDSCAPE OF LOYALTY RESEARCH REPORT 1

2 GENERATION Z VS. MILLENNIALS: THE CHANGING LANDSCAPE OF LOYALTY INTRODUCTION Millennials have officially surpassed the Baby Boomers as the nation s largest living generation and newcomers Generation Z are rising in the ranks, poised for consumer domination with $44 billion in spending power. It s expected that Generation Z will make up 40 percent of consumers by Never has understanding these two generations been as critical for brands in their pursuit of establishing consumer loyalty. CrowdTwist conducted research into the similarities and differences between Generation Z and Millennials, how they engage with brands, their shopping habits, their brand loyalty and their attitudes towards loyalty programs. This report provides an overview of those findings as well as recommendations for brands investing in loyalty strategies for current and future consumers. 2 2

3 GENERATION Z VS MILLENNIALS: DEMOGRAPHICS The Changing Loyalty Landscape: Generation Z vs Millennials survey was conducted in June An even distribution sample of 790 North American consumers aged between 18 and 37 were invited to participate in an online survey. Here s a breakdown by gender: Generation Z 1995 and later Millennials Female Male Female Male 3

4 BRAND LOYALTY LOYALTY DEFINED Multiple studies have indicated that Millennials are more brand loyal than any other age group. By contrast, Generation Z are widely perceived to lack brand loyalty. We surveyed what brand loyalty means to each group to get gain deeper insight into what makes each generation spend and engage with a brand % of Millennials said they consider brand loyalty to mean that they would sometimes buy a brand, but would consider other alternatives at a lower price, with 29.98% actually considering brand loyalty to mean they would buy the brand regardless of price, quality, convenience or brand promise. A higher percentage of Generation Z, 38.02%, would also consider other alternatives that offer a lower price, compared to a lower 26.72% who are truly brand loyal. This indicates that Generation Z are a little more price driven rather than brand name driven. Interestingly, the loyal Millennials are 50% more likely to consider alternatives that offer a more compelling brand promise than Generation Z. 4

5 BRAND SELECTION Generation Z rates ethical principles higher than quality of service as a reason to be brand loyal. We asked participants to rank from 1 through to 5 which of these factors was most important to capturing their loyalty: product, service, price, convenience/perks, ethical principles and the instance of a loyalty program. The majority in both groups ranked product first, 60.19% of Millennials and 52.89% of Generation Z. Price was ranked #2 by both generations. Predictably, a higher percentage of the price conscious Generation Z ranked this second compared to Millennials (19.56% vs 16.39%). Interestingly, 50% more Generation Z participants than Millennials ranked the presence of a loyalty program as a driver of brand loyalty! Generation Z and Millennials have different attitudes towards brand loyalty. Generation Z is more price conscious than brand name driven, and Millennials tend to be a little less flexible on their brand preferences. Additional value needs to be built-in throughout a loyalty program to ensure members are active and engaged. 5

6 CHANNEL ENGAGEMENT ONLINE VS OFFLINE Both Millennials and Generation Z prefer to engage with brands in-store, however, a higher percentage of Generation Z prefer to engage with brands on social media compared to Millennials % OF GENERATION Z ENGAGE WITH BRANDS MOST ON SOCIAL MEDIA 6

7 Millennials who engaged with brands on social media primarily selected Facebook as their channel of choice (77.19%), whereas Generation Z were almost split down the middle between Facebook (38.81%) and Instagram (34.33%)! SOCIAL MEDIA ACTIVITY We asked Millennials and Generation Z about how active they are on social media. Both generations are most active on Facebook (Millennials: 65.57% vs Generation Z: 43.80%). Generation Z are much more active on Instagram, Snapchat and Twitter than Millennials. Millennials are least active on Twitter and Generation Z are least active on Pinterest! Millennials and Generation Z are not engaging brands on one single channel, therefore a multichannel approach to engagement is necessary for brands to be able to meet consumers with the right message at the right time, wherever they are. 7

8 DATA SHARING More than 96% of Millennials and Generation Z are willing to complete survey fills. SOCIAL MEDIA CONNECTION We asked participants how likely they were to connect their social media accounts to a loyalty program and we found that almost 60% of Generation Z and almost 50% of Millennials were likely to do so! INFORMATION SHARING 76.58% of Generation Z and 73.07% of the Millennials we surveyed stated that they would be willing to share personal information with a brand in exchange for a more personalized experience. 8

9 When consumers share personal information with brands they expect a customized experience. Leverage solutions that allows you to collect data across all channels and use tactics like machine learning and predictive analytics to predict future behaviors, identify customer needs and wants and create more effective marketing experiences. PURCHASING HABITS Generation Z shop in-store more than Millennials! How they prefer to shop: IN-STORE VS ONLINE Despite being true digital natives, a higher percentage of Generation Z selected that they preferred to shop in-store (57.30% compared to 54.80% of Millennials). In the almost 50/50 split between online and in-store, a higher percentage of each generation opted to shop online via mobile and tablets rather than desktop and laptops. IN-STORE: 57.3% (Generation Z) 54.8% (Millennials) ONLINE (MOBILE): 26.7% (Generation Z) 25.8% (Millennials) ONLINE (DESKTOP/LAPTOP): 16% (Generation Z) 19.4% (Millennials) 9

10 PAYMENT PREFERENCES When it comes to how they settle their transactions, almost half of the Millennials surveyed preferred to pay by debit card (48.01%) compared with 57.85% of Generation Z. Interestingly, 14.33% of Generation Z chose credit card, despite their age and limited length of credit. It will be interesting to see if this percentage increases in the future. According to Experian s 7th Annual State of Credit, Generation Z carry fewer credit cards and have less average debt than previous generations. Compared to the Millennials carrying an average 2 credit cards, Generation Z only have 1 credit card. Generation Z recognize the value of building credit early in life. This leads experts to predict that Generation Z will be financially savvy, and will most likely have a different perspective on value and cost compared to Millennials. Ensure your loyalty program is omnichannel and seamlessly integrated across digital and physical properties so that your customers can enjoy the same experience both online and offline. Also offer tender-neutral rewards as part of your loyalty program, so that members have the freedom to pay however they choose. 10

11 LOYALTY PROGRAM PARTICIPATION ACTIVE LOYALTY PROGRAMS How does loyalty program participation differ between each generation? Despite the perception that Generation Z are less brand loyal, 63.36% of Generation Z respondents are active in at least one loyalty program, while only 36.64% aren t active in a single loyalty program. A higher percentage of Millennials (71.43%) are active in at least one loyalty program. PROGRAM PARTICIPATION BY INDUSTRY Retail saw the highest number of loyalty program memberships from each generation: 74.35% of Generation Z and 74.75% of Millennials. The second highest number from both generations was grocery stores. Interestingly, of course is where the generations differ. Financial Services and Travel ranked higher with Millennials whereas Beauty and Media & Entertainment ranked with higher with Generation Z. 11

12 GENERATION Z VS. MILLENNIALS: THE CHANGING LANDSCAPE OF LOYALTY 63.36% OF GENERATION Z ARE ACTIVE IN AT LEAST ONE LOYALTY PROGRAM

13 HOW RETAILERS ARE CREATING MORE VALUE IN A COMPETITIVE SPACE It s no surprise that retail ranks as the highest category for both generations. More retailers than ever are offering loyalty programs to their customers, and often the presence of a loyalty program is how many retailers win business. The industry is competitive and retailers are evolving their programs to create more value. Zumiez, a specialized apparel retailer, has really ramped up their efforts to create more personalized experiences and make their customers feel valued by using surprise and delight tactics to capture their loyalty. 13

14 LOYALTY PROGRAMS BY TYPE Our research also shows that despite being digital natives, Generation Z for the most part prefer card-based loyalty programs to digital or mobile. Millennials also prefer physical cards and providing information at the register to collect points. These preferences also strengthen the idea that in-store shopping is still huge with these generations. Beauty, Media, Retail and Grocery stores are key industries for Generation Z. Brands operating in these industries without loyalty programs run a high risk of losing business to competitors that do. 14

15 PERCEPTIONS OF LOYALTY BENEFITS REASONS FOR JOINING A LOYALTY PROGRAM What are the main drivers to signing up for a loyalty program? Both generations chose to save money as the number one reason. Not surprisingly, both generations also almost unanimously indicated that they would sign up for loyalty program if it offered a discount with the first purchase! To learn about new products and receive VIP treatment were ranked lowest as drivers to join a program. 64% OF GENERATION Z AND MILLENNIALS COULD BE PERSUADED TO SHOP WITH A BRAND IF THEY HAVE A LOYALTY PROGRAM 15

16 DESIRABLE COMPONENTS OF A LOYALTY PROGRAM What do loyalty members find most valuable in a loyalty program? According to our research, 33.72% of Millennials want member-only coupons/ discounts followed by member-only perks such as free shipping and free samples with 17.33% valuing receipt scanning/codes on packs as important. Generation Z also ranked for the same top three components. A higher percentage of Generation Z want personalized promotions and milestone rewards, which is not surprising considering they re slightly more willing to share personal information in exchange for personalized experiences. Generation Z are also slightly more interested in tiered loyalty programs where you can move up different levels based on spend and engagement. Generation Z want much more from a loyalty program than Millennials. They are looking for a personalized program that can save them money and provide opportunities to earn rewards. They look for member-only discounts and coupons and perks like free shipping and free samples. 16

17 ACTIVITIES AND REWARDS PREFERENCES PREFERRED ACTIVITIES Which engagement activities are each generation most interested in completing to earn rewards? Playing a game ranked #1 for both generations: Millennials 33.02% and Generation Z: 36.46%. Survey fill ranked #2 for both generations. Interestingly, Generation Z are almost 50% more likely to write a review for a brand than Millennials % OF MILLENNIALS AND 63.51% OF GENERATION Z PREFER TO BE NOTIFIED VIA OF THEIR LOYALTY POINTS AND REWARDS STATUS 17

18 APPEALING REWARDS In terms of rewards Generation Z were almost split down the middle in terms of preferences % prefer discounts/cash back primarily, and 41.87% which is a third higher than Millennials prefer free products. A larger percentage of Millennials (57.61%) prefer discounts or cash back. Experiences and social recognition, for example a Tweet mention, ranked lowest in terms of preferred rewards. Generation Z are more interested in charity donation rewards than social recognition rewards Why do these consumers abandon loyalty programs? Both Generation Z and Millennials said they leave a program if the rewards aren t compelling enough or if it takes too long to earn points. When building out a loyalty program establishing the rewards and activities you want to offer your members is paramount. Rewards or activities that aren t relevant or appealing to members will ultimately lead to less engagement and brand loyalty. 18

19 GENERATION Z VS. MILLENNIALS: THE CHANGING LANDSCAPE OF LOYALTY POPULAR LOYALTY PROGRAMS We asked participants to name the loyalty programs they are currently most active in and explain what drives that participation. The results provide interesting insight into the types of industries, brand names, perks and values that resonate with each generation. 19

20 AMAZON PRIME The largest majority of Millennials named Amazon Prime the program they were most active in. Amazon Prime was also named third most popular with Generation Z. It s not surprising, considering the paid subscription program boasts an impressive membership of over 66 million. The benefits of being an Amazon Prime member include two-day free shipping, unlimited streaming of movies and TV shows and access to Kindle books, all for a monthly fee of $10.99 or $99 for a year s membership. Generation Z chose Amazon Prime for the free shipping perk, the access to quality products and the streaming services. Millennials also cited free shipping as a driver of their participation but also noted that Amazon Prime provides convenience, a great product selection at competitive prices and quality service and dependability. 20

21 STARBUCKS REWARDS The largest majority of Generation Z named Starbucks as the program they are most active in. Starbucks also favors well with the Millennials who ranked them third. As of January 2017 there were 13 million active members in the Starbucks Rewards program. As the leader in the restaurant space, Starbucks offers coffee lovers the ability to order in advance and collect instore, pay via mobile, take advantage of birthday rewards, free products and bonus point promotions! Generation Z are active in the Starbucks Rewards program because they love earning points they can redeem for free and discounted drinks and food! Millennials love the program because of the free food and drinks rewards and the ability to order and pay via the convenience of the mobile app. 21

22 THE KROGER PLUS SHOPPER S CARD The Kroger Plus Shopper s Card reward program was a popular choice for Millennials, who ranked the grocery store program second after Amazon Prime. Although Kroger didn t rank as high for Generation Z, participation in this loyalty program is phenomenal. Nine out of ten of the purchases made at Kroger are made using the loyalty card! In fact, they are the highest rated loyalty program in the grocery industry. This is because the program offers so much value in terms of benefits. Members are eligible for grocery discounts and fuel savings. Members receive customized coupons and discounts based on their shopping behavior, with the ability to access and keep track of the program via a mobile app. Millennials cite personalized coupons and discounts on food and gas as the main drivers of their participation. 22

23 SEPHORA BEAUTY INSIDER Sephora ranked #4 with Generation Z (who also ranked another beauty contender, Ulta #2!). Millennials also called them out in their hotlist at #4. The Sephora Beauty Insider loyalty program currently boasts more than 10 million members. The program is tier-based meaning that members can accumulate points for spend and earn benefits and perks based on status. Benefits include beauty studio access at the highest tier, member-only sales, birthday gifts and free samples. Millennials love the large selection, and the perks including birthday gifts, and free products. Generation Z love the free products and rewards! 23

24 GENERATION Z VS. MILLENNIALS: THE CHANGING LANDSCAPE OF LOYALTY Notable mentions: GameStop, Ipsy, Walgreens, CVS Kroger Notable mentions: CVS, Target, Ulta, Best Buy 24

25 ENGAGEMENT SOLUTIONS AND RECOMMENDATIONS KEEPING MILLENNIALS LOYAL OFFER FREE SAMPLES AND FREE PRODUCT REWARDS Almost one third of Millennial respondents indicated that being loyal to a brand means they would not shop anywhere else. Two thirds indicated they would look elsewhere if the price was right or the product was better. This indicates that Millennials are slightly brand name driven. Not surprisingly, Millennials are also loyalty driven towards brands primarily due to product quality, followed by price. Millennials also rate discounts and free products as the #1 reason to join a loyalty program. Consider offering Millennials the opportunity to sample new products as part of your rewards offering. This allows them try something new from a brand they already buy from but without the added cost. PROVIDE GREATER FLEXIBILITY AROUND SHOPPING EXPERIENCES Despite the increase in online shopping over the recent years, most Millennials still find greater value in shopping in-store. Furthermore, they like the flexibility of being able to provide their loyalty member account information at the register. Ensure your loyalty program is omnichannel and seamlessly integrated across digital and physical properties so that your Millennial customers can enjoy the same experience online and offline. Incorporating features such as receipt scanning and codes on packs ensures that your customers can earn points for purchase no matter where they buy from. F CREATE A STRONG FACEBOOK PRESENCE Almost 70% of Millennials are active on Facebook, and half of them are willing to socially connect with brands. However, only a small percentage of Millennials are engaging with brands on Facebook. Therefore, Facebook is a great channel for brands to connect with Millennials. 25

26 BUILD A SIMPLE YET ENGAGING PROGRAM Don t make it too difficult to earn points for rewards, as this is the number one reason Millennials leave a loyalty program. Rewarding for spend is a solid foundation for the program, but rewarding for engagement to keep members active will be key to your program moving forward. Millennials are willing to play games, fill out a survey and visit your company website to earn points with your brand. Incorporating these activities will help keep members engaged. EARNING LOYALTY FROM GENERATION Z OFFER DISCOUNTS, COUPONS AND PERKS The financially savvy Generation Z are loyal to an extent to a brand s product, but are more price conscious than name loyal. They re happy to switch brands if the price is right. In the age where services such as Amazon Prime can offer a wide selection of products at flexible costs, it s simple to find cheaper alternatives to your product. Therefore, brands need to build economic benefits into their loyalty program in order to appeal to the younger generation. Consider offering discounts, coupons and perks such as free shipping or free returns on online orders. BE EVERYWHERE THEY ARE Generation Z are active on all channels, digital, social and in-store. They expect to be able to check the availability of in-store items online and vice versa. They expect a seamless shopping experience across all channels. Growing up in the information age, they are more likely to research a product before purchasing. This means visiting your brand website, your social media channels, and your in-store locations. Invest in creating a single brand identity across all of these channels. While Generation Z are very active across Facebook, Instagram and Twitter, they mostly engage with brands on Facebook in the social realm. Building a stronger presence on Instagram and Twitter could help you engage a wider Generation Z audience. 26

27 THEY ARE INTERESTED IN LOYALTY PROGRAMS. 63% of Generation Z are active in at least one loyalty program. Beauty, media, retail and grocery stores are key industries for Generation Z. Brands operating in these industries without loyalty programs run a high risk of losing business to competitors that do, after all Generation Z is more likely than Millennials to be loyal to a brand if they have a loyalty program. They are also more likely to sign up with a loyalty program that offers a discount on their first purchase..but THEY EXPECT MUCH MORE They want much more from a loyalty program than Millennials. They want to save money, get additional perks and earn rewards. They look for member-only discounts, coupons, and perks like free shipping and free samples. They will leave if rewards aren t compelling or relevant. However, the benefits of Generation Z signing up to your loyalty program are invaluable; they are willing to complete surveys and write reviews which provides your company with crucial feedback and insight. 27

28 THE FUTURE OF LOYALTY ACROSS ALL GENERATIONS In 2020, Millennials will account for one third of the adult population, and Generation Z will own 40% of the consumer power. The research in this report is not only useful for marketers to understand how the expectations of the next wave will differ from the last, it is also in helpful in identifying the overarching trends that bridge the generations. Loyalty programs like Amazon Prime are already doing an impressive job of building loyalty and engagement for members across both generations. Here are some best practices to incorporate into your loyalty program to sustain high engagement and loyalty across the spectrum. OFFER AUTHENTIC AND PERSONAL EXPERIENCES BASED ON BEHAVIORS AND PREFERENCES. Each generation has expectations from a brand and a loyalty program. However, a one size fits all approach doesn t always equal a good customer experience. Brands need to consistently gather data about their consumers across all channels and use tactics like machine learning and predictive analytics to predict future behaviors, identify customer needs and wants and create better marketing experiences. Fortunately, as our survey results attest, Millennials and Generation Z are much more willing to volunteer their personal information in exchange for these customized experiences. Encourage this willing audience to participate in surveys, complete profile updates and connect with your brand socially. You can also use this data to celebrate member milestones and special occasions such as birthdays and Mother s Day by rewarding members with a gift, such as bonus points, a sizable discount, or free samples. These tactics drive brand engagement and loyalty. INSTILL VALUE BY REWARDING FOR BOTH SPEND AND ENGAGEMENT Simplify your rewards-for-spend strategy so that earning points for spend becomes frictionless across all channels. Millennials, for example, love the fact that they can order and pay for their coffee using the Starbucks app. Consider integrating mobile payment and other commerce tactics like receipt scanning to ensure you re making it convenient for members to purchase and be rewarded for each purchase. Start integrating engagement activities that are appealing to both Millennials and Generation Z, like games and surveys. Offer instant rewards to demonstrate value to consumers and keep engagement high. Both generations love to save money on purchases consider enabling automatic rewards to apply discounts in real-time. 28

29 GENERATION Z VS. MILLENNIALS: THE CHANGING LANDSCAPE OF LOYALTY CONCLUSION Generation Z and Millennials have different attitudes towards brand loyalty. Generation Z is more price conscious than brand name driven, and Millennials tend to be a little less flexible on their brand preferences. But both generations are active across a multitude of channels and want to enjoy similar benefits in a loyalty program. The two most critical as identified in this research are: value and personalization. In this climate, brands can no longer operate with a one-size fits all approach to loyalty. Loyalty needs to evolve with each generation. Meet your customers wherever they are, with a loyalty program that makes them feel valued for being a member and utilize consumer data to drive better customer experiences and maximize brand engagement. These strategies will secure the loyalty of Millennials, and build upon the loyalty of Generation Z. 29

30 CrowdTwist is an industry-leading provider of comprehensive and patented multichannel loyalty and engagement solutions that drive incremental spend, leading to better customer data, stronger insight, and more personalized experiences. We are revolutionizing loyalty, helping top brands including Pepsi, L Oréal, 24 Hour Fitness, and Zumiez develop a deeper understanding of customers. Forrester recognized CrowdTwist as a Leader in The Forrester Wave : Customer Loyalty Solutions For Midsize Organizations, Q report. For more information, visit contactus@crowdtwist.com, or call E. 23rd Street, 8th Floor, New York, NY f/crowdtwist l@crowdtwist i/crowdtwist 30