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Why Gen Z and loyalty programs aren't (always) perfect matches

Marketers and thought leaders have this odd fixation on proclaiming things “dead.” Every few months or so, we get a summary report that a particular technology, marketing strategy or consumer mindset is now outdated (usually as of last night) and become one with the dinosaurs and Elvises.

We’re bombarded with reports about the “death” of programmatic advertising (when in fact there might not be anything of substance to take its place). 

Or we’re pummeled with articles on the dangers of e-commerce triggering a brick-and-mortar Retail Apocalypse (when truthfully in-store shopping is more popular than ever among younger shoppers).

Seriously, though. Enough already. We get the need to proclaim “the end is nigh” in order to generate a new round of clicks, likes and shares.

But things aren’t so black and white, especially when marketing to Gen Z. Things are actually pretty complicated — contradictory, even — when making one’s pitch to younger consumers.

Take Gen Z’s relationship to loyalty programs. There’s been a lot of talk lately that Gen Zers can’t be trusted when it comes to brand loyalty. Articles that proclaim only 15 percent of Gen Zers are active members of three or more brand loyalty programs, as opposed to the statistical average of 41 percent for other generations.

Certain articles would have you believe today’s college kids are all a bunch of happy-go-lucky mercenaries, beholden only to the rules of the Cyber Jungle, ready to abandon a brand (no matter how good it is) at the first sign of it being unable to offer them enough e-coupons.

While it’s true marketers cannot (and should not) rely exclusively on loyalty programs to win Gen Z consumers, it’s also true they shouldn’t just toss them out the window. There’s room for contradictions when marketing to these folks.

It’s true many Gen Zers aren’t “clicking” with loyalty programs...

… But that doesn’t mean Gen Z loyalty programs are “dead.”

While it may be true many brands aren’t living up to their full potential winning Gen Zers over with rewards programs, that doesn’t mean they can’t make it happen. It might just mean approaching it through a new lens.

As always, there’s evidence to allow one to draw one’s own dire conclusions. A recent study from Kobie, for example, finds 36 percent of college-age Gen Zers don’t belong to any loyalty program. That’s in comparison to 22 percent of Millennials and 16 percent of Gen Xers who don’t belong to loyalty programs. Those are significant differentials.

Nor are these cross-generational differences confined to one study alone. Indeed, joint findings from UNiDAYS and Ad Age show how Gen Z travelers aren’t taking full advantage of frequent flier rewards programs in the same way that earlier generations have, despite their near-universal appetite for vacationing as much as possible.

These are discrepancies you can’t close your eyes to. You need a diverse marketing mix with a generation as cyber-savvy as Gen Z, and the brunt of your efforts should be focused on social media and large affinity platforms that carry larger appeal. But — and as will be shown — you’d also be wise not to draw any end-all, be-all conclusions in how to engage the most diverse generation of consumers in history. There’s room for loyalty there.

Don’t believe (all) the hype.  Loyalty programs can actually help grow your Gen Z business.

It goes without saying a brand stands to gain from cultivating the loyalty of a particular generation and winning its long-term business. But is the notion of brand loyalty outdated or out of reach with Generation Z?

Not… so… fast…there… Chivalry ain’t dead yet and neither is Gen Z loyalty to brands they enjoy.

If, as a brand, you’re prepared to engage Gen Zers in a way that demonstrates your respect for their overall consumer tendencies — their expectation of customized marketing, their appreciation for data privacy and a personal reason to get behind your brand, to name a few examples — then you can build a rewards program that works nicely for everybody.

Take the case of Ulta Beauty, a beauty brand that’s popular with Gen Z shoppers. Being mindful of Gen Z women’s desire for a mix of both chic and mass-appeal beauty brands, they’ve created a successful loyalty program that counts 27.8 million as members and drives fully 90 percent of their year-on-year sales.


Or take a look at Target. With the introduction of Target Red, a rewards program that gives perks to consumers without their needing to own a credit card, the Seattle-based retailer seeks to attract value-minded Gen Zers looking to shop without any nasty surprises stemming from credit card debt.

Word to the wise: Just because you build it doesn’t mean they will come.

Brand loyalty shouldn’t be the only strategy by which marketers reach Gen Z. It can’t be. Social media and partnerships with Student Affinity Networks are the de facto, go-to way to engage college kids. But that hardly means loyalty can’t play a significant factor in a brand’s appeal to younger customers.

So what is the right answer?

Any repeat visitor to this blog knows retailers that deliver a carefully crafted, always-on Gen Z strategy will be the ones who win with this finicky audience. While the age-old notion of cultivating and nurturing a loyal customer base is key to success, so is being mindful that finding new ways of attracting the newest, most-influential consumer set is emergency-dial-911-level importance.

So while building a loyalty program to create loyalty is key, creating an evergreen way to attract new influential consumers (ahem, Gen Z college students) is even… key-ier?

Hint, we have a suggestion for you. And if you’re not up to speed on loyalty just yet, don’t fret…. There are folks who can do the heavy lifting with gaining Gen Z loyalty for you, and without a headache.

John Wheeler
John Wheeler
Managing Editor, Gen Z Insights

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