The original version of this piece appeared as a Forbes post.
As Gen Z ages into a core consumer demographic, marketers are scrambling to determine how best to serve a new generation of consumers with distinct values, commercial preferences and digital habits. One of the challenges they face is adapting loyalty programs to not only entice Gen Z but also earn their repeat business over many decades to come.
Gimmicks won’t cut it, and Gen Z will likely quickly detect superficial attempts to seem hip or cater to their values. But if brands bake respect for Gen Z’s preferences for autonomy, convenience and authenticity into their marketing communications, they can position themselves to compete for the generation’s more than $360 billion in disposable income reported by Bloomberg (paywall) in 2021.
Three steps marketers can take to appeal to this generation include offering flexible payment options such as buy now, pay later; personalizing loyalty benefits to make them feel valued; and incorporating authentic social values into loyalty marketing.
01 Offer Flexible Payment Options
Gen Z come of age as consumers in an era where there are more ways than ever to shop. Venmo and Apple Wallet are increasingly joining cash or credit as checkout options. Savvy brands and retailers will allow younger consumers to transact however they prefer—not just with cash or credit.
Beyond digital and contactless payment methods, other flexible payment options, like buy now, pay later (BNPL), have gained popularity with younger consumers. Research from Insider Intelligence and eMarketer shows that Gen Z buyers are the most likely generation to use a buy now, pay later service: 55% of Gen Z shoppers over 14 will make at least one digital purchase using BNPL this year.
With high rates of inflation, BNPL could give young consumers a way to treat themselves to an “affordable” luxury in a way that won’t upend their monthly budgeting. In fact, according to Motley Fool’s the Ascent in June 2022 (via Modern Retail), 61% of consumers aged 18 to 24 had made a BNPL purchase. For instance, the Dyson Supersonic hair dryer gaining hype on social platforms becomes a less scary splurge when its $430 sticker price is broken up into $39-per-month payments with Affirm.
But the attraction of BNPL isn’t limited to big-ticket purchases. As SFGate reported, people may also use incremental payments for everyday purchases, like gas, groceries and fast fashion. Brands aiming to meet young shoppers where they are should take note of these trends and integrate flexible payment options into their point-of-sale offerings and loyalty programs.
02 Personalize Benefits to Create a Value Exchange
Surveys consistently show that the majority of consumers want a personalized shopping experience, but the way most brands approach personalization could leave customers cold: 66% of Gen Z consumers surveyed for a 2020 Oracle report wanted to receive personalized recommendations through an app while they were browsing in-store, but only 39% reported having made a purchase based on a recommendation from a brand in the previous six months.
I’ve found that this disconnect between brand recommendations and customer decisions extends to traditional loyalty programs, which often fail to demonstrate value that resonates with Gen Z shoppers. Shoppers may not stick with traditional rewards programs if they take too long to earn and redeem points; make sure they can see value quickly.
Brands can address this by designing engagement-based programs that reach beyond the point of sale to connect with users and return value for every action they take with their brand.
For example, take fashion label Torrid, whose loyalty program incentivizes and rewards continual engagement with the brand between purchases. Shoppers earn points for posting and tagging the brand on Instagram, leaving reviews on items (with a bonus for including a photo), and even for clicking a link on Torrid’s daily marketing email. In their tiered rewards system, users can earn free shipping, free returns and other perks.
With a loyalty program that makes engagement into a clear and compelling value exchange that’s not limited to the sale, companies can nurture younger shoppers’ affinity and improve the relevance of personalized cross- and upselling efforts.
03 Incorporate Social Values Into Loyalty Marketing
Along with free shipping and discounted products, young buyers may also value giving back: In a Giv survey, “32.5% [of Gen Z respondents] cited seeing their philanthropic support as part of their legacy.” In 2020, Sephora’s already-popular loyalty program won approval for allowing members to redeem accumulated Beauty Insider points as donations for the National Black Justice Coalition.
Speaking to Gen Z’s attunement to social issues doesn’t necessarily require brands to take a social or political stance. Instead, brands can show younger consumers that they acknowledge their values and identities by designing loyalty programs that recognize who they are beyond the point of sale.
For example, they could create a program that is tailored specifically to students and considers the lifestyle and concerns of young buyers on a student budget. Brands that design loyalty programs that resonate with Gen Z shoppers based on their identities as members of communities could find ripe ground for connection and future conversion—because identity- and value-driven loyalty programs don’t just give shoppers things they want; they speak to who shoppers are.
Meeting the expectations of Gen Z consumers can seem intimidating. But a focus on autonomy, convenience and authenticity can be a boon for marketers who are prepared to engage Gen Z shoppers on their own terms. With a loyalty program that allows flexibility in payment, leads personalization efforts with engagement, and acknowledges users’ identities and social values, brands can make an impression on young shoppers that supports sustainable ROI.