The Z Factor: How To Win The Trust Of A Lucrative, Yet Brand-Wary, Generation

A new generation is here. While we were all busy peering at Millennials under a microscope, scouring their data and scrutinizing their purchasing behaviors, the second generation of digital natives was quietly beginning to come of age.

Born at the turn of the Millennium, there are more than 60 million of them in the United States alone. And at last count, they already had about $44 billion in purchasing power.

Cultural commentators have branded them Generation Z, but they might be quick to refute this title—or any title for that matter. You see, Gen Z as a whole is extremely wary of brands and branding in general.

As the most diverse generation in history, they value individuality and appreciate authenticity and transparency more than their predecessors, searching out brands and products that align with their values. They’re not exactly loyal either; they’ll switch brands if they can get a better deal or higher-quality product. And quality doesn’t just mean of the physical product. It can mean a product more deeply connected to a mission, fair trade, or other nontraditional measures of “quality.”

New Customers, New Strategies
So how do brands approach these fledgling disruptors and earn their trust and loyalty? Engaging Gen Zers is not impossible, but it’s going to take a little work. Remember, this is a generation that has been marketed and advertised to their entire lives, so they’re less likely to respond to tried-and-true tactics than older generations.

A good first step is to think in terms of what unique value your brand can offer to Gen Z and to the world. Research has shown they are interested in loyalty programs that offer them genuine value and an individualized customer experience. And unlike Millennials, who prefer experiences over ownership, Gen Z seems to be returning to a desire for tangible benefits and traditional notions of ownership.

So what’s a brand to do?

1. Avoid gimmicks. Offer genuine value instead: This generation can sense when they’re being sold to a mile away. They grew up advertised to through the television, through social media, and through in-app ads on their smartphones, which they have had in their hands since they were infants. You might even say they are “immune” to advertising in the traditional sense. Anything too commercial is sure to set off their BS detectors.

Gen Z is more likely to interact with a brand that offers them something of value and doesn’t necessarily ask for anything in return. This could be as simple as creating a sponsored Snapchat filter.

Retailers and brands should steer clear from cheap or overly commercial advertising tactics, and instead aim to provide value. That could be through an exclusive offer, a customized reward, or even a sneak peek at upcoming products, services, or interesting content. Younger consumers know that brands are trying to sell to them, and they appreciate those brands that go beyond the transaction.

2. Be transparent. It will earn you their respect. And their loyalty: Many retailers and brands have started weaving their social mission or corporate social responsibility (CSR) programs into their brand identities, and even their loyalty marketing strategies.

How does this work exactly? It’s what we call “the halo effect” in which companies’ philanthropic activities, community engagement, and environmental stewardship inform consumers’ perception of the brand overall. Engaging with a brand known for its social responsibility provides value to the socially conscious consumer—and the most socially conscious consumers of all are Millennials and Gen Zers.

For most marketers, leveraging a social mission or corporate social responsibility does not mean giving away hard-cost goods and services for free. They reward authentic desirable behaviors on a scale, but will flee from brands that try to fake a social mission. Calibrated correctly, brands can implement a reasonable program that values behavior differently and delivers incremental “good will” benefits and rewards consumers for helping them in their socially conscious mission.

For example, brands could join a program such as Southeastern Pennsylvania Transit Authority’s “Pass Perks” loyalty program, which rewards riders with discounts and special offers for museums, restaurants, and shops across the SEPTA service region. Or they could launch a campaign like Starbucks’ program that rewards customers with a discount for playing their part in conserving the environment by bringing in their own reusable mugs and tumblers.  

3. Treat them like individuals. Offer them customized rewards and experiences: With the availability of big data, companies have more opportunities than ever to meet consumers where and when they buy. There has been a seismic shift in recent years away from the mass emailing campaigns of yesteryear. The new brand-wary generation bristles at receiving offers for goods and services they would never buy. And they are quick to unsubscribe from an email list after receiving an irrelevant or untimely marketing email.

Targeting is key. Marketers that can implement multichannel personalization—customizing experiences to customers across channels and devices—are especially well-equipped for engaging this new generation.

Loyalty programs should integrate seamlessly with mobile apps and leverage data for even more personalized experiences. One example: mobile wallets. They can increase engagement and customer experience by giving consumers incentives to interact with the brand via the wallet, scaling rewards and customizing them directly to customers’ purchasing habits and behaviors.

And by allowing consumers to keep track of their balances, points, and cumulative rewards, these apps not only allow retailers and brands to track behaviors, but they also connect with customers where and when they buy.

Marketing, Disrupted
Like Millennials before them, Gen Z is cutting a new path through the sales funnel and asking more from brands beyond their products and services. Marketers must redefine what they know—or thought they knew—about brand loyalty, customer experience, and purchasing behaviors.

If one thing is clear, it’s that experiential loyalty programs are only going to be more critical for marketers’ strategies moving forward, to the point that these programs might eclipse the value of advertising and more traditional marketing methods altogether. To capture the attention and spending power of Gen Z, marketers must think of their strategies in the bigger picture of brand loyalty.

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