What will brands have to do in the future to truly connect with, gain customer loyalty from, and build strong relationships with NextGen consumers?
“At Alliance Data, we believe that loyalty for the Next Generations will mean looking beyond habit to the true drivers and motivations of consumers—both functional and emotional—to serve them,” Shannon Andrick, Vice President of Marketing Advancement at Alliance Data’s card services business, told Loyalty360.
This week Alliance Data’s card services business released new research titled, “The Rules of NextGen Loyalty,” which reveals how Gen Z and Millennials have been empowered by unique experiences, technology, and the power of choice to engage brands and experience loyalty in truly new ways.
“Based on our work with nearly 150 brands, we know that digging into the customer psyche is an absolute must,” Andrick explained. “As customer loyalty continues to become more complex, and as consumers are inundated with new ways of doing things and more choices than ever before, brands need to realize that they only have a few chances to get things right. Shifting the focus back to the basics is so important, as getting the fundamentals right goes a long way. Additionally, every consumer wants trust, honesty, and reliability as well as a great experience and equally good customer service.”
Conducted by Alliance Data’s Analytics and Insights Institute, “The Rules of NextGen Loyalty” study used a combination of qualitative and quantitative research methods, including mobile diaries and digital app tracking to determine behaviors, follow-up one-on-one Skype conversations to provide context, and a survey to identify the differences, perspectives, and preferences among younger generations.
Here are some of the key takeaways noted from the report:
Loyalty is earned. Understanding the role of and influences on choice is more important than ever before: 63 percent of younger consumers agree they have many choices of where to shop, so a brand must show them loyalty to earn their business. Once brands recognize the unique motivations of Gen Z and Millennials, they have taken the critical first step in building deep brand connectivity and earning lasting loyalty.
Loyalty is complex. Traditionally, loyalty has been viewed as one-dimensional. Yet, loyalty is anything but simple. Research shows when it comes to life loyalty and brand loyalty, a continuum emerges spanning a range from functional to emotional. Different types of loyalty span the continuum from traditional, mostly functional loyalty, to brand love, emotional loyalty. Re-thinking a brand’s approach to loyalty means understanding that true loyalty requires a combination of function and emotion.
Loyalty is fragile. Today’s younger consumers are increasingly unforgiving. They are empowered by instant access and greater choice to want more and “put up” with less. In fact, 76 percent of younger consumers only give brands two to three chances before they stop shopping them. One in three consumers said nothing could be done when asked what a brand could do to win them back.
Loyalty is multifaceted. Brands have typically viewed loyalty through a transactional lens. But NextGen loyalty is a combination of transaction (function) and emotion—traditional brand loyalty and brand love loyalty. Transactions aren’t the only indicators of loyalty. Brands must understand customers’ unique needs and think differently about measuring loyalty. Some consumers want the basics while others need more.
“Loyalty marketers have done a good job at driving repeat behaviors,” Andrick added. “CRM and promotional strategies do a great job at getting people to brands. But as retail competition becomes more fierce, and as the landscape as a whole evolves, driving NextGen Loyalty will mean looking beyond the transaction and frequency to understand the customer’s perception of their brand to maximize the relationship. As for the future, brands need to stop thinking channel and think ecosystem. How do you bring them in, service them in the way they want and expect, and then build a meaningful relationship based on their needs, wants, and desires?”
Gen Z and Millennials represent the future of customer loyalty, Andrick noted.
“And it doesn't stop with just them,” she explained. “The future of customer loyalty will continue to be dictated by the evolving landscape and the consumer is a natural byproduct of that equation. As for Gen Z and Millennials, these are two large consumer groups who are starting to make their impacts seen and felt in the retail ecosystem. Staying in tune with evolving customer behavior and the views of customers will be important no matter the generation in question.”
Andrick said that loyalty really comes down to solving customer needs, which could include fee-based programs.
“When they see value, they are all in,” she added. “Value comes in many different ways. Sometimes it is functional value that customers are looking for, while at other times, the value is more personal or more emotional. The fee for Amazon’s subscription service, for example, is easily justified when you consider the value they deliver in convenience, ease of transaction, benefit of content, and more. Every loyalty program would benefit from assessing its purpose, the value it provides, and where its customers fall on the NextGen Loyalty Continuum. And, whether it is worth the fee will ultimately reside with the customer, with them deciding if the perceived value was worth the money spent.”