How Gen Z think about loyalty and why you need to align your strategy

“Hyper-aware, hyper-connected and hyper-individual, Generation Z are challenging brands in search of a more equitable value exchange.”

Chris Sanderson, Co-Founder, The Future Laboratory

There’s a tidal wave of supercharged expectations coming and brands need to be prepared. This was the underlying takeaway from the loyalty event we hosted last week.

Bringing together loyalty leaders from retail, hospitality and further beyond, we explored how best to service the most diverse and soon to be most numerous consumer group in the world.

The event boasted presentations from those on the front lines of the rewards scheme ‘battle’ at a major chain restaurant, a futures consultancy tasked with understanding and communicating what comes next for businesses and one of our own consultants with 25 years of experience in bringing customer experience programs to life.

Today’s loyalty and rewards programmes are falling short

“Digital technology has given us a world of possibilities to reach our target buyers,” explains Joel Williams, Managing Director at Red Badger.

“It has never been easier to find our audiences, but engaging with them has never been harder. In this always-on world, their attention is constantly competed for by hundreds of applications and brands.”

The constantly evolving digital world where our consumers converse and share experiences creates an increasingly fragmented ecosystem for brands to engage their audiences.

New tools and technologies designed to close this gap have then created complex platforms from which to communicate from.

“Just when consumer expectations are soaring, we find ourselves in one of the more difficult moments to manage how we engage,” continues Joel.

“Gen Z demand seamless and effortless experiences and are ultimately switched off by brands without a compelling digital proposition.”

Today’s loyalty programmes (and potentially even customer engagement ecosystems) need an overhaul around a fundamental shift in thinking.

A move to a more product focused architecture and strategic approach to adding value back to the customer is needed. 

“We are already at a point where loyalty needs to be coherent, consistent and seamless across platforms,” continues Joel.

“It is not something that can be bolted onto the side of the business, it has to be viewed as part of if not the focal point of a technology ecosystem geared towards true equitable value exchange between brand and customer - particularly with Gen Z.”

How Gen Z differ and what brands can do to adapt

“Living at the height of cancel culture, this generation are highly educated in the woke-washing behaviours of businesses,” explains Chris Sanderson, Co-Founder of The Future Laboratory at the start of his presentation.

“As brand disloyalists [sic], it’s becoming easier for young people to support or disown brands when they feel they no longer uphold the same values they do.”

According to Ipsos research, 40% of Generation Z would boycott a brand entirely compared to just 16% of Millennials.

The disparity between the two generations is stark and the importance being placed on values and equity by Gen Z is extremely high. 

Brands are being pushed harder than ever before to engage at a deeper level.

It isn’t enough to create a desirable product or service, it must resonate with the audience and then offer significant value in return. Loyalty programmes must move in this direction too.

So what does this mean for loyalty and how can brands digest this information? 

“Brands need to listen much more closely to the voice of the customer,” says Chris.

“This new generation is changing the conversation, rewriting the rules for customer engagement and irrevocably changing what true value exchange looks like.

“If you are looking to drive take up and engagement with a loyalty programme with this generation you have to build something truly adaptable and make it as personalised as you can. This generation is hyper-aware, hyper-connected and hyper-individual.”

How to build Gen Z loyalty programmes 

“Our new CEO set us on a path to be the best restaurant brand most loved by Gen Z,” explains Ryan Foreman, Product Lead for Nando’s rewards programme.

“Fundamental to achieving this goal was to create experiences that aligned with their expectations and so we redefined our loyalty programme away from plastic and into the digital realm.”

Known for its PERi-PERi chicken, Nando’s has over 450 locations around the UK and Ireland. It’s phenomenal success means there is now at least one restaurant in every major town and city in the UK.

Repeat custom is therefore a critical element of any future growth plans for the organisation.

“Recognising that Gen Z will soon become the most numerous consumer group we knew we needed to create a programme that they could use effortlessly,” says Ryan.

“To help us achieve this we engaged Red Badger and set to work understanding the needs of our audience better to create a service they would love.”

Running numerous workshops with stakeholders and engaging customers through focus groups and surveys, the combined Nando’s and Red Badger team discovered a handful of potential solutions.

The final product, however, was a UK first: an NFC-enabled loyalty card that lives in the Apple Wallet and GPay apps. 

“We had to work hand in hand with customers and in particular Gen Z,” explains Ryan.

“To solve their challenges we had to understand them and then develop a programme that exceeded their expectations. As a result, we are seeing tremendous growth in the number of orders that redeem rewards and new registrations for our rewards scheme.”

The future of loyalty is in integrated product

The key takeaways from the event are that Gen Z wants to connect with brands but only if:

1. The experience is frictionless and meets the expectation of a generation that simply wants something to work
   
   
2. The program offers significant value (paid or otherwise) that is worth the effort and the exchange
   
   
3. The brand is transparent and aligned to their values

Only through true agility and an ability to iterate constantly can a loyalty programme begin to foster a lasting connection between brand and consumer.

We are beyond the free 10th cup of coffee and need integrated ecosystems that make intelligent use of data and digital to create meaningful experiences.