The next generation of consumers is leading the retail industry to an entirely new view on brand loyalty, according to new research by Alliance Data‘s card services business. The firm’s newly released study, The Rules of NextGen Loyalty, 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.
“This study really unpacks the shopping and loyalty preferences of today’s youngest consumer segment,” said Shannon Andrick, VP of marketing advancement for Alliance Data’s card services business, in a news release. “One-to-one conversations with real people supported by in-depth research has provided a unique view into the mindset of today’s youngest generations and what they expect from brand relationships. The loyalty landscape has truly shifted from brands driving loyalty to brands earning loyalty.”
The 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. The progressive approach sheds light on the difference between what consumers say and what they do.
To create insights that can help brands understand the market and tap into trends based on customer behavior, the study took a close look at what brand loyalty means to each of these segments:
- Older Millennials (born 1982-1989)
- Younger Millennials (born 1990-1997)
- Generation Z (born 1998-2010)
Some highlights 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.
