CURATED READS FOR GEN Z—AND THEIR Z-CURIOUS COLLEAGUES

first up

Welcome back! This week, we’re exploring Gen Z’s loyalty status with a McKinsey expert.

In a sea of endless options, why settle for good enough?

No, we’re not talking about Gen Z’s dating woes. Rather, consumer brand loyalty—or should we say disloyalty—is the topic du jour. Zoomers, for their part, are relatively disloyal, willing to try new brands they heard about on social media without so much as a goodbye to their former (brand) love.

But really, who can blame Gen Zers for their willingness to explore the brand universe? Expectations for customer service and product quality are high, and when left unmet, it’s easier than ever to find an alternative. 

One way to lock consumers in has been loyalty programs, which, as it turns out, have been around for hundreds of years. Major airlines, credit card companies—even your local coffee shop—offer loyalty incentives, but in today’s economic environment, the occasional perk isn’t enough to capture consumers over the long term. 

In a recent article, McKinsey senior partner Emily Reasor and coauthors discuss how to overcome the challenges in making loyalty programs relevant for today’s consumer. They found that tiered reward systems can help bring more customers into the fold than a one-size-fits-all loyalty program. 

McKinsey partner Oren Eizenman, one of the article’s authors, spoke with Mind the Gap about how Gen Z’s expectations for loyalty programs differ from those of older generations. Below is an edited version of the conversation.

How does Gen Z interact with loyalty programs compared with older generations?
 
Gen Z tends to be more value conscious when it comes to loyalty programs. They like rewards that they can attribute a value to, and they are more likely to do the math on a program’s economics.

What are some of the standard fixtures of loyalty programs that are not relevant for Gen Zers? 

Gen Z actually appreciates most of the same things that older consumers appreciate in loyalty. Beyond value, they seem drawn to the recognition, experiences, and sense of community these programs curate. 

Within each industry, though, we see different preferences for Gen Zers. For instance, in travel we see that Gen Zers appreciate benefits that give them convenient or expedited access to travel amenities much more than older generations.

What’s at stake for consumer businesses in making loyalty programs more appealing to Gen Z? 

If they don’t, they will lose their customers—it’s that simple! Most consumer companies are trying to straddle the line between keeping their older customers happy while trying to get Gen Z customers excited about their offering. One way to do this is by adding flexibility into their loyalty programs so that all generations find what they are looking for.

Gen Z is notoriously disloyal when it comes to shopping consumer brands, so do loyalty programs even matter? Or do they matter even more because of this? 

Loyalty programs matter more than they ever have. Not just because all shoppers are less loyal than they used to be or because they have more options than they ever have before; rather, it’s because almost every consumer company has introduced some version of a loyalty program, which has raised the bar and customer expectations for them. 

When loyalty programs are designed correctly, they have a huge impact on customer behavior (this is true about Gen Zers and older consumers). They increase how frequently and how much consumers spend, reduce how many customers they lose to competitors, and make consumers less sensitive to changes in price.

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—Edited by Alexandra Mondalek, editor, New York