NYU STERN / PROJECTS / GEN Z LOYALTY



bUILDING GEN Z BRAND LOYALTY



Co-developed with Devon E.



Using findings and insights from extensive consumer research, we developed a revamped loyalty program to achieve a brand's strategic goal of specifically attracting new Gen Z consumers by tapping into what they value most.



All imagery, numerical data & brand names have been changed/excluded as per the NDA to retain the confidentiality of the client



Understanding Gen Z:





We started our project by gathering data through research on the brand and surveys of over 500 Gen Z consumers. When we analyzed our data, we found that a clear set of values amongst the Gen Z population began to reveal themselves, such as fit, looks, availability of additional product information, convenience, etc. One of the most interesting takeaways was that while sustainability is not the most important attribute when considering a purchase, Gen Zers do value sustainable programs and lifestyle choices.


This is a generation that is extremely unique. They prefer to follow niche influencers and share their own social media content. For them, engagement with the brand exists long after the initial purchase. Some of their favorite brands like Urban Outfitters and Nordstrom are well known for their loyalty programs and it’s clear that recognizing customers for being loyal has a huge impact on future purchases.





Understanding Loyalty Programs:





Through our research and interactions with Gen Z and the brands they prefer, we observed that Brand Loyalty can be achieved in two distinct ways, Organic and Programmatic.

  • Organic Loyalty is achieved through the brand’s value systems and how those values filter into their products, services, and distribution; it's really the DNA of the brand and how consumers relate to them.

  • Programmatic Loyalty can achieve a similar fan-following through carefully crafted rewards systems that incentivize consumers to engage with the brand and develop short-term initiatives that build immediate adoption.


Studies conducted by Bain, Nielsen, and Salesforce have shown the quantifiable impact of Loyalty Programs on Brands. Some of these include a boost in revenue through higher spends, improved customer retention and lifetime value of loyal customers, and building stronger customer relationships through appreciative rewards, driving satisfaction, and improved spending behavior.



We found that most Loyalty Programs and their corresponding Rewards Systems could be bucketed under 9 key categories as displayed below. Keeping the values that GenZ is drawn to in the forefront, we feel the 5 starred categories could provide us with critical approaches to develop the Loyalty Program for our target brand.



Competitive Landscape Of Brand Loyalty:





We then mapped the 5 categories against the main brands we studied to create a rubric that helps us evaluate the success of each brand’s loyalty programs.


On each extreme is a unique case. With Zara, while there is no programmatic loyalty system, GenZ is organically attracted to the brand. On the other hand, GenZ also responded positively to brands such as Sephora and Starbucks who have the best-in-class examples of Loyalty Programs that keep consumers across demographics engaged with the brand.


Looking into what Sephora and Starbucks are doing right, and digging deeper into the specific behaviors in consumers that each brand is able to impact, we found that Membership, Repetition of Purchase, and Cross-Promotions of products were rewards that could be derived from each of the 5 categories. Moreover, Community as a concept provides multiple benefits making it a crucial element to work towards. It became clearer at this stage that no one approach would be sufficient to engage with GenZs and overlapping these categories would provide customers with unique incentives that would lead to a wider impact across the brand.





Proposal:





Building off the already existing framework of the brand's currently under-used loyalty program, we developed the initiative further using insights from the survey and identifying key consumer behavior that we believe deserves rewarding. Through all of our research and brainstorming, we developed a simple principle that is at the foundation of the program. The formula is:


Gen Z Values + Brand Goal = Loyalty Initiative


Our program was driven by benefits not discounts; a tiered points system that uses gamification so clients can level up from Member to Insider and then Ambassador and unlock additional benefits along the way. Our three segments were designed to make it very easy to enter the program and then quickly level up too, as data has shown us that once someone is part of a loyalty program they are more likely to shop the brand and will spend more, even if there is a better deal to be had elsewhere.


Additionally, many brands provide textile donation services and we wanted to weave this into the loyalty program because it has proven to be immensely successful in multiple ways. It addresses Gen Z’s desire to participate in sustainable systems, it helps promote the brand's sustainability initiative and upcycle programs. It also acts as an additional entry point into the loyalty program. If you’re going to recycle your clothes anyway why not get rewarded for it? Most importantly, it is an experience that actively involves the client and makes them feel good- this increases the brand’s social value.



Execution Strategy:





Operationally, there are three broad approaches that one can take when executing a Loyalty Program:

  1. A POS-integrated solution
  2. A standalone software
  3. An onboarded external Loyalty Management agency


With each option there are pros and cons and a good middle-ground is a Hybrid Model where the brand, which is us, would provide the concept and structure of the Loyalty Program to a consulting agency that manages the platform set up and analytics allowing the brand to retain control on their experience, keeping the brand up-to-date with essential insights and ensuring that the brand can focus on their ongoing operations without distractions.


We proposed a phased implementation that can help launch the entire program within 12 months across all channels and outlets after which we would be ready to activate a step-by-step activation and marketing campaign with the aim to move to auto-pilot mode eventually.




For the complete proposal and concept, please feel free to reach out to me and we can discuss the idea and approach in more depth.


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