Loyalty for Millennials: A Comprehensive Guide
The traditional view of loyalty seems a bit dated: it implies a one-sided faithfulness, something that does not bode well with some (erroneous) perceptions of the millennial generation.
Millennial loyalty has been the focus of much research, studies, reports, statistics, insights and guides so here is a comprehensive round-up for this valuable and often misunderstood generation.
Are millennials loyal?
Millennials get a very bad rep when it comes to Loyalty. From their work to their brand loyalty, there is a sense of distrust when it comes to the millenial mindset.
Even millennials themselves seem to agree with that: 70% of Millennials consider their generation as less loyal to brands than previous generations. Indeed, more than 65% of U.S. Millennials admit to jumping ship from one of their favourite brands in the last year and when it comes to hospitality 81% of Millennials do not consider themselves as being loyal to a specific hotel or hotel brand.
Their attitude towards traditional (we will discuss the difference of traditional vs current loyalty later) loyalty is not as friendly. Among millennials, a demographic that is projected to spend $200 billion annually by 2017, over 85% expressed a negative sentiment.
However, this is might be another misconception about millennials and not necessarily an accurate representation of their loyalty habits: 86% of Millennials join loyalty programs, 80% of them actively participate in reward programs and 63% of millennials said they had joined a program within the past year, versus 55% of the general population.
So, when asked if millennials are loyal, the answer is a bit more complicated than a simple yes or no; they are, but not in the traditional way. They are loyal, as long as they are given a reason to be (we will discuss reciprocity a little later).
There are also loyal in a different way, considering how online has disrupted loyalty.
The changing nature of loyalty
Digital advancements have changed the very core of loyalty. It is crucial to remember that loyalty is tested constantly: 65% of Millennials have abandoned a purchase in-store as a result of an online search on their phone while shopping.
This is the same for travel and hospitality: Millennial travelers will cross-check 10 online sources before booking a travel option, with 24% of them checking online reviews.
Loyalty is also changing in structure: in the past, we would be loyal to one brand per industry; now the concept of loyalty expands to include multiple brands in the same vertical: even though 44% of millennials say they are loyal to brands they buy when it comes to shopping from a single shop:
Fashion: 16% of Gen Z’s compared with 26% of older millennials
Beauty: 19% of Gen Z’s compared with 34% of older millennials
Groceries: 38% of Gen Z’s compared with 55% of older millennials
However, 63% of Millennials would join a loyalty program if offered an incentive; the question is, would they stay loyal? This is where the concept of reciprocity is introduced.
Reciprocity
Brand loyalty has to incorporate reciprocity: if you are part of our community, you gain something tangible. This depends on the aspects they prioritise, from discounts to brand image (we will cover preferred perks later on).
Part of the reciprocity is for the business to create a loyalty program that makes the user’s life easier and is up to scratch with current technology. Gone are the days of individual loyalty cards – when having your credit card in your phone runs your wallet an obsolete accessory, why would you carry one just for your loyalty cards?
Why would millennials change brands?
We all have our own reasons for leaving our favourite brands or moving along to something else. When it comes to millennials, the main five reasons are:
Product quality or the unavailability of a brand in-store or online (40%)
Poor customer service (56%)
The brand no longer fit their identity (66%) or the brand was no longer unique (64%)
Simple desire to switch brands (66%)
Availability of desirable new alternatives (64%)
What makes millennials tick?
Even though price is credited to have the greatest influence on Millennials’ purchase decisions, Millennials place more emphasis on the perceived value for money, something that applies for all categories as 52% will choose quality over price. Apart from price (56%) additional reasons include brand affinity (33%), reliable delivery (25%), and an easy-to-use website or mobile site (23%).
In terms of advantages, discounts seem to come to the top , with 48% of Millennials preferring product discounts, followed by rebates & cash back (41%), free products (33%) and free shipping (32%).
In terms of structure, Millennials are most incentivized to join a loyalty program based on how quickly rewards accrue (51%) and the variety of rewards available (38%).
TOP 5 LOYALTY MOTIVATORS FOR MILLENNIALS
1. Exclusivity
Exclusivity seems to be the most desired element of loyalty programs for millennials (51%), with 45% of millennials joining a program in the past year because it offered access to members-only events, sales and products in comparison to 33% of the other generations.
63% of millennials said it’s important that their loyalty program participation supports lifestyle preferences such as wellness programs, sustainability efforts or a charity, versus 53% of Gen X’ers and 46% of baby boomers.
2. Mobile functionality
As we are all used to having the world on our fingertips, there is nothing easier than having everything in one place. Right now, we seem to have our entire lives on our phones, so it should not come as a surprise that 40% of millennials prefer to use an app to identify themselves as loyalty members.
Still not convinced? 18% of millennials stopped participating in a program because it did not have a smartphone app, compared to 13% of the other generations.
3. Ease of use
Mobile is good, however simply having an app is not enough: 42% of millennials continue being part of a program because it has a mobile payment option. In fact, 84% of Millennials and 80% of adults with household incomes of over $60,000 are more likely to use mobile payments if loyalty rewards and discounts are automatically applied, showcasing that it is crucial to align payment with ease of redemption.
Online and app-based loyalty has another perk: the user doesn’t have to have different cards – they can all live in their phones and be accessible with one touch; 29% of Millennials rated “too many programs to keep track of” as one of their top three things they dislike about rewards programs vs. 17% of Gen X’ers and 20% of Boomers.
4. Relevancy
The power of personalisation is not a secret, and as you might expect, applies to millennials as well: 85% are more likely to make a purchase if it is personalized to their interests, both in-store and with digital displays.
However 49% of millennials stopped using a loyalty program after receiving irrelevant communications, compared to 37% of other generations. The key learning? Make sure your CRM is streamlined and you put your best foot forward.
5. Purpose
An overlooked part of loyalty is the brand image and especially how environmentally, culturally and community-centred it is. 87% of Millennials are willing to purchase products with a social or environmental benefit vs. 83% U.S. average with 76% of them stating it is crucial to them that stores carry goods that cater to the local community. In a digital age companies might lose more than Millennials' custom; it might actually end up hurting their image: with 28% of Millennials stating they have participated in a boycott, the ramifications of a fallout can be quite severe.
Bars and Restaurants
When it comes to B&R loyalty programs, even though 96% of millennials are using them, 59 quit them because rewards “aren’t valuable enough”. Instead, 30% of millennials prefer earning points based on the money they spend at the restaurant.
Again, following the trend we saw above, 56% of Millennials wanted to use apps as the preferred medium for restaurant loyalty programs, and 50% of Gen Xers agreed with 40% of them preferring to track/redeem rewards on an app.
What about Hospitality?
Hospitality is an untapped market for millennials: only 8% are enrolled in 1 hotel loyalty program; 6% are enrolled in 2; 86% are enrolled in none. However 48% of Millennials consider loyalty programs to be important when booking flights and 51% when booking hotels, showing that this is a huge opportunity for hospitality.
Why is this important? Millennials indicate they would pay $41 more per night and travel up to 15 minutes out of their way to stay with their preferred hotel brand.This means that once you find a way to their hearts and remain there with your loyalty program, you have a dedicated customer.
So, what would they want to redeem their points on? 70% most often spend loyalty program points on a free or discounted stay or a room upgrade.
As mentioned above, technology plays a part: 58% of millennials say they would find a mobile app for a hotel’s loyalty program “very” or “moderately valuable".
So, what should you do?
Lim College proposed these 5 actions in order to remain millennials' brand of choice:
Develop innovative new products and services (80%)
Improve design/style to reflect uniqueness (74%)
Improve product quality (67%)
Engage in causes, philanthropy, or endeavors that reflect beliefs/values (63%)
Limit distribution to maintain the brand's exclusivity (54%)
I would also add being authentic and adding purpose to your loyalty scheme. It is not enough to have a loyalty scheme, it needs to have a purpose; it should be reciprocal and mutually beneficial. We are all customers, we should ask ourselves:
Would I sign up to this program?
Is the discount enough to make me feel valued?
Are the perks enough to make me feel special?
Is it easy to use?
It is in keeping with the times?
If not, then you wouldn’t sign to your loyalty program – why would other people ?
I hope all of the above is useful; the statistics came from the very comprehensive list of Access Development so head over there to have a look.
Looking to take the next step in creating loyalty with your consumers? Book an exploratory call with us and let’s make sure your brand goes into 2021 stronger than ever.
