Why Gen Z Customers Require a New Approach

  •    A freelance reporter and writer based in Philadelphia, Pa., Dinah previously worked as a staff reporter for The Associated Press and Dow Jones Newswires.

Retailers and brands are being warned to prepare for the newest generation of consumers: those roughly 18 years old and younger known as Gen Z, or Centennials — who are expected to pose unique challenges for business.

In fact, Ernst & Young says, to be successful with Gen Z shoppers, business owners need to do more than tweak the strategies they use to market to Millennials, who are now about 19 to 34 years old.

“A radically different generation requires a radically new approach," the consulting firm says.

Courting the Centennials is clearly important for your business, as this age group is expected to comprise 40 percent of the U.S. population in five years.

Centennials already command more than $44 billion in purchasing power in the United States, according to Mintel Reports data that Ernst & Young cited.

“Generation Z is coming of age. Rarely, if ever, has the world experienced so much change as has happened in their brief lifetimes. Politically, socially, technologically and economically, we are moving at warp speed. These changes have created a generation very different than any known before," Marcie Merriman wrote in a recent EY report on Gen Z, which the firm defines as those now about 13 to 18 years old.

Gen Zers appear to be more self-aware, persistent, realistic, innovative and self-reliant than Millennials, according to Merriman's EY report. They are also entrepreneurial, EY says. And, in what may be troubling news for retailers, Centennials aren't very interested in loyalty programs and traditional promotions.

“Retailers and brands must authentically connect with Gen Z in their hearts and minds," EY says, adding that it won't be easy. Members of the Gen Z generation, EY says, “are impatient and will quickly discount those who can't immediately deliver on their needs or who complicate their lives in any way. This translates into extremely high expectations and a high bar for anyone who covets their business."

The Center for Generational Kinetics, which defines Gen Z, or iGen, more broadly as anyone born from 1996 to the present, says these youngsters — more than 23 million members strong in the United States — "are increasingly self-aware, self-reliant, innovative and goal-oriented."

Ninety-three percent of Gen Zs' parents "say their children have some influence on household spending decisions; 65 percent say their children are influential in vacation choices; and 32 percent say their children's opinions matter when it comes to buying home furnishings," EY says, citing other research.

EY suggests that businesses may succeed with Gen Z by:

  • Intuitively delivering on their constantly evolving needs
  • Making them part of the solution
  • Showing respect and loyalty before asking for it

It's a tall order, but not impossible. Businesses that make transactions quick and hassle-free, and allow for easy customization, should be on the right track, EY suggests.

As far as respecting customers, EY cites the example of an online bra business founded by a teenager who wanted to offer age-appropriate (nonsexualized) undergarments for younger girls. The founder, frustrated at what she found while helping her sister shop for bras, not only built her own solution, but developed "a relationship of mutual respect with her customers, thereby earning their loyalty," EY notes.

PowerReviews made similar findings about Gen Z members.

“Technology is embedded into the lives and demands of Centennials. Their expectations from retailers are bigger, their desire for information greater and their patience shorter than any other generation," PowerReviews notes in a December 2015 report based on a survey of more than 1,000 Gen Zers.

“Centennials also don't want to be talked at — they want a two-way dialog. If you fail to engage with this generation, they have the independence and control to conduct their entire shopper journey without you," PowerReviews says.

Centennials rely on online reviews more than Millennials, with 95 percent reading reviews before making a purchase. Reviews are second only to price for Centennial shoppers, surpassing brand name and free shipping.

Nearly half of Centennials say they won't buy a product if they can't ask a question about it online, and while they'd like to do that on a brand or retailer site, most prefer to get their answers from other customers who've used a product.

“A huge 79% of Centennials admitted going straight to another retailer or to Amazon if they couldn't ask a question on a product page. For brands and retailers, this means thinking about how you can facilitate a communication exchange between new and existing customers," the report says.

Merchants should make sure their websites include helpful product information and reviews, and emphasize those customer comments that discuss quality information, PowerReviews says. The firm also recommends that retailers respond to both positive and negative comments, and not erode shopper trust by removing negative reviews from their sites.

Online retailers also should make sure their sites are mobile-friendly and “easy to view and navigate wherever your customer is," PowerReviews says.

The EY and PowerReviews surveys differed on a key point — where Centennials like to shop. PowerReviews found that almost all Centennials do shopping research online but more prefer to shop in bricks-and-mortar stores.

EY came to another conclusion. “Getting these consumers to be loyal to your brick and mortar will be more challenging than ever. Our research shows that online ordering and delivery are extremely important to Gen Z, and the ability to order online and come into the store to pick it up is, for the first time, declining in importance," the firm says.

“The bottom line is that Gen Z expects retailers to get the product to them," EY says. "This adds to the pressure to find new ways to grab and hold consumers' attention."