What does a brand have to do to inspire Millennial and Gen Z loyalty?
At PreciseTarget, we used machine learning technologies to look at more than 5 billion purchase transactions spanning more than 2,300 fashion brands. The analysis clearly indicates younger consumers are a brand-switching bunch, although this attribute is often misunderstood by marketers.
These two generations — together, the Gen Zennials — are the product of nonstop social streams, algorithmically designed to stream something new, different and often shocking every time they pick up their phones. Social media created a class of novelty seekers who have a nonstop expectation of new and different. They don’t dislike you, they dislike that you aren’t new.
Before writing them off as one-and-done customers, you should know they have remarkable loyalties. They’re loyal to their personal tastes. They might have seven different jeans brands in their closet, but each pair will be remarkably similar to the others.
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Our analysis zeroed in on the 20 to 30 product features — like price, size, color, fabric, style — that make a product unique. It showed young consumers rarely veer outside the white lines of their established tastes. When we looked longitudinally, it also showed that consumer tastes are remarkably stable over time. Over a three-year time span, we saw virtually no changes in tastes at the individual level.
We’re data scientists, which means our taste loyalty hypothesis had to be tested. We selected three categories where we observed particularly high negative brand repurchase rates: outwear, footwear and sports apparel. Our pre-test analysis showed consumers were likely to choose a different brand the next time they made a purchase in the category. We worked with a major retailer for the test, which involved machine learning a new set of 1 million transactions.
What did we see? Their young shoppers were indeed brand switchers but remained very loyal to their tastes. How loyal? Eighty-six percent remained in their taste lane in outerwear, 96 percent in footwear and 91 percent in sports apparel.
Conclusion: Young fashion consumers are remarkably consistent in exhibiting two behaviors: they purposefully switch brands and they’re incredibly consistent in selecting new brands that are like their previous brand. Incidentally, we’re also learning that taste-based targeting offers the best advertising performance.
Aside from brand switching, we were compelled to probe deeper into the behaviors of tomorrow’s shopper. The behavioral research revealed young customers want to engage, but on their terms.
Gen Z prefer in-store shopping, although they want it aided by their mobile phone, not a sales clerk. Griping about anonymous store visitors “showrooming” is so yesterday.
They’re also the influenced generation. Adweek reports 70 percent of them follow online influencers, and 52 percent trust influencers even when they know the influencer is paid by the brand. Perhaps your future chat bot will be manned by a paid influencer. If you go this route, make sure your influencer is well versed in whether your brand uses sustainable materials, conducts fair labor practices and has real people and bodies in your ads. Your new customer is taste loyal, mobile dependent and socially responsible.
What does this mean for brands? The music industry lived through the purchased music-apocalypse, and despite predictions of demise, people are listening to more music than ever. They’re just doing it differently. They’re using AI-powered apps like Spotify, which uses machine learning to understand a consumer’s music tastes. It’s AI streamed to headphones.
Retail will go through an analogous transformative wave. Your new customers will also wear clothes and footwear, but they’ll purchase them differently. Your marketing systems won’t segment them using demographics, rather you’ll segment customers by their machine learned tastes.
Influencers will become an important source of signal data, supplanting the role of yesterday’s fashion show. And your future AI-driven e-commerce site will look and be AI-personalized like Spotify. Young consumers will welcome a more intimate digital relationship with you.
Rob McGovern is chief executive officer and founder of PreciseTarget, a retail data science company that helps brands and retailers connect with their highest-value customers.
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