Capitalizing on an appetite for experiences – Article by David Elliott
There’s a tremendous amount of effort put into understanding Millennial and Generation Z consumers – individuals aged 18 to 35 – what they like, what motivates them, and how they are willing to spend their disposable income. This is for good reason; these consumers represent $143 billion in spending power, and comprise about 38% of the US workforce. Brands need to meet their needs in order to survive, and if they hope to be able to compete they need to identify ways to drive loyalty from this cohort.
This is particularly true for travel brands (though as a recent article in this magazine points out, there’s some work to do). Gen Zers and Millennials will take about three leisure trips a year, and they are most likelyto spend more money on vacations than other age groups. They tend to be less inherently brand-loyal and are more interested in quality and value. Gen Z travelers will spend about 25%of their travel budget on flights, and one in three Millennials are willing to spend $5,000 or more on vacation. These are numbers that airlines, hotels and other travel providers can’t afford to ignore.
Financial services companies also need to pay close attention to Gen Z’s tastes, particularly as they relate to travel and loyalty. Credit cards are still the best way to pay for travel and experiences, and travel is Gen Z’s preferred redemption option for their cobrand cards. One financial services brand taking advantage of this trend is American Express– they announced a new tool that allows members to use their loyalty points to bid for airline upgrades. This lets points-savvy Millennials and Gen Z members compete for upgrades they may not have been able to afford with traditional cash or points transactions alone. For many of these consumers, the thrill of bidding points for a flight upgrade is an experience in and of itself, and enough to drive loyalty.
So how can travel brands and financial services companies build loyalty among younger generations? By investing in loyalty strategies that provide relevant, personalized interactions; emphasize experiences over traditional rewards and points; keep pace with the technology demands of this digital-native generation; and offer recognizable value, convenience and flexibility.
Relevance and Personalization
Gen Z and Millennial consumers don’t respond to undifferentiated “points” or “miles” as rewards. They expect personalization, as well as offers and content that are tailored to their interests and guaranteed to be relevant to them.
In exchange, Millennials and Gen Zers will allow brands to collect data about their behavior, if that data is used for more personalized rewards and brand engagements. These consumers, already conditioned to sharing their much of their lives through social media, will give brands unprecedented access to their attitudes, motivations and preferences; it’s up to brands to leverage that insight to provide the right rewards to incentivize loyalty.
To boost their relevance with this consumer segment, travel brands also need to consider broadening their product offerings. American Airlines does this by offering dynamic packages that allow the customer to customize their own vacation by bundling an American Airlines flight with a hotel, car rental, and unique activities in destination. For Gen Z and Millennial consumers that put a premium on choice and value, this kind of dynamically-packaged inventory can enhance their experience with the brand.
Experiences Above All
But beyond tailored rewards and packaged inventory, what holds the most appeal to Gen Z and Millennial consumers? In a word, experiences. An Eventbrite study(among countless other articles and reports) found that younger generations overwhelmingly prioritize experiences over “stuff” (78% according to the Eventbrite study). If brands want to drive loyalty, their rewards strategies and program structures should focus on delivering unique, high-value experiences. Brands that can provide unique, Instagrammable experiences at good value – as rewards or otherwise – can more effectively “hook” Gen Z consumers.
Travel brands are in the perfect position to capitalize on this appetite for experiences, because travel is an experience itself. Financial services companies, many of which offer travel-based cobranded cards and rewards as part of their loyalty and retention strategies, are likewise well-positioned. According to data from Switchfly’s internal user tests, 95% of younger consumers say getting points to redeem on cashback or travel is the aspect of loyalty that most appeals to them. Travel and financial services brands can further optimize their loyalty programs to focus on experiential rewards, like American Express’s upgrade-bidding initiative or Marriott Bonvoy’s new experience-based “Moments” program.
Value, Convenience and Flexibility
While experiences as rewards are critical, the day-to-day loyalty experience is also important. Gen Z and Millennial consumers are looking for value, convenience and flexibility, which may seem like qualities of loyalty programs that appeal to travelers and consumers of all generations – and they are – but they are particularly important to Gen Z. As digital-native generations and the first to come of age in the era of ultrafast mobile connectivity, Gen Z consumers demand intuitive, convenient, tech-driven interactions and frictionless experiences.
At the same time, Gen Z consumers typically have lower loyalty points balances than older member segments. This means that brands that offer “points + cash” redemption options or points redeemable for activities or experiences (which usually require fewer points) can create value for younger consumers and encourage them to interact more frequently with the loyalty program and the brand. For financial services companies, aggressive earn and auto-replenish strategies for engagement will also excel with Gen Z consumers, who are always looking for a deal.
By implementing loyalty strategies that facilitate personalized offers and curated rewards, focus on experiences rather than points, and offer day-to-day value and convenience, brands can more effectively engage the all-important younger consumer segment. For travel brands and financial services companies, this means moving beyond traditional points- and miles-based programs. To do so, many brands will need a technology partner to help move their loyalty strategies forward so they can attract, retain and engage Gen Z and Millennial consumers – a competitive imperative for brands in any industry.