Gen Z and young millennials are much more sensitive to price and hold lower brand loyalty than previous generations, according to a new study released Tuesday by Swift Prepaid Solutions, a payments solutions provider. The study was emailed to Retail Dive.
More than 80% of those interviewed, 202 respondents between 18 and 29 years old, said price is the most critical factor when making a purchase. Half of survey respondents said they believe name brands cost more than private label brands. Additionally, 67% said name brands are what they buy when they want assurance a product will meet their standards. Sixty percent of respondents were neutral about private label versus name brands.
The number one way this demographic learns about new brands is from friends and family, beating Google, social media, Amazon, retail stores and television, the survey found. Rewards and surprises are a big draw for this age group: 83% said value-added rewards and surprises inspire greater loyalty and 82% said when earned rewards come paired with a special offer it can encourage them to spend the reward.
When it comes to making purchases what it really comes down to for younger shoppers, according to this survey, is price and a recommendation from someone they know. That presents new challenges for brands when it comes to loyalty.
"Brands are at a crossroad with the shifting loyalty of Generation Z and young millennials, requiring a fresh approach to engaging this next generation of buyers," Rodney Mason, Swift's chief revenue officer, said in a statement. "As brands develop new strategies, incentives and referral programs using prepaid cards will become more crucial to recruit, retain and grow their customer base by appealing to buyer's wallets and communities."
Younger shoppers are more likely to shop name brands when the quality really matters, but they turn to private labels more often when they're looking for lower prices, according to the survey. Where name brands win is with smartphones (79%), computers and electronics (72%), cars (69%) and large appliances (65%).
The report also touches on some of the motivations these shoppers have to refer friends. For a brand name they use regularly, 68% are willing to refer a friend, while only 56% would refer a friend to a private label brand they frequently use. Meanwhile, 41% would refer a friend to receive a reward. That makes sense, when you consider the dearth of digitally native brands offering promotions for free products when customers refer a friend (think Blue Apron or Stitch Fix, among others). According to the survey, referrals are the number one way to grow a brand base beyond price.