This article by Resonate CMO, Ericka McCoy was featured in TotalRetail. Read it in full here.
Despite cautious optimism about the economy leading to increased spending, rising prices are causing consumers to tighten their belts, resulting in fewer purchases across categories. However, a glimmer of hope exists for businesses: the rising spending power of Gen Z.
This generation happily mixes brand names from familiar stores, like Target or Macy’s, with lesser-known finds, baffling marketers who grapple with their love for established labels yet seem indifferent to brand loyalty. But reaching this crucial demographic (and their wallets) requires understanding what sets their shopping habits apart.
Social Proof as a Shopping Guide
Gen Z doesn’t blindly follow trends. They rely heavily on social proof — i.e., recommendations from peers, influencers and online communities. Viral trends on TikTok or endorsements from their favorite YouTubers can turn into instant shopping sprees. According to Resonate’s data, only 5 percent of Gen Z shoppers are influenced by traditional celebrity endorsements, while only 9 percent are influenced by traditional marketing tactics.
Traditional advertising holds far less sway compared to relatable micro-influencers who mirror everyday life. These “normal” people with dedicated followings feel more authentic and trustworthy, fueling Gen Z purchases.
Self-Expression Through Purchase Power
Gen Z curates their personas using fashion, beauty products and even everyday items they buy. They seek brands that align with their values and aesthetics, allowing them to express themselves and project a desired image. Over 50 percent of Gen Zers say owning the right things becomes a way to connect with like-minded individuals and build an identity — real and virtual — and 40 percent stick with familiar brands.
Gen Z also thrives on a two-way street of influence, not only consuming content but also actively creating it. Sharing their purchases and experiences online allows them to influence their peers and gain social validation. Achievements, authority and influence are their key motivators. This feedback loop drives further engagement with brands and products, creating a cycle of influence and being influenced.
So, what can we learn from these data points?
Embrace More Data and More AI
The idea that micro-segmentation can’t achieve scale is no longer true. Thanks to advancements in artificial intelligence technology, brands can now target smaller, highly relevant audiences with the same reach as larger, generic ones, but with improved effectiveness.
The most valuable data for understanding a demographic is that which describes them in distinct, human ways. By leveraging AI-driven descriptors such as psychographics, lifestyle, attitudes and personal values (which describe why a person makes certain decisions) can be provided at individual and sub-segment levels to deliver comprehensive profiles of Gen Zers. This type of data goes beyond traditional factors like price sensitivity and convenience.
To stay ahead in the market, it’s crucial to constantly offer new and improved offerings. By ensuring data is continuously refined and well-connected, brands can achieve a much more nuanced and effective targeting strategy.
Content is (Still) King
To effectively connect with Gen Z audiences, brands need to create compelling content that appeals to their need for familiarity and trust in brands. While YouTube is important, it’s essential to use influencer marketing strategies across different platforms.
It’s also important to highlight unique products, collaborate with up-and-coming brands, and promote a shopping experience that reflects values such as sustainability, environmental care, minority ownership, and support for local businesses.
Experience is the New Currency
The Gen Z audience consists of savvy multichannel shoppers. Surprisingly, 88 percent of Gen Zers say the in-store experience still holds significance, while only 12 percent prefer direct-to-consumer brands. Regardless of the platform, it’s crucial to prioritize a smooth shopping experience, with a focus on delivering exceptional in-store experiences that cater to Gen Z’s preferences.
They prefer to make purchases online but pick them up in-store. They also like the option to buy online and then return items to the store, to varying degrees. Additionally, they’re interested in browsing in-store and purchasing online. While this may seem counterintuitive, it’s a critical point for retailers to grasp. These customers are browsers; they want to touch, feel and experience products. This isn’t necessarily because they want to interact with people, but because the overall ambiance of the store matters to them.
A deeper understanding of Gen Z’s personal and diverse motivations will unlock the key to long-term customer acquisition and retention. This isn’t just about selling products; it’s about building genuine connections with the next generation of consumers.
