While there are many things financial marketers should know about Generation Z, the absolute essential is that money stresses this generation more than anything else.
“Money is in short supply for these people and it drives everything they are doing,” says Jim Marous, industry observer.
Generation Z, by one convention, consists of people born between 1997 and 2012, and it has become the largest generation in the world, by population, representing about a third of the world. The older ones are in college and either working part-time or full-time and one thing they share is a focus on savings, because of their money anxiety. Indeed, even though they have just started on adult life, they commonly already think about retirement.
This comes from astute observation. Their parents may be Gen Xers just waking up to the need to save for retirement or possibly even Baby Boomers confronting it. Either way, “they see that retirement is not as stress-free as they would have liked it to be,” says Marous, Co-Publisher of The Financial Brand and Owner/Publisher of the Digital Banking Report. Marous provided opening remarks during a webinar presented by EVERFI and The Financial Brand.
Gen Z Wants Financial Direction from Someone Who Knows
Beyond wanting to save, Gen Z adults want to avoid revolving debt, in part due to the burden of student loans that they share with Millennials. Marous uses his own son, a Gen Zer, as an example of this generation’s norm. Even now that his son is at a point where he is using credit, he almost always pays it off quickly, says Marous.
“This generation doesn’t want to get into any more debt than they are in already,” Marous explains.
However, he continues, while they already desire to avoid credit card debt and save money, Gen Z consumers see themselves as needing to know still more about personal finance. “This generation is really looking for help,” says Marous, “and they want to learn how to make good financial decisions. And they want solutions that are proactive.”
An example of the latter concerns everyday spending.
“Gen Z has been learning, gaming and living interactively pretty much from the time they could walk.”
“Gen Z doesn’t want to be told that they have made an overdraft,” Marous explains. As children of the digital age, they expect financial institutions to be able to help them in the present tense.
“They want to be told, ‘It doesn’t make sense for you to make this purchase right now, because you have a rent payment coming up’,” says Marous. For such interactivity, of course, that warning will come from technology, most likely in the form of some type of artificial intelligence. And that doesn’t faze them one bit. They have been learning, gaming and living interactively pretty much from the time they could walk.
This is because Gen Zers are the true digital natives, according to Wes Cobb, Senior Director, Financial Education, at EVERFI. He explains that while Millennials love technology, many can remember life before their first computer and before their home became connected to the internet. By contrast, Gen Z only knows the age of the internet, ubiquitous wifi and life by mobile device. EVERFI’s own research indicates that 45% of Gen Zers surveyed admit to being online almost constantly.
Cobb says that Gen Z in America is 90 million strong — with an estimated $44 billion in annual spending power, between wages and allowances. But in spite of that huge crowd, the opportunity to connect with this generation won’t linger. Marous points out that this generation is just as comfortable with the idea of establishing their primary financial relationship with a fintech or a big tech as with a traditional financial institution. Many are already in the years when they establish key financial relationships.
“You’ve got to start now, before the window closes,” Cobb advises. He presented a series of ways to begin the process.
1. Rethink Your Institution’s Approach To Loyalty Programs
Brand loyalty appears to be developing as a different concept among Gen Zers. A strong and satisfying customer experience means more to them than earning points for doing more business with a brand. In addition, “having grown up in the shadow of the Great Recession,” they are cautious with their finances, according to Cobb. They know how to quickly research things online and will seek ways to compare different brands for experience quality. Cobb says they expect to be able to switch providers quickly based on what they learn and what they hear.
Given this attitude, merely doling out airline miles may not hold these younger consumers. Cobb cited 2015 Ernst & Young research indicating that while 45% of Millennials surveyed like traditional loyalty programs at stores, only 30% of Gen Zers surveyed then said that they like them.
So keeping processes state-of-the-art may mean more than points. Marous spoke of his son’s preference for online applications for cards that could be completed while he watches TV.
“You will have to continuously earn the loyalty of this cautious cohort,” says Cobb.
2. Take Stands on Key Issues and Social Causes — Even If They Go Outside Your Core Business
The Nike campaign revolving around football’s Colin Kaepernick represents an extreme example of building brand by aligning with a controversial stance. Cobb, emphasizing that he wasn’t addressing the politics of that specific position, cited the campaign as one company’s way to attempt to capture Gen Z loyalty. Nike consciously sacrificed market share with older groups that it expected to be alienated by the affiliation with Kaepernick.
When Gen Zers believe in a cause, they seek out providers who support what they consider to be important. Diversity in boardrooms and sustainability are two popular causes that Cobb suggests a financial institution could endorse.
Placing advertising that ties into issues “resonates with this demographic,” says Cobb. Not every institution is game to do this, and Cobb says that it is not essential to “plant a big flag” like Nike did. However, whatever a bank or credit union does in this regard must be sincere. Any inauthentic effort destroys trust, he advised.
3. Feed Gen Z’s Hunger for Expertise in Personal Finance
Generation Z is shaping up to be the most-educated generation yet, according to figures cited during the webinar. Of those between 18-20, 59% are in college. At the same ages, 53% of Millennials were in college and 44% of Generation X.
“This is a generation that has grown up steeped in the importance of education,” says Cobb. “They expect to be informed. They won’t necessarily do what their parents tell them to do. They are going to seek out information for themselves. And they are used to learning online.”
Cobb believes that the latter is especially important when trying to connect with Gen Z. Research by Powered, Inc., indicates that across all consumer groups online education creates a favorable perception of a brand.
“If you are not educating Gen Z about your products,” says Cobb, “you are not reaching them effectively.”
4. Let Gen Z Be Part of the Solution to Their Own Problems
“Function” is a line of hair care products that has had some success among Gen Zers. Cobb explains that when consumers engage with the brand they begin with an online “hair quiz” that helps them select the optimum shampoo and conditioner for their hair type.
This reflects an aspect of “personalization” that many may not be familiar with. Beyond merely customizing marketing, successful brands give Gen Z some control.
“It’s no surprise that they want to be active in working with companies to create their own solution to their problems,” says Cobb.
“Gen Z wants a product that no one else has,” he explains, “something unique to them.” He adds that most financial institutions have not caught up to this desire yet.
5. Make Gen Z’s Content Short, Sweet and Channel Appropriate
“Gen Z is the omnichannel generation — they are often managing five screens at any given time,” says Cobb. Research suggests that Gen Zers have an attention span that can sometimes be measured in seconds, not minutes, and they are comfortable with content presented across multiple channels.
Anyone older than a Millennial attempting to put through marketing messages may find themselves in for a fast ride. Cobb, who is himself a Millennial, quotes a Gen Z lifestyle blogger, Hannah Payne, who wrote:
“Generation Z takes in information instantaneously, and loses interest just as fast.”
What this means, Cobb continues, is that Gen Z won’t read long blog posts or watch lengthy videos.
“Your content for them must be given in memes and moments,” says Cobb.
6. Go After Gen Z Now — Hit Them on Campus
Waiting until Gen Z begins working full-time may not succeed, Cobb warns. A good way to get their attention is to work with colleges on developing and presenting financial literacy programs. Colleges recognize the need for these and lack the resources to provide them directly. Cobb adds that memories have faded of the days of campus credit card marketing practices that eventually drew legislation and regulation against them. Campus officials will be more willing now to partner with banks and credit unions on financial literacy.
Making a campus connection is one of three best ways to reach Gen Z, Cobb says. While mobile and websites rank highly, campuses present a unique opportunity for outreach.
Marous stresses the need to genuinely be “working on their behalf, not your behalf. Know them, look out for them and reward them.”