According to Nielsen, Gen Z, which includes consumers between the ages of 12 and 27, is expected to wield $12 trillion in purchasing power by 2030, making them likely the wealthiest generation in history.
Good news for discretionary businesses, right?
Hmm, that’s complicated.
Gen Z is less brand loyal than previous generations. The latest sign of this dishonesty comes from Piper Sandler’s biannual “Understanding the State of Teens” survey, which found that Chick-fil-A, McDonald’s, Chipotle, Raising Cane’s, and Texas Roadhouse It has been shown to be a favorite restaurant brand among teenagers. This affinity has remained unchanged since the last survey conducted about six months ago, but the scores of the top two companies (Chick-fil-A and McDonald’s) fell by 4% and 1%, respectively. Chipotle and Texas Roadhouse were unchanged, and Raising Cane’s was up just 1%.
Meanwhile, teens’ preference for Starbucks has decreased by 6% since the spring survey, and Dunkin’ has decreased by 2%.
These percentage decreases occur as teens spend more money. Spending for this cohort increased 6% year-over-year and 2% from spring.
Technical data supports Gen Z’s lower affinity, as outlined below. Gen Z was the least loyal overall, with statistically significant differences by restaurant segment.
quick service
Gen Z: 33% intend to return. Intention to recommend, 29% Millennials: Intent to repeat, 34%. Intention to recommend, 30% Gen X: Intent to repeat, 37%. Intention to recommend, 32% Baby Boomers: Intention to return, 37%. Intention to recommend, 31%
fast casual
Gen Z: 32% intend to return. Intention to recommend, 30% Millennials: Intent to repeat, 37%. Intention to recommend, 34% Gen X: Intent to return, 37%. Intention to recommend, 34% Baby Boomers: Intention to return, 38%. Intention to recommend, 34%
medium size
Generation Z: 30% intend to return. Intention to recommend, 28% Millennials: Intent to repeat, 35%. Intention to recommend, 33% Gen X: Intent to repeat, 30%. Intention to recommend, 34% Baby Boomers: Intention to return, 37%. Intention to recommend, 33%
casual dining
Generation Z: 30% intend to return. Intention to recommend, 29% Millennials: Intent to repeat, 34%. Intention to recommend, 33% Gen X: Intent to return, 38%. Intention to recommend, 36% Baby Boomers: Intention to return, 37%. Intention to recommend, 34%
According to Robert Byrne, senior director of consumer insights at Technomic, the continued growth of third-party distribution may be one reason for the lack of loyalty among teens.
“Gen Z consumers tend to prefer third-party aggregators more than other consumers, and in my opinion, this serves to commoditize the product in a way that dilutes the “brand” from the opportunity. “Consumers don’t say, ‘I ordered McDonald’s,’ they say, ‘I ordered DoorDash,'” Byrne said.
Gen Z consumers also have to navigate historically high prices in a way their predecessors could not at their age, which may have eroded their loyalty somewhat. For example, the Washington Post reported that Gen Z pays 31% more for housing and 46% more for health insurance than Millennials. In particular, prices for limited service have outpaced general inflation for nearly two years, with nearly 80% of consumers now considering fast food a “luxury”.
Lack of loyalty can be a big challenge for restaurants that spend a lot of money on marketing. But it’s also an opportunity. According to a report from Morning Consult, Gen Z consumers spend most of their disposable income eating out. They also express a desire to eat out more.
So what exactly are those opportunities? According to data from Revenue Management Solutions, Gen Z consumers aren’t just buying breaded boneless wings, they’re also buying chicken tenders (which KFC is offering in its latest promotion). As noted, it’s no wonder tender competition is fierce). Gen Z also loves the ability to customize their meals and mix and match menu options.
Gen Z is also the first generation to be considered digital natives, so a seamless experience through apps and online ordering platforms is important. Finally, given the tough economic backdrop, these consumers are looking for great value meals and BOGO offers, but they need variety to keep them motivated long enough to buy.
Contact Alicia Kelso. [email protected]
