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204 Seiten, Note: 1,7
Table of Content
List of Abbreviations
Table of Figures
2. Theoretical Principles and State of Research
2.1. Generation Z
2.1.1. Definition and Delineation
2.1.2. Generational Theories
2.1.3. Analyzing Generation Z
220.127.116.11. Personality Traits and Core Values
18.104.22.168. Shift from Millennials to Generation Z
22.214.171.124. Shopping Behavior
2.2. Customer Experience
2.2.1. Emergence of Experience
2.2.2. Customer Experience Management
2.2.3. Customer Journey and Touch Points
2.2.4. Designing In-store Experiences
2.3. Conclusion and Generation of Hypothesis
3. Empirical Research
3.2. Qualitative Research
4. Discussion of Results
5. Recommendation for the Brick-and-mortar Retailer
7. Conclusion and Future Prospect
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Figure 1: Generational labels and dates reported in different sources (Own representation based on Reeves & Oh, 2007, 296) Error! Bookmark not defined.
Figure 2: Big Five personality traits, (Eyseneck 1950) E rror! Bookmark not defined.
Figure 3: The Progression of Economic Value (Pine/Gilmore 1998, 98)... Error! Bookmark not defined.
Figure 4: Classification of the research concept into the frame of reference of the SOR model, (Own representation based on Mehrabian and Russell 1974) . Error! Bookmark not defined.
Figure 5: Customer Experience Model (Own representation based on Eight Inc. 2018) . Error! Bookmark not defined.
Problem, Relevance and Objective
Digitalization, differentiation, speed, innovation. In an era where the phrase “retail apocalypse” gets shouted across the globe and brick-and-mortar retailers struggle to remain competitive in a digitalized world, it’s do or die time (Magana 2018; Gara 2017; Ernst&Young 2017). In 2017, established department stores like Macy’s and JCPenney announced closing over a hundred stores, while fashion store Urban Outfitters admitted that they are overextended and Toys R Us filed for bankruptcy (Peterson 2017; Farfan 2018; Gustafson 2017; Schwartz 2015; Ruff 2017). Rapid technological change is fueling innovation but, is disrupting and upending traditional businesses. Innosight points out in their Corporate Longevity Forecast 2018, that the 33-year average lifespan of the top 500 companies in the Standard and Poor’s Index (S&P) in 1964 narrowed down to 24 years in 2016 and will be expected to be 12 years by 2027 (Innosight 2018).
Offline retailers realize the need to play catch-up with fast growing online-only retailers that have a data driven approach to steadily improve their operations and understand consumer needs (Forrester 2016). In a highly competitive industry where the lack of functional differentiation is a catalyst for products and services to become increasingly exchangeable, a competitive advantage can only be created based on experiences (Pine/Gilmore 1998). The increasing relevance of consumer experience is also shown in the fact that 89 percent of companies believed that customer experience will be their primary basis for competition by 2016, versus 36 percent four years ago (Gartner 2014). Further, McKinsey states that 50 percent of purchases are based on word of mouth and that 80 percent of that word of mouth is generated by direct experiences (McKinsey 2010). CEO of Experience Design firm Eight Inc., Tim Kobe, notes that businesses that win the battle for consumer attention—and ultimately loyalty—are those that offer their customers an outstanding customer experience (Kobe 2018). But even though businesses are aware of the importance of consumer experience, 54 percent of customers in the United States point out that the customer experience at most companies needs to be improved (PWC 2018).
Brick-and-mortar stores admit to struggle understanding shopper needs while also facing a new Generation of consumers, that differs to any other known before (Forrester 2016; IBM 2018). Just as businesses started to understand the behavior and expectations of Millennials, a more paradoxical cohort is entering the global market (Reeves/Oh 2007, 297). Generation Z, born as digital natives between mid 1990’s and early 2000, will make up 40 percent of consumer by 2020 in the United States and become the most powerful consumer group with a spending power valued at 44 billion USD (Visioncritical 2016, 5; Sparks and Honey 2015, 7). Growing up in a digital world, accessing data 24/7, Generation Z raises sky high expectations and a seamless both physical and digital experience at their retailer of choice wherever and whenever they want (IBM 2018). Consequently, retailers have to move past Millennials and gear themselves up for the powerful cohort of Gen Zers in order to remain relevant in a highly competitive retail environment, where experiential retail is a buzz word and synonym for good retail (Retaildive 2017).
Sector research offers insight into personality traits and core values of Generation Z (IBM 2018; Visioncritical 2016; Sparks and Honey 2015; McCrindle/Wolfinger 2010). General sentiment determines a high level of importance placed on creating an engaging in-store experience, through this lens the cohorts, Gen-Z, expectations gets examined. While the importance of experiences and the experience concept is studied (Verhoef et al. 2009; Shaw/Ivens 2002; Pine/Gilmore 1998; Schmitt 1999, 2003), no further research has been conducted that definitely provides information about how the experience for Generation Z should be designed in order to meet their expectations of a seamless and unobtrusive shopping experience. Even though literature determines the concept of consumer experience management, businesses struggle to define a plan of action in order to achieve their goal to offer meaningful consumer experiences (Borowski 2015). Therefore, the objective of this thesis is to determine key success factors in consumer experience required by brick- and mortar in order to successfully attract Generation Z.
Structure of Thesis
The present work is divided into six chapters. The first chapter serves as an introduction to the topic and should deal with the relevance and problems of consumer experience and the brick-and-mortar retail industry as well as the objectives and the question of the work.
Chapter two will address the theoretical foundations relevant to this work and serve as a foundation for empirical research. It is again divided into two sections. The first theoretical part focuses on the definition and analysis of Generation Z. After the cohort got defined and delineated from past generations, personality traits, core values and shopping behavior will be studied. The second section deals with the the emerge of experience and defines the concept of consumer experience management as a whole. The theoretical framework ends with the resulting research question and the generation of a hypothesis.
In the third chapter an explorative, qualitative research is carried out with the aim to review and extend findings about Generation Z itself and to further explore and identify expectations and requirements of an in-store consumer experience to attract the cohort. The chapter is subdivided into a methodology and result section. The next chapter deals with the discussion and hypothesis review of the qualitative results from Chapter three. Chapters five and six each deal with the recommended course of action for brick and mortar retailers as well as the limitation of the surveys. The chapter Conclusion and Outlook summarizes all findings and completes the work.
Generation Z describes the cohort born after the generation of millennials. In scientific literature there is a variety of theories and studies about the birth date of Generation Z but no universally accepted year that clearly determines Generation Z. Born in the mid to late 1990's the cohort is growing up as digital natives and differs from any other generation in the way of living, socializing, decision making and information perceiving (Greenfield 2015).
The new cohort, also known as Gen Z, iGeneration, Net Gen, Centennials or Pivotals is a massive and influential generation (Visioncritical 2016, 11; Jagaciak/Fink 2017). Start entering the workforce, their power of spending is currently valued at $44 billion and will quadruple in the next two years (Visioncritical 2016, 5). Based on research by Sparks and Honey (2015, 7) the cohort will be accounting for over 40 percent of the consumers by 2020 in the United States. Making up 25 percent of the U.S population Generation Z is a larger cohort than the Baby Boomers or Millennials (Dill 2015}.
Before analyzing Generation Z and describing the shift in behavior and values from Millennials to Generation Z, it is necessary to first delineate generational boundaries in labeling and year of birth. Therefore, it is helpful to use a division of five generations pursuant to Reeves and Oh (2007, 296f.)
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Figure 1: Generational labels and dates reported in different sources (Own representation based on Reeves & Oh, 2007, 296)
Different research shows various ways to analyze and interpret the generational gap. According to Reeves and Oh (2007, 296), a useful analysis can be achieved through the divisions of five generations. Scientific literature shows various definition of generations as well as theories regarding their period. Oblinger and Oblinger (2005) argue that the generation of “post-Millennials” started in 1995. Reeves and Oh (2007, 296), on the other hand, assert that Generation Z started in 2001. This thesis emphasizes the definition by Reeves and Oh (2007). The studies about Generation Z started in the early 2000s. One of the generational research pioneers, Tapscott (1998), defines Generation Z as “generation net.” According to the author, Generation Z is unique because there is no generation before it that was more comfortable, knowledgeable and educated with the help of technology and innovation. Further he argues that Generation Z is all about innovation, freedom, and tolerance. As a result, they are encouraged to change the modern life and enhance the future world (Tapscott 2009, 2f.).
Howe and Stauss (2000, 4) describe the Generation as more significant, more educated and diverse than the generations before. According to them, this generation is the greatest because it possesses unique abilities, skills, and mindset that differs from the previous generations. Despite such optimism, understanding Generation Z is surrounded by controversies, especially regarding the ethics. Zemke, Raines, and Filipczak (2000, 98f.) further distinguish the different generations at workplaces. The authors believe that the following features can characterize Generation Z; confident, independent, and educated. Furthermore, they are considered to value diversity, feel comfortable with changes, and admire flexibility.
Lancaster and Stillman (2002) conducted similar research while trying to distinguish the generational differences at the workplace. The authors differentiated between Generation Z and other generations that came before them. They characterized the Generation Z as realistic, confident, diversity, and pragmatic in problem-solving. Martin and Tulgan (2002) also examine the same topic while trying to distinct the generational differences. They note, in their research, the essential characteristics of every generation. The authors achieved the best organizational results due to the diverse skill set associated with every age. Oblinger and Oblinger (2005) describe the cohort as Net Generation, due to the continuously access to the internet. The authors emphasize the importance of technical opportunities created for the Generation Z and the vital role technology plays in the cohorts eduction. They further explain that Generation Z members have a high literacy level because they prefer to learn compared over other activities due to their openness towards diversity
Defining Generation Z requires an understanding of the method used for the generational divide. Reeves and Oh (2007, 295 f.) explain the classification of generations through the categorisation of time is only one way. Demographers believe that birth years may not be sufficient to analyze the generational differences. More complex assessments involve analysis of the history, the social factors, and individual character traits. Different scientific theories and approaches have been found to be useful in understanding the different generations. One of such methods is Karl Mannheim’s proposal. Mannheim (1952, 179 ff.) argued that generic type could be defined by a different series of socio-historical situations and events. Mannheim goes further to assert that another critical factor to be considered is the age of the generation. He states that, a unique socio-historical event must take place when the individuals are still young. Through the effect of the event and the memorable experience, the generation gets shaped and will be connected with the era of the happening.
According to Howe and Stauss (1991, 64), some of the most respectable researchers in generational issues, argue that defining generations based on their birth year is a limited approach. The authors assert that three primary classes can be used to describe generations appropriately and effectively rather than relying on years of birth. The three categories include perceived membership, which refers to the awareness of being part of a particular group. A group begins in the adolescence stage and develops into adulthood. The second class involves the shared beliefs and behaviors, which includes the existing attitudes, ideas, and behavioral norms that define a given culture. Lastly, the shared history which involves the historically significant events and experiences that happened during the times of generation member’s adolescence and adulthood and had an impact on their future lives.
Numerous studies have shown the significance of generational cohort in the overall analysis and generational classification. Therefore, Schewe and Noble (2002, 129 ff.) depicted the importance of common behaviors, situations, and experiences that provide interconnection among generations. There is evidence to show that different generations have unique cohort experiences which require analysis to recognize the types of generation. At the same time, researchers have found that shared experiences can be of an independent nature: economic and political situations, socio-historical events, or essential innovations in addition to containing influence from particular trends. Lancaster and Stillman (2002) in their study highlighted how generational differences are necessary for the workplace. These researchers had their focus on qualitative data that depicted how generations in the workplace could be differentiated through their behaviors. As a result, values, culture, personality traits, leadership style, worth ethics, and other forms of behavioral methods provides an in-depth understanding of dissimilarities between generations in comparison to their years of birth. Further, Lancaster and Stillman (2002) alluded to the fact that generational analysis was critical and had a direct relationship with success in the organization. Similarly, Hammil (2005) conducted a replica study where the generational division was based on analyzing the personality characteristics, core values, communication style, workplace behavior, leadership style, and work ethics including other behavioral patterns that correspond to particular types of generation.
Political, economic, social, and cultural events create division among generations and shape their differences. McCrindle and Wolfinger (2010, 1ff.) referred to generations as groups of people that were born during the same historical period. Consequently, they were influenced by experiences that were common and have been impacted by the same history and technology stressing sociological analysis in determining the generational division.
According to various generational theories, similar patterns of actions, thoughts, opinions, traits, and behaviors can be divided and characterize people into groups. Many authors and theoretical frameworks have explained the analysis of personality traits and characteristics. Wiggins (1996, 51) states that the fundamental distinction is how personality is viewed. Some scientific sources have indicated that character is shaped by the impact of internal factors. Therefore, Eysenck's (1950) Big Five Personality Theory, which is demonstrated in Figure 2 presents, that the individual’s personality gets shaped through the interconnection of five core traits. According to this theory, the characteristics include openness, conscientiousness, extraversion, agreeableness, and neuroticism.
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Figure 2: Big Five personality traits, (Eyseneck 1950)
In addition to Eyseneck’s model, and like mentioned in chapter 2.1.2, other sources state, that also external factors have a strong influence on the personality of an individual and accordingly, people's character develops from interactions between the environment and individual (Ryder 2014, 53ff.).
In the following Generation Z will be analyzed in order to get a better understanding of the cohort’s values and personal characteristic. While internal factors will be described, the external aspects that influence the generation’s personality are also taken into account.
Generation Z members were born during a period of radical technological changes and have further undergone climate change and the shift towards more cultural diversity.
Growing up in a globalized world, the generation does not get limited by geographical boundaries. More over members of the cohort have no restriction when it comes to accessing information or connecting to people around the world. Especially obstacles between people with distinctive backgrounds are erased through globalization and digitalization. Therefore, Gen Z’ers are able to join any community, and work their interests (Sparks and Honey 2015, 46). McCrindle and Wolfinger (2010, 105) argue that the presence on the Internet has influenced and connect the cohort through music, movies, but also through trends, fashion, and the language used on various platforms.
In the aspect of globalization, the significant factor whose role cannot be undermined is diversity. Currently, Gen Z’ers are growing in what can be referred to as a non-traditional social structure, which means that they do not segment between wrong and right, or abnormal and normal. More over, the cohort grew up with knowing that people come from various economic and social backgrounds, nationalities, ethnicities, and races. The critical aspect of Generation Z members is embracing the world as being full of individuals of different sexual orientations and gender identities (Sparks and Honey 2015, 59). Furthermore Folmsbee (2017) notes that individuals from Generation Z are least sexist, racist and homophobic compared to other generations. The outcome of the diversity value has been earning respect from all people with dissimilar backgrounds. For most members of this generation, among the relevant issues include immigration, the rights of women, racial equality and the rights of lesbian, gay, bisexual and transgender.
The second aspect connected to the personality characteristics of the Generation Z concerns technology . Member of this cohort have never lived without technology and, therefore rely on technology for solutions. Further the cohort experiences a lesser impression of technological innovations, since it has always been integrated in their daily lives (Sparks and Honey 2015, 30).
Sparks and Honey (2015, 30) allude to the fact that for this generation of digital natives, having the Internet and staying connected to their peers comes naturally. Lenhart (2015) states that 92 percent of members of Generation Z go online daily while 24 percent have a constant online presence daily which makes their lives inseparable from technology. One of the significant features of this generation is that they are accustomed to using multiple technological devices. Typically, the home of a Generation Z individual has several items, such as smartphones, televisions, laptops, desktops, and tablets. Speed is of significance in the life of Generation Z members and therefore the cohort place significant emphasis on time (Finch 2015). Being surrounded by technology and all opportunities that come with it, innovativeness is another key characteristic of the cohort. Therefore, many members of this generation are trendsetters and adopt new ideas quickly. A report by Vision Critical (2016, 10) emphasizes that this generation is developing a future of networked tools, job automation, and artificial intelligence. At the same time, this generation is the most entrepreneurial-minded where for instance 70 percent of the teens have their businesses such as teaching music lessons or selling on eBay and other online platforms such as Amazon. Johnson (2015) noted that members of Generation Z have valuable working experience critical in preparing them to become future top innovators. Furthermore, they cherish the realization of a work- life balance that drives them to think of new approaches to tasks, especially in the workplace. According to Jagaciak and Fink (2017, 5), the desire of a work-life balance and to be independent mainly resulted from the case, that the cohort witnessed their parents failing to manage their work and personal life. Folmsbee (2017) noted that the Generation Z is highly developed educationally and socially and has the potential of becoming the most significant, smartest generation ever to exist.
Vision Critical (2016, 11) asserts that the Generation Z individuals are more concerned with their privacy when using the Internet. Understanding the possibilities of current technologies and the ease of accessing information, makes the generation more attentive to what they share.
Social and Environmental Advocacy
Another character that is considered unique for the member of Generation Z is social advocacy and passion for positive impact in addition to making positive contributions. The cohort makes use of their voice to cause change within the society. According to Barr (2016), an example of how this generation cares for the world and the future could be demonstrated by the fact that the levels of drugs and alcohol use are the lowest, while their engagement in political matters is high. Another core value of this generation is sustainability. A significant percentage of members from this generation are concerned about environmental and social issues that involve concern for the way planet earth will look in the future. Brown, Bridge and Riggs (2015) assert that these individuals are passionate and empathetic about making positive change around the globe. Among the social issues that Generation Z considers to be of importance, include hunger, poverty, health, human rights, and the environment.
One of the core values of this generation is having the need and desire to create a sense of belonging in addition to a feeling of fitting in the community. As mentioned, the rapid change in technology presents a stressful environment for Generation Z individuals, which drives them to form groups that offer a sense of belongingness. The groups are mainly comprised of peers who share similar interests. Long distance holidays and exchange programs also play a critical role in the formation of the communities since they allow people to interact and meet individuals from various societies, which lead to the creation of online communities to maintain relationships (Sparks and Honey 2015, 46). McCrindle (2012) states the cohort is more than any other generation before, shaped by and connected to their peers. Their digital network is broader numerically geographically and online available at any time.
Furthermore, authenticity is a core value that members of this generation possess. Generation Z values everything that is authentic, personal, individualistic, relatable, and real (Mediakix 2017). The significant element of this generation is uniqueness and authenticity in what they do. In their report, Sparks and Honey (2015, 54) noted that due to the extensive internet usage, people in this generation have the capability of creating multiple digital personas and hence able to try various roles.
Jenkins (2017) notes that political uncertainty, global recession, and the lessons learned from the previous generation have contributed to Generation Z members being practical. These and other events have made Generation Z members cautious in addition to being a catalyst for them to work harder to build a better tomorrow (Anatole 2013). Sparks and Honey (2015, 78) noted that Generation Z saves money for their future with 58 percent of teens already making savings. Due to the economic slowdown during the Great Recession, Generation Z looks for stability in their lives. Saving is essential, and they view the convenience of a product or lifestyle not as being adventurous but having reliability. Claveria (2017) noted that the significant saving motivation is security and stability in their finances.
Finally, among the core values that characterizes Generation Z is freedom. While this generation values social, political, and racial liberties, the issues were fought for by generations that came before Generation Z. Consequently, Generation Z grew on a globe that considered these freedoms as a norm. Hughes (2017) notes that the freedoms that members of this generation aspire to achieve are financial flexibility, authentic self, and among the most critical being free to develop what they desire to live. Being themselves regarding decision making and presenting their opinion is vital. Generation Z members have the understanding that people cannot be the same and hence the need to accept individuals as they are. Geographical freedom is an aspect that members of this generation seek to attain considering that nothing is any longer attached to physical places as they can work in the comfort of their homes and can rent an apartment in any part of the world with a single click. Generation Z is in constant search for new opportunities, and they are ready to travel the world to realize their dreams. Members of this generation value independence and consider that achieving it requires financial freedom (Huges 2017).
One of the critical reasons that Generation Z matter is the fact that they are a representative of today’s global youth as they exceed a population of 2 billion and hence one of the most influential and largest audiences that any brand can target. It has been estimated that by 2020 this generation will have made up 40 percent of all consumers in the United States (Patel 2017). Members of Generation Z have been considered to be materially endowed while at the same time technological saturated and have the most formal education that the world has ever witnessed (Jagaciak/Fink 2017, 3). Nonetheless, in assessing what motivates Generation Z members, there is an increase in the beliefs compared to Millennials. One of the most significant changes from Millennials is that members of Generation Z have a different way of viewing the world. While the dream of Millennials has always been changing the world, members of Generation Z have been practical in changing it (Future Cast 2017).
Millennials influential years were between 1991 and 2010, but there was much uncertainty due to the unfavorable global trends such as environmental pollution, global warming, natural calamities, fanatic terrorism and school shootings (Jagaciak/Fink 2017, 4). Baby Boomers viewed their future as being bright, but Millennials considered it discouraging and questioned whether there would be a future. Thus, most Millennials value living in the present without worrying about tomorrow. On the other hand, the most critical years of Generation Z started from 2005 to the present. Members of this generation grew up with a Great Recession which made them acquire a traditional mentality on personal success, financial liability, and lifestyle. Furthermore the cohort is shaped by terrorism and violence, which makes them feel unsettled (Jagaciak/Fink 2017, 5).
Further growing up in a globalized and digitalized world, Gen Z’ers are facing a more complex situation than previous generation when it comes technology and social media. Being bombarded with an information overload, the fear of missing out and the constant adaption to new innovations, requires copping mechanism (Jagaciak/Fink 2017, 5f.)
Several noticeable shifts in the lives of Millennials and members of Generation Z exist. First, Generation Z is more concerned about the future rather than enjoying the present. Due to their perception of reality, they seek to think and prepare for the future and wants communities, leaders, parents, and brands to treat them as mature (Jagaciak/Fink 2017, 6f.). Second, Generation Z aspires to connect with products or services that support their life goals instead of defining their lifestyle. Therefore the cohort expects brands not to tell them the message “we can get you there” but “we can help you get yourself there (Future Cast 2017). Third, the generation has a low loyalty to brands. Low brand sensitivity makes them unwilling to remain committed to specific brands (Wood 2013). For Millennials, they had a low loyalty that was caused by higher awareness of the brand.
Other shifts experienced are related to optimism and realism. Millennials had optimistic beliefs while members of Generation Z are practical and realistic concerning fulfilling their needs in life. Apart from this, Generation Z has shifted to becoming pragmatic and hence wants to achieve their goals in an orderly way. Members of Generation Z expect to gain success through hard work instead of luck which many Millennials used.
Generation Z expands from Generation Y in a variety of ways. First, they have a higher likelihood of impacting the world. Their attention to change and the role that technology plays in enhancing that ability makes it more probable that they will alter world issues (Millennial Branding 2014)..
Also, Generation Z desires attention. The behavior can be seen in their search for affirmation in online communities. Young people are posting their pictures on the Internet to get positive feedback from their peers. The generation is also highly technological being driven to get things on-demand compared to the Generation Y whose low development of technology taught them to wait. More over member of the cohort expect to be served with information and content based on predictive services. Generation Z also expect instant gratification and what rewards for each step they make. Brands have learned this element and responded to comments and thank their buyers to increase their engagement. Lastly, customization is a valuable aspect of this generation. Personalized products and services are popular with this generation and drive them to seek uniqueness. Thus, they have a high expectation of customization (Jagaciak/Fink 2017, 11f,).
Despite the fact that Generation Z is one of the most researched cohorts today, literature only offers little insights into the shopping behavior of Generation. According to Kotler et al. (2005, 256) the consumer behavior gets influenced by various factors. Besides culture, the cohort gets influenced by its social environment like reference groups, family and friends. Furthermore personal factors such as the age and lifecycle stage, economic circumstances, personality as well as the selfconcept affect the cohort’s shopping behavior. Last but not least psychological characteristics like motivation, perception, learning, beliefs and attitutes need to be taken into account (Kotler et al. 2005, 256ff.)
In collaboration with the National Retail Federation, the IBM Institute for Business Value conducted a survey of 15,600 Gen Zers from 16 countries across six continents. The survey group is formed by 50 percent male, and 49 percent female, while one percent preferred not to indicate their gender. The groups’ age ranges from 13 to 21 which represents the cohort of Generation Z (IBM 2017).
After traits and the relationship between the cohort and brands were examined, their objective was to discover shopping habits and behavior of Generation Z. When choosing a shopping channel, the most important factors that matter in Generation Z’s decision making are the range of a wide product choice, product availability and the proximity of the store location. More than a half of all Gen Zers surveyed said a fun in-store experience is also important in their decision-making process. (IBM 2017,2). Research conducted by Accenture, who collected data of nearly 10,000 respondents in 13 countries in 2107 add the finding that Generation Z is likely to decide whether to buy a product or service based on three factors: getting offered the lowest price, experiencing products in-store and reading reviews. More than Millennials, Generation Z also place greater importance on listening to family and friends and checking social media for inspiration prior their decision what and where to buy (Accenture 2017, 2f.). When it comes to choosing a brand the affinity to the cohort’s personality is of high importance (Sensis and ThinkNow Research 2016). Therefore member of the generation are looking for brands that help to not only create a unique and personal style but that are align with personal values and amplifies their personal characters (Vision Critical 2016, 34).
Even though the cohort is known for being technological savvy, 98 percent of the sample responded that they either purchase in-store most or some of the time. Compared to 67 percent of Gen Zers that buy in-store, only 22 percent said they use a web browser to make a purchase for most of the time (IBM 2017, 3).
Undoubtly technology has a big impact on Genereations Z’s shopping behavior Whether shopping on a website, through an app or in a store Generation Z expects consistence and reliability. Therefore, the ability to switch among channels easily while browsing, researching information or shopping is either important or very important (IBM 2017, 4). Growing up as digital natives, the cohort appreciates technology for easier, more rewarding shopping. Important to mention is that this Generation does not get excited about fancy features and gadgetry like previous generations. In terms of their shopping behavior, 47 percent of surveyed Gen Zers use their phone in-store to look up products, compare prices and to find discount promotions prior to purchasing a good or service. Besides that, they are requesting an access to transparent inventory data to look up product details and availability while shopping in a store. More than researching on shopping relevant information, 73 percent of the surveyed the cohort responded that they use their mobile phones to engage with family and friends on social media while shopping (IBM 2017, 6). Accenture’s research also finds that the cohort prefers visiting stores to buy goods and describes their visits as a “multi-media/multi-channel” event. Furthermore, it is mentioned, that Generation Z is more likely to engage with sales associates, compare different shops on mobile devices and interact with self-service digital information sources in the store (Accenture 2017,2).
Being asked what kind of new shopping technology the cohort would like to see in the future, they are keen to embrace innovational solutions that enhance their shopping experience. They are looking for features like customization, Virtual reality (VR), augmented reality (AR) and robotics that enable a seamless shopping experience. Respondents mentioned tools like a “magic mirror” that helps them to imagine a look without actually putting the item physically on. Interactive screens are expected to help the cohort to go online and browse while shopping in-store. Knowing that speed is of high importance in the life of Gen Zers, 60 percent said that they will not use apps, websites or facilities that are hard to find or navigate (IBM 2017, 7).
When it comes to individualization Generation Z shows a high demand and strong desire for shopping experiences that are unique and personal. Prioritizing individualization, tailored service loyalty or price rewards are important to surveyed Gen Zers. Furthermore, they said that reward programs influenced their decision where to shop. The importance of personalization gets highlighted in the report. Therefore, Generation Z values a personalized shopping experience but is expecting an even more engaging in-store experience (IBM 2017,7f.).
Most of the research on marketing literature history has not examined the concept of customer experience as a separate entity (Verhoef/Langerak/Donkers 2007, 97). Berry and Carbone (2007, 26) argue that most of the literature and researches have mainly focused on the concepts related to customer satisfaction, service quality and customer relationship management. Similarly, Parasuraman, Zeithaml, and Berry (1988, 12) also argue that though emphasis has been placed on the three concepts mentioned above, it does not mean that customer experience has been ignored. Holbrook and Hirchmann (1982, 137) carried out a study on consumer experience over 35 years ago. In their research, the authors noticed that consumer experience significantly influenced consumption. As a result, they emphasized that there is a need for researchers to underline on consumer experience in the future studies. Pioneer researchers such as Gilmore and Pine came up with the exhibit of progression of economic value which is shown in figure 3. The principle behind this concept of progressing monetary value is that there are differentiations to consumer pricing and wants.According to Pine and Gilmore (1998,98),this concept opines that there is a realization of higher value when more offering is dedicated to ensuring the needs of the customers are met. Consequently, customization of services is done to create experiences while products develop services. Therefore, for an enterprise to gain a competitive advantage in the market, it must upgrade its offerings to meet the requirements of the economic value.
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Figure 3:The Progression of Economic Value (Pine/Gilmore 1998,98)
In another study, Pine and Gilmore (2000, 18ff.) examine the concept of competitive advantage based on the customer experience. According to the authors, a competitive advantage can be created based on the experiences and not the actual products. In their study, the authors argue that there has been a fifth distinct offering, which they describe as ''transformation" that has been added to the progression chart. However, the new offering has not been explicitly examined; therefore, it has not been given attention in this thesis.
The lack of functional differentiation has become a catalyst for products and services to become increasingly exchangeable. Schmitt (2010, 67f.) concluded that the needs of customers for memorable experiences had increased the view shared by (Pine/Gilmore 1998). Further Schmitt states, that the highest value of economic offerings are experiences, that are entertaining and educational for the consumer (Schmitt 2010, 67). Shaw and Ivens (2002, 15f.) demonstrated that approximately 85 percent of significant leaders in business agree that differentiation that only relies on physical elements such as delivery and price cannot be referred to as sustainable business strategy due to the competitiveness in the market. Therefore, a new differentiator is required; customer experience is gaining greater emphasis. Consequently three aspects become critical to the customer experience: brand, perception, and feel of the organization (Shaw/Ivens 2002, xi).
Furthermore researchers differentiate between different various types of experiences. Similar to Schmitt (1999) who refers to the “strategic experiential modules” consisting of sense, think, feel, act and relate, Dubé and LeBel (2003, 68ff.) examined four related “pleasure dimensions” and differentiate between emotional, intellectual, social and physical pleasures. Gentile Et al. (2007) expand the concept with the experimental component of pragmatism. Therefore he distinguish between the sensorial component that includes the five natural senses, which trigger excitement, satisfaction, and aesthetic pleasure. The second dimension is the emotional component, that supports the development of a relationship between the customer and the company through setting off emotions and feelings. The cognitive component creates experiences that trigger thinking and problem solving processes in which the customer alter assumptions about offered products. Furthermore pragmatic experiences can result through the practical act of using a product. The fifth component, lifestyle experiences, describe experience that emerge through the confirmation of personal belief and values of the customer. The last experience evolves relational experiences through the social interaction that occur in the event of collective consumption as a part of a community or endorsed social identity (Gentile/Spiller/Noci 2007, 397f.). However it is to note that Gentile et al. could not verify the independency of all experimental components, as most of the experiences overlap and show interrelations (Schmitt 2010, 70). Based on Schmitt’s strategic experiential modules, Brakus et. al. (2009) viewed the models as internal outcomes and determined brand experiences as
“subjective internal consumer responses (sensation, feelings, and cognitions) as well as behavioural responses evoked by brand related stimuli that are part of a brand’s design and identity, packaging, communications and environments” (Brakus et al. 2009, 53).
In conclusion, researchers in the experience field commonly state that the conceptualization of experiences along various experience dimensions is useful. Furthermore social and relational elements need to be considered as experiences are aroused by environmental cues (Schmitt 2010, 71).
According to Schmitt (2003, 63), Experience Management can broadly be described as a way of customer centred marketing that build connections between consumers and brands. Taking this view into account, experiences may be created through products, communications, in-store engagements, sales relationships or events and arise of online or offline interactions. However other authors interpret the customer experience concept more narrowly and only apply it to relationship, event or interaction concepts (Lasalle/Britton 2002, 30).
Various authors have defined the term “customer experience management” differently. Schmitt (2003, 85) argues it refers to the process or methodology that marketers apply to handle the cross-channel experience of consumers with the brand, firm or its services. Customer experience management is sometimes referred to as CEM composes the creating and implementing customer encounters within their journey to ensure value development for all stakeholders including the organization (Schmitt 2010, 88f.). Similarly, Meyer and Schwager (2007) examined customer experience management and argued that customer experience shows how the customer perceives the organization during all the encounters, which they describe as “touch points.” Further, they argue that customer experience provides the organization’s management a tool to realize the caps in the customer’s journey. Meyer and Schwager (2007) emphasize that this enables the organization’s management to identify where expectations and the experience do not meet. Therefore, customer experience management could be interpreted to mean a process that firms use to determine the different interactions that they have with dissimilar consumers within their encounter (Meyer/Schwager 2007).
Despite all these definitions, there is a need to consider still that an exhaustive explanation of the CEM still lacks in the most literature. Dandridge (2010) defines the term “customer experience management” as a process and discipline that the organization uses to enhance the customer experience factor. Palmer (2010) explains that different methods of CEM have been developed because of dynamism in customer experience. Berry et al. (2002, 85), on the other hand, argue that the idea should be perceived holistically in consideration of the complete customer journey, encompassing customers’ expectations before and after the experience. The holistic perception can be achieved by managing messages or clues that the organization sends to its customers. Also, it can be achieved by developing competence for the CEM (experience audit) and creating a theme (experience motif) for implementing the customer experience management. Shaw and Ivens (2002, 11) observe that customer experience is possible by constantly exceeding customers’ physical and emotional expectations. Further, they assert that great customer experiences are designed “outside in” instead of “inside out” (Shaw/Ivens 2002, 11). Shaw and Ivens explanation means that organizations should consider the experiences customers want instead of masking organizational experiences as consumer choices. Frow and Payne (2008, 90ff.) also introduced the concept of “perfect customer experience.” They advanced the idea that customer experience management should focus on providing positive day-to-day experience. Further, the authors argue that CEM should be used to develop the highest expertise to enable the organization to deliver the excellent experiences. They also emphasize that companies should consider customer experience throughout their customer relationship.
Meyer and Schwager (2007) believe that most of the companies lack approaches to strategic customer experience management. According to them, most companies prefer to invest in customer relationship management (CRM) instead of customer experience management. In their comparison of CRM and CEM concepts, Verhoef et al. (2009, 32) assert that customer experience management emphasizes the current and immediate events with the consumers rather than the experience history involved. In other words, Meyer and Schwager (2007) noted that through customer experience management, organizations could determine the thinking of the consumer about the firm operations rather than the knowledge on the consumer. Further, CRM is less useful because it is focused on getting information after the encounter instead of focusing on the actual contact. As already mentioned in the previous section of this paper, most organization leaders recognize the importance of customer experience management, but they still refute the usefulness of its results (Schmitt 2010). Meyer and Schwager (2007) explain the gap between the concept of customer experience and business managers. According to the authors, three main limitations or barriers inhibit customer experience management in the companies. Besides, the questionable profitability of CEM and the lack of the measurement in order to evaluate the Return on Investment, the authors note that various organizational leaders lack a significant understanding of the consumer needs. However, managers who have specialties in other fields, such as engineering, finance, or manufacturing industries may consider CEM as the work of marketing, sales, and customer service department instead of considering it as the fundament of all operational activities. Rawson et al. state that if the customer experience is managed right and holistically, organisations an achieve enormous rewards. Besides increasing customer satisfaction, the customer churn rate can be reduced, revenue increased, and the employee experience enhanced (Rawson/Duncan/Jones 2013, 1f.)
In McKinsey quarterly issued in June 2009, the concept of “consumer decision journey” got introduced (Edelman/Singer 2015, 88). The results of the study show that current consumers take an iterative journey consisting of four stages when narrowing buying power. In particular, the four stages include consideration, evaluation, purchase, and finally enjoy, advocate and bond (Edelman/Singer 2015, 88ff.). In the first stage of consideration, the consumer makes initial reviews of the set of brands and hence the experience is dependent on a prior encounter or recommendation. Secondly, the evaluation stage refers to the level where the consumer is actively engaged in seeking information and evaluating options available. The evaluation stage is followed by the point of purchase, which creates the opportunity for the customer to develop and extend an open-ended relation with the brand. According to Edelman and Singer (2015, 89), at this stage, the customer can be engaged and share their personal experiences with their friends. Similar to Edelman and Singer, Lasalle and Britton (2002), defined the experience engagement model and differentiated between the five stages: Discovery, Evaluation, Acquisition, Integration and Extension.
According to Meyer and Schwager (2007), the customer journey can be understood as the experiences of touch points that the customers have with the company and its brand. Meyer and Schwager (2007) explain that the actual customer experience and customer journey are two concepts that are closely intertwined. Customer experience refers to both direct and indirect contacts existing between the consumers and the organization. Direct connections emanate from consumers such as use, purchase, and service. On the other hand, indirect contacts are contacts started by a firm, for instance, word of mouth or advertising. Direct and indirect connections create the customer journey and encounters.Together they determine the consumers' brand perception. Therefore, the customer encounters do not solely include the directly controlled ones like advertising, purchase, and service; but also indirectly controlled ones such as reputation, reviews, or word-of-mouth (Verhoef et al. 2009, 34ff.).
Considering each stage of the customer journey model, Davis and Longoria (2003) developed the “brand touchpoint wheel” which differentiate between the pre- pruchase, purchase and post purchase experience phase. Within these phases the authors identified touch points between the customer and company that may evolve in experiences. While the pre purchase phase includes contact points like advertising, website appearance, direct mail and promotions, the purchase phase touch points focus on the in-store experience. Therefore touch points like displays, store and shelf placements, sales representative and the sales environment get named. The objective in this phase is to instill confidence and trust as well as to deliver value. The after purchase phase contains the product and package performance, customer service, newsletter and loyalty programs (Davis/Longoria 2003, 4).
In terms of the sales environments, research has been conducted on in-store (Spies et al. 1997; Mathwick et al. 2002) and on atmospheric experiences (Bitner 1992; Turley/Milliman, 2000; Babin/Attaway 2000). The store atmosphere, assortment, and the service interface are part of the retail customer experience.
Rawson, Duncan, and Jones (2013, 90ff.) explain some of the requirements that need to be considered when customer experience management is implemented into the customer journey; the emphasis being a single touch point are insufficient. Further, they report that what is of importance is the full journey. As an outcome, the focus changes from the touch point to journey orientations. Ironically, despite touch points being considered to be highly significant interaction moments between an organization and consumers, firms still tend to have much of their focus solely on touch points. Rawson et al. (2013, 90) further assert that it can draw focus away from the bigger picture: the customer’s end-to-end journey. Therefore, companies need to manage the cumulative experience across all the touch points and stop emphasizing on a single transaction.
The growth of the experience economy and increasing investigations on the benefits that customer experience brings to the marketing of services has created a new field of customer experience management, known as service design. Service design borrows design principles and combines them with customer experience management ideas to develop better services (Schneider/Stickdorn 2011). Patricio, Gustafsson and Fisk (2017, 4) point out that service design plays high importance in generating new ways of value co-creation with customers and organizations. Through holistic design thinking and a human-centered approach, service design brings new service innovations to life (Ostrom et al. 2010, 5).
Service design is the development of an overall experience of services based on their plan and the strategy for offering them. It brings together service elements, for example, the physical environment, people and behavior, and the facility itself to aid consumers to develop their experiences. The notion behind service design is making services more accessible, more usable, and highly desirable by developing specific touch points and identifying how they interact together and with the user of a service. In recent years, the design function has increased its value and involves multidisciplinary teams when creating holistic experiences. The look of a product or service is recognized as one of the parts of ensuring positive customer experience (Moritz 2005, 39f.).
Yu and Saniorgi (2018, 41) determine service design as an approach of the service development towards a more service and consumer-centric logic. Further, they describe the discipline as a process for value co-creation through a detailed understanding of consumer experience, co-designing methods and the user involvement.
Due to the emerge and importance of the customer experience, the interest in marketing and customer behavior research increased to discover the effect of the retail space design on consumers. Homburg and Krohmer propose a division of the design of sales areas into the dimensions assortment, layout, allocation of space and atmosphere (Homburg/Krohmer 2009). Similarly, Baker and Cameron distinguish between design, atmospheric, and social design of the retail space (Baker/Cameron 1996).
In addition to atmosphere (Pucinelli et al. 2009), layout or room allocation, (Grayson/McNeill 2009), social influences by personnel and other persons (Karin/Jain/Howard 1992) as well as design and aesthetics (Bitner 1992), the authors Kerin, Jain and Howard (1992) add the criteria product assortment and waiting times of customers.
According to Bitner, (1992) the atmospheric design of the physical spaces offers retailers the ability to address the customers five senses, which include the visual, olfactory acoustic, haptic and gustatory sense. Multi-sensory concepts have proven to be particularly effective. Here, the phenomenon of multi-sensory enhancement is exploited according to which stimuli activates more than two senses at the same time. These affect people more than mono- or bi-sensual (Schöwing 2010). In addition, several independent studies have shown that deliberate atmospheric design of the salesrooms and the resulting sensory stimulation of customers can influence their buying behavior (Puccinelli et al. 2009; Mattila/Wirtz 2007; Vaccaro et al 2008). In addition to triggering desired ad hoc behavior at the point of sale, longer-lasting effects of multi sensory store concepts are relevant for marketing from a brand perspective. Multi-sensual store concepts have proven to have a positive effect on customer loyalty (Spangenberg et al., 2006; Grewal et al., 2003).
In light of changing consumer expectations and the evolve of the experience economy, an adequate measuring instrument was needed. From the SERVQUAL instrument used to quantify service quality (Parasuraman et al., 1988), Maklan and Klaus (2011) developed the EXQ scale; a multiple item scale in order to assess customer experience in the emerging experience marketing model. Following Churchill’s (1979) sale development paradigm, the dimensions of the EXQ scale were determined through the analysis of what customers experienced as triggers of their purchase behavior. The 19 items in the questionnaire measure the customer experience in the four dimensions Product Experience, Outcome Focus, Moments-of-Truth and Peace-of-Mind, which are also summarized under the acronym POMP and will be described in the following.
1. Product Experience: The dimension describes the customer’s perception of having the ability to choose and compare between different offerings (Maklan/Klaus 2011). Srinivasan et al. (1998), state that the ability to have choices is a critical factor in modelling consumer behavior and the precursor of loyalty.
2. Outcome Focus: Items in this dimension are related to reducing customer’s transactions cost, such as searching and selecting new options. Therefore the importance of experiences that are goal-oriented get reflected in the Outcome Focus (Maklan/Klaus 2011).
3. Moments-of-Truth: The importance of flexibility in unforeseen situations and proactive actions of the service provider get characterized through various items that reflect the moments-of-truth (Maklan/Klaus 2011).
4. Peace-of-Mind: The fourth dimension builds on items that are highly associated with the emotional part around the experience. Therefore the peace-of-mind is based on the perceived expertise, convenience and guidance that is served throughout the service process (Maklan/Klaus 2011)
Maklan and Klaus show in their research that the customer experience acts as a media-tor variable between the POMP dimensions presented and the customer experience outcomes of loyalty, customer satisfaction and referral behavior. The peace-of-mind dimension, which represents the emotional aspect of the experience evaluation, has the strongest influence on all three outcomes (Maklan/Klaus 2011).
This chapter deals with the main research question and the hypothesis developed from it. Both are based on the previous theoretical framework and additional findings. Brick-and-mortar stores are facing dramatically changing shopping behavior and consumers with sky high expectations of the physical retail space. On the heels of figuring out what makes Millennials tick, it has been found that the digital divide is only widening with the rise of Generation Z. The cohort is expecting a seamless shopping experience with their retailer of choice wherever and whenever they want. While literature offers research about personality, behavior, and core beliefs of Generation Z, there is no explicit research on how a physical retail experience needs to be designed in order to meet expectations of the cohort. At the same time, retailers admit that they don’t understand what matters most to shoppers. Today, Consumer Experience is a key element and essential differentiator but is characterized by high complexity. Therefore, the objective and topic of this thesis is to evaluate key success factors in consumer experience required by brick-and-mortar in order to successfully attract Generation Z.
The hypotheses of this master thesis deals with the ever changing expectations on the physical retail space and the in-store shopping experience. Growing up as digital natives and being confronted with an overload of digital and virtual connections, Generation Z starts appreciating the physical world and face-to-face communication and interaction.
H 1: G eneration Z is shopping in-store because of the social and human interaction and the multi-sensory experience.
Driven by rapid innovations and technology, Generation Z accesses data and information online wherever and whenever they want. Receiving information on- demand, the new Generation expects to be served with information and recommendations based on predictive services that calculate their needs based on consumer data. Therefore, the second hypothesis deals with the importance of in-store technology.
H 2: R eal-time data is essential to drive a positive in-store customer experience in brick-and-mortar stores, because it supports a personalized experience.
Besides information tailored to Gen Zers needs and expectations, the cohort is highly demanding of unique experiences and is looking for a deep meaning and purpose. Generation Z is looking for opportunities to co-create an experience that is uniquely their own.
H 3: T he in-store experience needs to go beyond the product itself, in order to become meaningful and valuable.
Based on research founded on Generation Z’s consumer behavior, personal traits and values and the importance of an engaging in-store experience is outstanding. So far there are no explicit findings that offer knowledge about how the physical experience should be designed in order to meet Gen Zers expectations. Based on the available information about Generation Z, qualitative research will be conducted to confirm and to innovate. With the help of an exploratory approach, the objective is to examine key aspects that, according to expert opinion, create and enrich the consumer experience in the physical space in order to meet expectations of the cohort.
The explorative research explores the topic of research in different levels of depth but leaves space for further researches. The approach does not intend to provide conclusive evidence to the research question (Singh 2007; Sandhusen 2008).
The format of physical retail spaces, also known as brick-and-mortar, include department stores, boutique stores and specialty stores. Further Varley and Rafiq (2004, 39) add supermarkets, hypermarkets, convenience stores, factory and discount outlets to the list. Brick-and-mortar stores can further be divided into single-brand or multi-brand retailers and can be run by individual shop-owners and brands, larger chains or through franchise models (Dawson et al. 2004; Diamond 2006; Levy/Weitz 2012).
In order to come up with more specific and valuable recommendations on an approach that can be taken to improve the experience between the retailer and the consumer, the following work will be zeroing in on single brand retailers that are run by the brand itself. Further the work will focus on the fashion retail industry, as research, conducted by IBM (2017), identifies the sector as the most important for Generation Z. While spending most of their money on shoes and clothes, the cohort influences over 60 percent of the family spend in this retail segment (Magana 2018).
Since the work deals with the explanation of environmental influences on individuals, the considerations are based on the stimulus-organism-response paradigm of Mehrabian and Russell (1974). According to this, external environmental stimuli (S) that affect an individual cause emotional reactions in the organism (O), which in turn trigger certain behavior or behavioral changes (R) (Mehrabian/Russell 1974). The effect on organism always has a subjective component. In the development of emotional reactions as a result of external stimulation, the personality of the individual plays a moderating role (Hoffmann/Akbar 2016, 157f.).
As the following explorative research deals with the study of stimuli in the retail environment that influence the perception of the customer experience of Generation Z, the the investigation of this work is to be classified between the S and the O range. Therefore the in-store design stimuli, prior in chapter 2.2.4 defined as service elements as well as a multi sensory atmosphere are classified as stimuli in the S range and present the independent variables.
The perception of the experience, on the other hand, is the dependent variable and takes place on the emotional level of the customer, in the O-range. Here also personal preferences and taste need to be considered, which are suspected as possible moderation variables. The R-range of the concept plays no further role in the investigations. Though service experience and atmosphere can demonstrably cause behavioristic reactions among consumers, this correlation is not the subject of this investigation. This only clarifies the relevance of the research question for the retail practice.
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Figure 4: Classification of the research concept into the frame of reference of the SOR model, (Own representation based on Mehrabian and Russell 1974)
In order to review and extend the findings of the literature review, qualitative research in form of expert interviews will be conducted (Gläser/Laudel 2010; Scholl 2015). An expert is a person who has clear and retrievable information in a particular area (Meuser/Nagel 1991; Mayer 2013). In addition, the definition of an expert depends on the particular research question as well as the field of action of the person (Helfferich 2011, 163).
For this work, nine experts from the retail sector as well as the research and consulting industry are interviewed on the phone about the shift in consumer behavior of Generation Z and the resulting expectations and implementations for brick-and-mortar retailer. All answers were recorded and anonymised with the informed consent of all experts.
The designed interview is semi-structured and guided. Therefore it is based on a pre-designed script but enables the interviewer to modify and adapt questions as well as interact with the interview partner (Eriksson/Kovalainen 2015, 91f.). Furthermore the script consists of open-ended questions, which are designed in order to collect a large amount of content and allowing the respondents to contribute their knowledge and express their viewpoints (Gall/Gall/Borg 2003)
In order to come up with more specific recommendations, the interview has been segmented, following the Consumer Experience Model by Eight Inc. shown in Figure 4. Designing consumer experiences, the Design Studio approaches and considers the four experience realms of Environments, Communications, Products as well as Services and Behavior. Based on the values of the brand, these realms must be developed to work in concert to deliver a successful holistic experience. Important is to put the customer at the centre of every decision in order to develop an integrated brand experience based on customer need, states and building the foundation to a new and more meaningful relationship (Eight Inc 2018).
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Figure 5: Customer Experience Model (Own representation based on Eight Inc. 2018)
As a basis for the interviews conducted, a key questionnaire has been developed that underpins the interview with the help of open questions in each segment of the Experience Model. It should serve as a guideline in the phone interviews and ensure that all important aspects of the research question are covered. Hence, nothing is overlooked (Mayer 2013, 37). It consists of five sections and is listed in full in Appendix 1.
- Section A: Information about the Expert
- Section B: Generation Z
- Section C: Excellent Consumer Experience
- Section D: Pillars of Designing Consumer Experience
- Section E: Future Prospect of the brick-and-mortar industry
The questionnaires were sent to the experts in advance in order to get an idea of the content of the survey prior the phone interview. The survey will be recorded for the purpose of later analysis with the consent of the experts. The duration of the interviews was between 30 and 40 minutes. All interviews will then be transcribed and can be found in Appendix 2-10.
The following qualitative content analysis should summarize the most important findings of the expert interviews. Here, the expert interviews are treated as raw data, from which information is extracted by so-called extraction, "[...] which is relevant for answering the research question" (Gläser/Laudel 2010, 199f.). The search grid in this case is structured according to the individual questions listed in the key questionnaire regarding the research question.
Expert VIII determines the cohorts birth year around the turn of the century between 1998 and 2001 (Appendix 8, EO_10_02 02:25) which gets confirmed by Expert II who describes Generation Z as young adults in their early 20’s (Appendix 3, CB_09_19 01:39). The Cohort is described by all experts as a generation that grew up in the digital age which is why they are completely immersed in digital (Appendix 5, JF_09_20 01:49, Appendix 7, EK_09_19 03:57, Appendix 10, CE_10_03 01:03). Further Expert IV describes them not as only digital but also as a “mobile first” and as a highly socially driven generation (Appendix 5, JF_09_20 01:49). Expert III sees the mobile first characteristic as the consequence of their need and desire to always remain connected and to communicate with each other (Appendix 4, BR_09_18 02:06). Even though Generation Z is highly online orientated, the experts recognize a high demand for offline connections and social interactions with people and communities (Appendix 2, MM_09_19 08:03, Appendix 3, CB_09_19 03:36, Appendix 4, BR_09_18 02:06, Appendix 5, JF_09_20 03:05, Appendix 6, SL_09_20 04:56). Expert V outlines that different from previous Generations, Gen Zers “build up affinity communities through shared interests through social media and different digital channels” (Appendix 6, SL_09_19 03:56). But starting a connection online, Generation Z is driven by the desire to engage with people and to experience physical places (Appendix 6, SL_09_19 04:56).
Expert III states that Generation Zers compared to Millennials, are more social-, environmental-, and economical consciousness. and have high expectations towards companies from a social, cultural and economic standpoint (Appendix 4, BR_09_18 01:19). Respondent II and V add that, besides raising environmental concerns, sustainability, and authenticity of a business and brand are important factors for the cohort. Further, they lack trust in big brands. For Gen Zers ethical brand values and transparency about products and business operations are crucial for this customer segment (Appendix 3, CB_09_19 02:49, Appendix 6, SL_09_19 11:45). Those characteristics also get confirmed by Expert IV who mentions the high importance and interest of creating a purpose and making a change in the world. In addition, the Expert describes members of Generation Z as fast moving and unique individuals, who forge their own paths and do not want to be categorized in any ways (Appendix 5, JF_09_20 02:21).
In terms of their spendings, experts note that the cohort is price sensitive due to their young age. Once they entered the workforce age, their disposable income will raise, and they will become a crucial customer segment (Appendix 3, CB_09_19 02:30, Appendix 8, EO_10_02 01:51)
In terms of their spendings, experts note that the cohort is price sensitive due to their young age. Once they entered the workforce age their disposable income will raise and they will become a crucial customer segment (Appendix 3, CB_09_19 02:30, Appendix 8, EO_10_02 01:51)
Generation ZShopping Behavior
Generation Z gets highly influenced by what they see and discover online. This cohort is more likely than any other cohort to convert based on what they have seen on social media channels (Appendix 5, JF_09_20 03:40, Appendix 8, EO_10_02 02:25). Browsing online connects Generation Z to their communities and influencers. Those online connections are highly instrumental when it comes to shaping the cohort’s attitudes and buying habits both online and offline (Appendix 5, JF_09_20 05:13). Expert III adds that Gen Zers certainly research information and engage with brands on online and social media platforms but, they also love the in-store and multi-sensory experience of shopping (Appendix 4, BR_09_18 03:46).
All experts agree that Generation Z appreciates the convenience, speed, and practicability of online shopping. However, eight out of nine experts point out that the cohort prefers the experience of shopping in a physical brick-and-mortar space over e-commerce (Appendix 2, MM_09_19 02:51, Appendix 3, CB_09_19 03:24, Appendix 4, BR_09_18 03:46, Appendix 5, JF_09_20 04:21, Appendix 6, SL_09_19 07:22, Appendix 7, EK_09_19 02:58, Appendix 9, SS_10_03 04:52, Appendix 10, CE_10_03 02:36). Growing up in a digital world and “touching glass for living” (Appendix 7, EK_09_19 03:57), the cohort finds it a novelty to go to a store, having an multi-sensory experience, being in lifestyle centers, and in a place for social interaction (Appendix 3, CB_09_19 03:36, Appendix 7, EK_09_19 03:57, Appendix 10, CE_10_03 02:36). The biggest key differentiator in the in-store shopping experience is the human factor. The human touch point is becoming rarer and rarer in an ever more digital world, and therefore it becomes more and more valuable (Appendix 6, SL_09_19 07:22).
Shopping in brick-and-mortar offers the opportunity for deeper human connections and relations, more human engagement, and instant gratification. Moreover, different to shopping online, all senses can be triggered in the physical space (Appendix 3, CB_09_19 05:33). Expert V outlines and illustrate the added value to the customer’s journey. Through human and emotional touch points like speaking to someone, getting expertise, empathy, warmth, and being welcomed satisfies the basic human needs (Appendix 6, SL_09_19 07:55). Further, Generation Z is craving offline experiences, and want to be part of something that is unique in the moment and that can be documented and shared online (Appendix 5, JF_09_20 05:13). Also Expert V observed the massive desire for experiences supersedes in value over purchasing products. Social Media in addition helps to shape and share the experience (Appendix 6, SL_09_19 05:46). The importance of a physical touch point of a brand and the shopping experience also gets outlined by Expert VIII. Designing human experiences, the Expert helps an increasing number of online- only retailers to transfer their digital business into physical spaces, in order to meet Gen Zers expectations of multisensory experiences (Appendix 9, SS_10_03 04:52).
Looking on both digital and offline shopping, experts state clearly that both should not be seen as separate channels. Generation Z is the first cohort who sees them very interconnected, operating seamlessly, and working in concert side by side (Appendix 5, JF_09_20 06:14, Appendix 9, SS_10_03 04:52). Expert III adds that the Generation expects to switch between channels seamlessly at any time and on demand. Therefore, retailers are facing the challenge to remove friction points between online and offline in order to ensure a flexible and smooth experiences across channels (Appendix 4, BR_09_18 02:47). A key challenge is also seen in frictionless shopping on mobile devices. Expert VI describes a lack of standard frictionless, mobile payment options, and calls for an industry standard. While QR Codes support an easy interaction, the tool has not caught on in the United States yet (Appendix 7, EK_09_19 05:41).
Excellent Consumer Experience
When asked what an excellent consumer experience defines, the service and hospitality aspect was highlighted. Respondents described the service as a concierge level of service (Appendix 3, CB_09_19 08:05, Appendix 7, EK_09_19 07:15 07:57, Appendix 9, SS_10_03 05:45). They described an experience where they got welcomed in the store and were handed a glass of wine and locally grown grapes. (Appendix 9, SS_10_03 06:40), Or, were offered an espresso or ice tea, while they tried on different products (Appendix 6, SL_09_19 13:38, Appendix 7, EK_09_19 10:35). The atmosphere was described as very comfortable and casual which did not make them feel pressured to make a purchase. In Expert II’s point of view, it should not be differentiated between hospitality and retail. Since both sectors are blurring, they should be seen as one in the same (Appendix 3, CB_09_19 09:31).
Another factor that enriches an excellent in-store experience are well-trained and friendly Sales Associates. (Appendix 7, EK_09_19 07:15, Appendix 8, EO_10_02 06:42, Appendix 9, SS_10_03 06:40, Appendix 10, CE_10_03 05:18). Being welcomed with a smile and having a pleasant interaction will make customers want to come back to the business (Appendix 7, EK_09_19 07:15). Experts described the immersive knowledge that sales associates had not only about the product but, also about the production and the heritage of the product. Also, the smooth interaction and the encouragement to try things out were highly appreciated (Appendix 7, EK_09_19 07:57, Appendix 8, EO_10_02 06:42, Appendix 10, CE_10_03 05:18).
In addition, Expert III and VI highlight the aspect of storytelling around the product and the brand identity in-store. While Away is a retailer that sells luggages and travel accessories, the whole store concept focuses on the travel experience. The retailer is looking at how life is an adventure and how the customer’s life can be enhanced by using Away products (Appendix 4, BR_09_18 06:38). Another example that the experts mentions is a company called “Story”. With the curation of rotating shopping experiences, the space features different themes and stories every few months. Editorial story telling excites customers and curates’ unique experiences for customers to discover (Appendix 4, BR_09_18 06:38). Likewise, Expert VI describes the importance of storytelling. Featuring the story around the product and information about the culture of the village where the product was grown as well as the heritage of the good, adds great value to the in-store experience (Appendix 7, EK_09_19 08:43).
An excellent consumer experience in the physical space also gets shaped through an interactive and multi-sensory environment. Therefore, a brand Nike is used by experts as an example. Nike is more than just a place for transactions. People go there to hang out, a DJ is playing music, customers can try the latest sneakers in a basketball court or try out different sports. Besides creating a place for the community, the brand hosts unique events with sport icons and makes sure there is always something new to discover in the store that the audience wants to share on social media (Appendix 5, JF_09_20 08:11, Appendix 10, CE_10_03 08:05). However Expert VII states that the in-store experience not only needs to be multi- sensory but also fun and enjoyable for the consumer (Appendix 8, EO_10_02 07:43).
Another aspect that is mentioned by experts when it comes to an excellent in-store experience, is the local approach and the consideration of local communities. Picking up elements and notions of what the local community is about, contributes and enriches an authentic experience in the physical space. Not only the design of the space but also the sales associates shaped a very localized experience by offering local food and updating the customer about upcoming events in the store and area (Appendix 9, SS_10_03 05:45). The local approach also gets described by Expert I. “Allbirds”, a shoe retailer in New York, offers buckets with free shoelaces for customers who leave the store. The customers are invited to pick the color based on the community they live in whether it is Brooklyn or another neighborhood (Appendix 2, MM_09_19 06:45).
The in-store environment needs to be aligned with the brand, the brand image, and incorporate that with the products. Therefore, an understanding of the brand and how it is perceived and presented is of high importance (Appendix 8, EO_10_02 08:45). In order to attract Generation Z, the environment should be unique and experimental; it should not feel heavily transactional (Appendix 5, JF_09_20 09:45). it should be highly tactile and authentic and should engage all senses (Appendix 3, CB_09_19 10:08, Appendix 7, EK_09_19 11:40).
Further, considering Generation Z’s need for communities and human interactions, the store environment should invite a shared place to gather around a common theme and should invite communities (Appendix 2, MM_09_19 08:03). Expert II brings up the Apple store as an example and compares the physical store with a community center. Beside engaging with the community, the consumer should get offered classes or learning events where they can discover how to get the most out of a product (Appendix 3, CB_09_19 10:38). Another Expert adds the aspect to also attract the mobile workforce through offering wifi and coffee in the store (Appendix 4, BR_09_18 10:04). The Expert also states the importance of steering away from the legacy mindsets “to have everything stacked on top of each other” (Appendix 4, BR_09_18 09:05). A clean, curated environment with less products that are Focussed on quality and more unique assortments. Further, the environment should contain a place where the customer can get their selection custom-fit and personalized (Appendix 4, BR_09_18 09:05). Overall, the in-store environment needs to offer space for interaction that supports Generation Z to be creative (Appendix 10, CE_10_03 06:33). The overall goal is “to make a store feel like a destination that is in service of something other than the product…” (Appendix 2, MM_09_19 08:49).
The Role of Technology In-store
In order to attract Generation Z, technology needs to be completely integrated and invisible in the in-store environment (Appendix 3, CB_09_19 11:44, Appendix 4, BR_09_18 11:32, Appendix 5, JF_09_20 10:59, Appendix 9, SS_10_03 08:33). Further, it needs to be very intuitive and should never feel intrusive (Appendix 9, SS_10_03 08:33). Retailers should not use technology for the sake of using technology (Appendix 3, CB_09_19 11:47). Technology needs to support the customer experience and should make their shopping experience even more interesting, fun, relevant and practical (Appendix 2, MM_09_19 09:33, Appendix 3, CB_09_19 11:47, Appendix 8, EO_10_02 10:37).
Growing up with technology, Generation Z expects technology to work and expect the retailer to understand their needs (Appendix 7, EK_09_19 14:14). The cohort does not get excited about fancy and gimmick technology gadgets like magic mirrors, AI or VR (Appendix 2, MM_09_19 09:33, Appendix 4, BR_09_18 11:03, Appendix 5, JF_09_20 10:59). Further Expert VI states that “lots of technologies are being talked about, but very few are truly useful” (Appendix 7, EK_09_19 15:00)
In order to attract Gen Zers, technology has to add direct value, remove friction points and should enhance a seamless experience (Appendix 4, BR_09_18 11:03). Experts remark the convince and practical factor of technology in the brick- and-mortar space. Technology can help to make processes more efficient and quicker (Appendix 2, MM_09_19 10:21, Appendix 3, CB_09_19 12:22, Appendix 8, EO_10_02 10:37, 11:56). One Expert mentions the example of his experience at a shoe retailer. Equipped with an iPod, the Sales Associate was able to provide all information on demand and could get the shoes from the back of house with out leaving the customer. The Expert highlighted the speed and easiness of the process and interaction (Appendix 3, CB_09_19 12:22).
Expert I, II and IV note that technology can support an easier and faster checkout and payment (Appendix 2, MM_09_19 10:21, Appendix 3, CB_09_19 12:58, Appendix 5, JF_09_20 11:56). Generation Z is looking forward the ability to check out directly with a technically equipped sales associate, so that they do not need to line up and wait in a long queue. Moreover, the integration of a mobile application can add value to Generation Z’s shopping experience and checkout process. While browsing in-store, the item’s barcode can be scanned and saved in a digital basket. Check out can be done with preferred payment methods which are already saved in the application (Appendix 5, JF_09_20 11:56).
How a seamless experience can be created between digital and physical is also illustrated by Expert VI. He sees a branded mobile app as powerful tool to enrich and enhance the customers experience inside brick-and-mortar stores. With an app the consumer can get more information and exclusive sale offers by scanning the barcode. Further an app can help the navigation through a store. With an integrated list of articles, the customer is looking for, the app can help to find products quicker and easier (Appendix 7, EK_09_19 13:32).
Technology and Sales Associate
Experts state that Sales Associates are able to provide a better and personalized experience, when they are digitally equipped and enabled to access the right information (Appendix 4, BR_09_18 13:51, Appendix 5, JF_09_20 12:47, Appendix 6, SL_09_19 16:28, Appendix 8, EO_10_02 12:22, Appendix 9, SS_10_03 11:08). The ability to access a customer’s e-commerce profile allows a Sales Associate to make tailored recommendation based on the client’s purchase history and preferences (Appendix 3, CB_09_19, Appendix 4, BR_09_18 13:51, Appendix 5, JF_09_20 14:19). Moreover, the sales associate can continue the customer’s journey instead of restarting it. Shoppers browse, discover, and select online but like to experience products in-store. So rather than asking the open- ended question “how can I help you?”, the staff already nows what the customer is looking for and can provide information or get the product immediately (Appendix 5, JF_09_20 18:23).
Digitally equipped staff can also access detailed information about the product including availability, sizes, colors, information about the production and the story about the product but, also complimentary items. This information can be delivered to the customer quickly and on demand (Appendix 2, MM_09_19 12:25, Appendix 5, JF_09_20 13:36, Appendix 8, EO_10_02 11:31).
Accessing customers information also enables the Sales Associate to identify the customer, greet them personally, and thank for their loyalty (Appendix 4, BR_09_18, 13:51). Being able to give the customer the feeling, that he is known is a very powerful tool and makes them feel to be part of a “larger family” (Appendix 2, MM_09_19, 15:13). Based on personal information the sales associate can also help to customize and personalize a product and can also assist the customer as a knowledgeable personal shopper. The expert also sees the trend of converting measurements into a database, so that the consumer is able to render personalized products on the retailers website. Following the trend, high potential is seen in brick-and-mortar to become a starting point for e-commerce transactions (Appendix 7, EK_09_19 21:58).
While technology helps to make processes more efficient, it gives Store associates more time to engage with customers. In the downtown time digital devices can help store employees to do research, educate, learn and continuously evolve to become a brand ambassador (Appendix 4, BR_09_18 11:59, Appendix 8, EO_10_02 12:54)
With the option to directly order non-available products through the device, Generation Z’s need for instant gratification, speed and immediacy can be satisfied (Appendix 5, JF_09_20 13:36). Expert III adds that in that way a retailer can convert the customer in-store instead of losing him and his loyalty (Appendix 4, BR_09_18 14:43). Being equipped with a handheld device, the sales associate is also able to close transactions by offering a fast checkout right on the spot (Appendix 5, JF_09_20 14:56, Appendix 4, BR_09_18 14:39).
A Expert remarks, that the use of data needs to be smart and responsible and should never be done in an intrusive way (Appendix 5, JF_09_20 14:19). Furthermore, Expert VI states that customers are very sensitive about their data and privacy, therefore it is of high importance to approach them in the right and respectful way. He see’s the challenge in the future in how consumers can be incentivized and made comfortable about receiving a tailored experience based on their personal insights (Appendix 7, EK_09_19, 17:23).
People and Behavior
The Role of a Sales Associate in the Future
The Role of the Sales Associate in the Future will evolve and will become more complex. The role needs to shift from a transaction-driven employee towards a hospitality-driven Brand and Consumer advocate (Appendix 7, EK_09_19 18:09). Consumers expect the sales associate to become a storyteller, a solutionist, a consultant, and also a knowledgeable brand expert and advisor (Appendix 3, CB_09_19 16:07, Appendix 5, JF_09_20 15:52, Appendix 7, EK_09_19 18:09, Appendix 10, CE_10_03 11:15). The role in the future puts the sales associates in the middle ground and the key gate keeper between brand and the customer (Appendix 2, MM_09_19 13:46, Appendix 10, CE_10_03 11:15).
Beyond the listed roles, the Sales Associated needs to be an experience host that treats the customer as a guest in their space and provides a “more human level of value” (Appendix 6, SL_09_19). If the customer is facing a new service model or new in-store experience, the experience host is able to guide the customer, manage the customer journey and help to build relationships (Appendix 6, SL_09_19 19:53).
Expert IV sees the role also shifting towards the role of an influencer. With technology that enables them to run an own profile with personal picks of the week or month, they can become a key component of engagement and authentic influencer of the customers taste (Appendix 5, JF_09_20 16:39).
With the role of a sales associate becoming increasingly critical, it also becomes a key differentiator in brick-and-mortar (Appendix 4, BR_09_18 12:58). Therefore retailers need to empower, educate, train and incentives their store employees (Appendix 4, BR_09_18 12:58, Appendix 6, SL_09_19 17:41, Appendix 10, CE_10_03 11:15). Moreover, the employee experience plays a crucial role. Expert V states the importance of intrinsic motivated Sales Associates that love the brand, believe in its value and vision, and wants to associate themselves with the brand. If the sales person motivated, trained and incentivized the right way, they will service their customers incredibly well (Appendix 6, SL_09_19 17:41).
Service and Products
Services and Programming that incentivizes Generation Z
Generation Z is attracted by events, that feel unique, exclusive but are also purpose driven and help to connect with the community (Appendix 3, CB_09_19 18:19, Appendix 4, BR_09_18 15:17, Appendix 5, JF_09_20 20:13, Appendix 6, SL_09_19 24:36). Therefore, the events need to be more than just about the product (Appendix 3, CB_09_19 19:14, Appendix 4, BR_09_18 15:17, Appendix 9, SS_10_03 14:18).
Gen Zers have a thirst and desire for information as well as for self-improvement. Therefore learning events and learning experiences are highly valuable for the cohort (Appendix 4, BR_09_18 15:17, Appendix 6, SL_09_19 24:36, Appendix 7, EK_09_19 26:15). Important is, that the learning event is align with the brand’s core services and values. For instance, a financial provider that identified the struggle of his customer’s financial behavior can add value by organizing a learning event with a private financial coach. At same time, a music event held by a financial institution does not benefit the customer and would not be successful in order to attract Gen Zers (Appendix 6, SL_09_19 24:36). In addition, Expert VII provides the example of a shoe retailer that offers small workshops on how to care for their shoes. Those events add to the bottom line of a company and they also increase the level of credibility from an expertise standpoint (Appendix 8, EO_10_02 16:42).
In addition, Generation Z’s attention can be won through exclusivity. This can be generated through a limited offering or limited access to a product (Appendix 4, BR_09_18 15:17, Appendix 5, JF_09_20 20:13). The cohort is not only attracted by the unique feeling of possessing a limited product, they also see the strong resell value (Appendix 5, JF_09_20 21:01).
Exclusive events such as appearances by influencing personalities or exclusive product launches, where only an insider may have access to, are further appealing to the young Generation (Appendix 10, CE_10_03 14:38).
Expert V further describes the success of events when they have a local approach to the community. Those events are set up in order to support a certain community, that relates to the heritage and tradition of the brand or city. Therefore the expert describes the example of luxury fashion house Burberry, a British heritage brand. Considering the country’s history of being a major source and producer of musical creation, the fashion brand connects with young Brits and supports up and coming musicians. Knowing the interests of their audience and with the focus on the next generation of superstars, the company hosts special events to help launch the musician’s records (Appendix 6, SL_09_19 22:24).
Besides well thought out programming, a visit to the physical space attracts Generation Z when they know that there are incentives, such as free samples (Appendix 8, EO_10_02 15:35, Appendix 10, CE_10_03 14:38). Expert VII mentions the cosmetic “Lush” as an example. Whenever a customer checks out, they are offered free samples. The customer can choose from a wide array of products and can take as many as he/she wants, as Lush does not limit the number of free samples (Appendix 8, EO_10_02 15:54).
Unique programming and services enable Generation Z to co-create their experience in two ways. On the one side the customer is able to customize and personalize the product, on the other side the cohort co-creates their experience through the documentation and sharing of the event on their social media platforms. Being part of an event and to be able to share it, becomes social currency (Appendix 2, MM_09_19 17:39)
As the success and acceptance of loyalty cards and programs are significantly decreasing, high potential is seen in a brand membership model that offers access as a reward (Appendix 6, SL_09_19 25:42). Giving a customer exclusive access in exchange for their loyalty, can also satisfy their demand for unique experiences, that other people can not have. Through the retailer’s point of view, a unique membership program gives them the chance to collect customer data and information (Appendix 6, SL_09_19, 25:42). People seek a tailored and individual experience and do not want to buy mass produced goods. Therefore, a brand membership program that rewards customers with the access to customization or limited configuration tools, can be highly effective in motivating the customer to join the program (Appendix 9, SS_10_03 17:53). Expert III sees also the chance in taking the relationship between customer and brand to another level by giving them access to exclusive and community-based events (Appendix 4, BR_09_18 16:02).
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