Walmart’s Interest in TikTok Sparks Urgency to Engage Gen Z Shoppers. Here’s How to Start

Winning over Gen Z is crucial to many retailers’ plans, and the relationship between Walmart and TikTok adds a new level of urgency to the equation. The vision that Walmart CEO Doug McMillon has put forth involves making social commerce easier, such as by facilitating purchases of items that users see in TikTok videos. This goal comes full circle when you realize that 60 percent of TikTok users are Gen Zers.

Walmart is sending a clear signal about the value it sees in Gen Z. The upper end of this cohort (approximately 23 years old) is starting to join the workforce. They're gaining more income, adopting new buying habits, and prioritizing different types of purchases. Gen Z’s $150 billion in spending power is only going up.

Ultimately, Walmart’s interest in TikTok is a catalyst and critical reminder for the retail industry: Always be prospecting. Here are three factors that retail marketers should be thinking about to stay ahead of the shifting consumer landscape and engage the new generation.

Branding

Many retailers tend to concentrate on bottom-funnel tactics — and rightfully so. These activities drive conversion. While focusing on the bottom of the funnel delivers revenue in the near term, it also risks longer term declines in conversion rates because it doesn't address the top of the funnel enough to attract plenty of new shoppers.

What’s more, the lower end of the funnel is extremely competitive. Companies like Amazon.com create pressure to race to the bottom because they've cornered the market when it comes to the perception of price, convenience and customer service. In a world where most retailers can’t lower their price further or deliver products faster, how can they regain a competitive edge?

The solution is to refocus on branding and relationship building with your up-and-coming buyers. That’s Gen Z for many retailers today. Build your brand among this audience by identifying what they value and what you can uniquely provide that aligns with those values.

For instance, Gen Zers tend to turn to their social networks to make buying decisions. How can you be more outfront on social media when it comes to values that Gen Z prioritizes, like social issues and the environment?

Gen Zers are massive video consumers. How can you invest in influential and educational video content? Experience-driven brands stand to gain an advantage in building long-lasting relationships with Gen Z customers.

Targeting

The examples above are attributes that Gen Zers tend to have. As with any massive audience, it’s crucial to segment it further to provide targeted messaging, imagery and products. That said, segmentation is often a daunting task for marketers. Where should you begin and how should you define your segments?

While the answer will depend on your specific audience and goals, it’s important to realize that segmenting by basic factors like age, gender and location are table stakes. Consider a full range of factors by which you can segment, such as types of actions on your site, interactions with your brand, engagement with your ads, lifestyles, and interests.

Not all these attributes will matter to your business or be available to you. However, once you collect the data that's at your disposal, there are few steps to take. First, estimate the size of each segment. The audience must be large enough to optimize with statistical significance, yet small enough so you can provide relevant messaging.

In addition, evaluate each group’s value. Which segments are driving more traffic and converting better? Which ones have better lifetime value? These are key questions to answer so that you can allocate budget appropriately to each segment. In addition, if budget constraints arise, you'll know where to reduce spend first.

Thirdly, understand where the most valuable segments go online. What types of platforms attract them? When new platforms emerge (such as TikTok), you'll be able to evaluate if it’s a place where your core customer segments will flock. If a new platform deserves your investment, be sure to extend consistent targeting and messaging to each group on that platform.

Testing

Most retailers build testing into their planning process and budget for the year. It’s also one of the first line items to be cut or reduced for that spur-of-the-moment ask from an executive or a reforecasting exercise.

Yet having an always-on testing budget is key to staying ahead of shifting customer behavior. It should be a must have, not a nice to have. Continuous testing lets you learn about your audience proactively, rather than falling into a state of complacency where you’re targeting the same group over and over because it’s working now. That group’s behaviors and preferences will undoubtedly change and you will be left guessing how to market to the next wave of customers.

Keep a few best practices in mind when developing your testing strategy. First, have a clear vision of the multiple versions of creative and messaging you plan to test, as well as a curated set of products for each audience segment.

Ensure there's a plan for reporting and measurement. Performance must be clear so your team can quickly and easily make decisions on which is the best version of messaging. Continue to test. Regularly communicate results and learnings to leadership.

With a thoughtful plan for the day-to-day execution and clear reporting and measurement, you'll be armed with the data you need to make the case for an always-on testing budget.

Any retailer’s target audience doesn't remain stagnant. A new generation of shoppers is always moving into view. Right now, Gen Z is precisely that up-and-coming audience for many retailers. However, that’s not all. There's another generation that will come after that, and so on. Retailers must always engage their current core customer base, as well as prepare for and prospect the next round of shoppers.

Mike Farrell is senior director of integrated digital strategy for Sidecar, a performance marketing technology company.