Theresa McEndree, vice president of Marketing at Hawk Incentives, sat down with Loyalty360 to discuss how gift and incentive cards can improve brands’ loyalty programs, especially with millennials. Hawk Incentives inspires better engagement with industry-leading insights, technology, and corporate incentive solutions designed to bring out the best in a brand’s customers. The company’s solutions include consumer, employee, and sales incentives, as well as rewards that drive participation.
We’d like to know what your research is and what it means for brands working around customer loyalty.
The research was done on behalf of Blackhawk Network, and as a leader in the gift and incentive cards space, we go out to broad audiences to understand how they want to engage with cards, both on an individual consumer level and as part of corporate sponsored programs, loyalty being one of the very big categories within that. We went out to 3000 U.S. adults to understand what their perception about gift cards is and how they want to see them in their loyalty programs, in their employee rewards programs, and when they themselves shop as consumers. So really we went out to understand about gift card preferences.
Who conducted the research?
We went out through a nationally representative online panel with a third-party company, Leger.
What were you trying to find?
We went out to test a couple hypotheses. First, we really wanted to understand how digital and mobile have influenced consumer perception of gift and incentive cards. Next, we wanted to understand how the trends of personalization and relevance fit in to how people perceive gift cards. So, we took those macro-marketing trends that we see and try to understand how that connects to the rewards that people receive. We wanted to track overall preference. So, we’d ask, “How do you feel about receiving a gift card today as part of a loyalty program versus last year?” We also wanted to explore by cohort. How does your demographic influence your preference for gift and incentive cards?
How is sentiment toward gift cards changing?
We’ve seen that gift and prepaid cards are increasing in popularity. Eighty-two percent of respondents said they’d prefer to receive a gift card over other incentive options, like discounts, checks, or merchandise. The reason we’ve been seeing this trend is brands are more important than ever. When you ask people how important their favorite brands are to them, it’s up there with family, church, and state. So that’s where we see a lot of growth in attachment. So, if you’re an Apple versus an Android user, a Starbucks or a Dunkin Donuts person, those brands mean more to people today than they ever have. That’s one of the reasons we see the category growing.
Are you saying, for example, that if I’m in a Macy’s loyalty program, getting a Macy’s gift card is important? Is that for all brands?
My answer is that it depends on the individual. So, when you look at setting up a loyalty program, one of the biggest findings that we see is that choice is more important than ever. You can curate personal opinion and choice by providing a large number of gift cards with brands in your program. For example, you may love a very community-responsible brand and you might attach to that and that’s why you love a certain brand. And I might love deal-seeking and bargain hunting. So, I love TJ Maxx. What we’ve found is that with the brands on gift cards you’re able to connect with the individual’s passion and preference better than ever. I think also with cards you’re able to tap into people’s desire for experience. That’s why we’ve seen a huge shift away from merchandise. So, when you get a card you’re imagining what you’re going to buy and the experience you’re going to have with it. So, brands are achieving a greater halo effect by using cards as part of the reward experience.
How should brands use this information? Should they consider partnerships?
They should use this information when they consider the rewards for their loyalty programs. They need to make sure they’re using the best catalogue of brands that match their customer demographic, because different demographics connect with different brands. If you’re trying to attract a millennial male, they’re going to be looking at a different card assortment than a Boomer female. And it’s going to look different to the brands that are in the programs themselves. It will look different in the delivery mechanism. If you’re trying to target younger millennials, egifts or digital cards are more important and more attractive to a younger demographic than to the older, so it’s creating a deeper connection with the rewards themselves.
How is this different from what brands may be thinking?
If you look at how brands are approaching loyalty, everybody looks are personalization, relevance, segmentation, those are all the tried-and-true factors of a loyalty program. I think this research is important because it extends those principles to the rewards themselves. Really making sure that you extend that personalization into the catalogue itself and you can target your rewards in that manner as well. I don’t think it’s a different thought. I think it’s just extending personalization through to the rewards.
Is there one piece of data coming out of this research that you would recommend that brands use?
Probably the biggest, most transformative change was that now more than half the consumers surveyed report interest in digital gift cards and especially those that can be added to mobile apps or digital wallets. This over-indexes in millennials. Digital and mobile payments have been talked about for a long time. We are seeing those across the chasm as far as preference and adoption and desire are concerned. So, if you were going to add rewards to your program next year, digital and prepaid gifts would be the highlight takeaway.
Is there a concern with digital fraud?
When you’re looking for a digital rewards vendor, make sure that they have strong, broad protocols and measurements in place. With any stored value mechanism, you should always align yourself with vendors that have strong risk management.
How can brands make sure they have not only the right value propositions but also the right reward options?
They should look to their rewards vendors to help match rewards to segments and match rewards to profiles. Loyalty program managers should have some nice data on who their customers are, and a strong strategic rewards partner should be able to say, “Hey, this is what we recommend for this segment, and this is what we recommend for this segment.” We know millennials like digital. They like experience. They like community and charitable aspects, eco-friendly aspects, so a partner should be able to say, “Here’s what you should do. It should all be digital. It should all be travel. You should do this.” You should be in partnership with your rewards vendor to get that. A strong rewards partner should have the data and insights to help run programs better.
How should we be looking at measurement? How do you figure out what’s working?
So, when we work with brands, the ultimate goal with a loyalty program is retention, and you have a number of leading indicators of that. You look at how a reward engages in a loyalty platform and you case test the staircase to success in a number of ways. One is, as you promote the rewards, what response rates do you get back from emails? That’s a really good and easy way to tell what rewards connect with your audience. So, if I’m promoting brand A in an email and brand B in another, you can do a pretty solid A-B test. That’s a great way to understand how your specific audience is going to engage. Frequency of redemption. One of the great things about gift cards is that you can value them from $5 into the hundreds, and if you can create more incrementality in redemption, you will see people that are more engaged in the long run. So, if I’m part of your loyalty program and I get the awesome experience of coming in and redeeming a $5 or $10 gift card every month or two, I’m going to be more engaged in that program because of more immediate value. That’s another good way to measure loyalty.