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You are familiar with gift cards, and you may be considering offering them to customers. But you may have also heard about ‘Rewards,’ ‘Stored Value,’ and ‘Wallet.’ What do these terms mean? How do they relate to gift cards and loyalty? What value do they bring to your customers? And how can they benefit your business? In this post, we’ll define each, and list a few of the advantages.
Gift cards are everywhere. They can be offered with a fixed value/denomination, or they can be loaded up with whatever amount the purchaser wants to add. And of course, giving a physical plastic card isn’t the only way to give a gift card. You can also send an electronic card. An e-card costs less to implement, and many merchants are adopting an e-version of their gift/rewards program as an alternative or supplement to a physical card. However, for gift giving, many consumers still like to give a tangible card.
Often, gift cards are given as a true gift, and the recipient can spend the funds on whatever goods or services they want. But gift card use goes far beyond gifting. Some merchants use them as a promotional item at events; as a token of appreciation; or as a way to make amends and apologize when something doesn’t go quite right. Some consumers use them as a payment or budgeting tool. For example, they may use a gift card to allocate a certain amount in their budget toward coffee. Or they may give one to their college student to buy groceries or gasoline.
People who receive a gift card typically end up spending more than the amount on the card. Gift cardholders spend up to 40% more than the amount on their gift card. When paired with stored value and a rewards program, gift cards help can turn one-time customers into repeat customers.
Gift cards that can be replenished offer what is known as stored value. The dollars associated with the card (physical card or e-card/virtual card) are stored for the user to spend. Sometimes, the ‘container’ where the stored value is held is referred to as a ‘wallet.’ ‘Wallet’ is also becoming associated with mobile apps that enable smartphone users to pay at a point-of-sale location.
Probably one of the most well-known stored value programs is the Starbucks gift card/rewards/ loyalty program. The gift card recipient or the giver can replenish the card’s value. Registering the card with Starbucks comes with perks (no pun intended).
Maybe you have a few tattered, coffee-stained business card-sized paper loyalty cards filling your wallet or purse. You know, the ones that use punches or stamps to record a purchase toward a reward. Buy nine coffee drinks, get the tenth free, or something like that.
With the advent of plastic gift cards and e-cards/virtual cards, merchants find that adding some kind of reward for purchasing, or replenishing, a gift card encourages buying behavior and promotes loyalty.
The incentive might be in the form of dollars, points toward a free or discounted item, or a significant discount on a future purchase. Examples include “Buy a gift card worth $100 or more before Black Friday and we’ll give you an extra $10 card as a stocking stuffer.” Another incentive might be “Buy two $50 gift cards – one for yourself and one for a friend – and get 15% off your next dining visit totaling $50 or more.”
Item-based Versus Value-based Rewards
Rewards can take the form of a specific item or a dollar value. An example of an item-based reward might be “Add $25 in value to your gift card, and your next 12-ounce latte is on us.” A value-based reward might be “Top off your card with $50 or more before X date and get a bonus $5, on us.”
Which works better? It depends on a number of factors. Some people respond better to item-based rewards; other customers might prefer value-based rewards. You will need to study your audience. Some rewards program vendors have all the flexibility you need to run a trial, and make changes to adapt to your audience.
One Xenial client, a multi-location quick-service restaurant, switched from item-based to value-based rewards and found that frequency of visits went up 16% for loyalty (rewards) program-enrolled customers, while these customers’ average ticket increased 25%. Their customers liked the flexibility of spending their rewards on whatever they wanted rather than receiving a pre-determined item as the reward.
Rewards programs are proven to drive frequency of visits and higher sales.
One Xenial client found that their rewards customers visit 71% more often than non-rewards customers, and they spend 63% more per customer, annually, than non-rewards customers.
Bringing it Together: Loyalty, Gift Card, Stored Value/Wallet, and Ordering in Mobile Apps
One 600-location quick service restaurant developed a custom app that is packed with incentives such as a free gift upon download and periodic coupons. The app comes with an integrated re-loadable gift card (‘stored value wallet’) that gives customers an easy way to pay. A tiered rewards program encourages larger orders. In the near future, customers will be able to place orders through the app for pickup at a nearby store.
Gift cards have become far more than a piece of plastic that is assigned a value. Tied to stored value/wallet, rewards, and even a mobile app, gift/loyalty cards and programs increase engagement and retention. Loyalty programs such as gift/stored value/rewards can give customers those warm fuzzies every time they earn rewards for patronizing your business. Often, your gift card / loyalty program members become advocates for your brand who share their positive sentiment and experiences, and that’s a good thing.