How gift cards are reshaping the landscape of loyalty programs

In today’s environment of high inflation, soaring gas prices and the threat of recession, consumers are looking to get the most out of their purchases and know where they are spending their money. This is why rewards programs are more important today than ever; merchants and businesses need the right rewards program in place to entice existing customers to keep spending and attract new customers. While there are many types of rewards programs companies can offer, data from Blackhawk Network indicates that gift card rewards are one of the most effective.

To learn more about this trend, PaymentsJournal sat down with Aimee Wright, Vice President of Strategic Relationships and Digital Commerce at Blackhawk Network, David Southwell, Head of Strategic Relationship Management at Blackhawk Network, and Brian Riley, Director of credit counseling at Mercator Advisory Group. .

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How gift cards are reshaping the landscape of loyalty programs

PaymentsLog How gift cards are reshaping the landscape of loyalty programs

Using gift cards often results in increased spending

Riley noted that consumers’ use of gift cards tends to be associated with an overall increase in spending.

Data from the recently released 2022 study by Blackhawk revealed that depending on the value of the gift card, up to 90% of gift card recipients are willing to spend more than the amount of the gift card. map. Overspending can range from around $50 for a $10 gift card to over $100 for a $500 gift card. “

*Source: Blackhawk Network EQ Global State of the Union Insights, n=2,165 US 18+, March 2022

Riley added that store-specific gift cards also offer the benefit of allowing the merchant to bypass typical interchange fees associated with using debit and credit cards.

The high degree of flexibility of gift cards also makes them attractive. Riley cited an example of flexibility: In today’s sky-high gas prices, grocery stores are offering discount gas gift cards to customers who spend a certain amount of money at the store. Gift cards can also incorporate incentives that make them appealing, Riley said.

“There is a component where consumers can get a gift for themselves by giving a gift,” Riley added. “Like an offer where if they spend $100 on a gift card, they get a $20 gift card back. For the retailer, it’s a win with two potential customers now.

What makes loyalty programs attractive

All of these reasons make gift cards an attractive reward for consumers who participate in loyalty programs. Blackhawk Network’s Aimee Wright acknowledged that “cash back has always been king in loyalty programs,” but gift cards are becoming increasingly popular. Gift cards can incentivize the consumer to spend within that merchant’s ecosystem and are also less expensive to administer than cash back programs.

“For businesses, gift cards help manage the cost of loyalty programs,” Wright said. “Cash back is the most expensive reward [for businesses], then travel and gift cards are in third place. It is therefore a much more attractive reward to offer consumers than cash back or travel. »

Southwell added that gift cards make consumers more interested in the specific brand associated with the gift card and they generally spend more time on that merchant’s website. Consumers also tend to use gift cards sooner than other rewards associated with loyalty programs. So it’s no surprise that many merchants and businesses have started to embrace gift cards.

“Loyalty programs supported by Blackhawk Network have experienced double-digit growth over the past few years,” Southwell said.

Flexible customer engagement

Gift cards can be distributed physically or digitally, which is important, especially as the COVID-19 pandemic has dramatically changed consumer behavior. When consumers were stuck inside their homes during shutdowns and couldn’t visit friends and family for birthdays, holidays and special occasions, they relied on sending digital gift cards , Wright said.

It’s important that loyalty programs are not only robust, but that rewards are delivered “in the channel that consumers want and as quickly and quickly as possible,” she added.

The gift card experience is equally critical to engaging consumers. In this regard, Wright noted that Blackhawk Network has had great success with its line of Blackhawk Originals Choice multi-brand gift cards that bring together different brands on a themed gift card. For example, a “Retail Therapy” card can be used in a variety of fashion, beauty, and home stores, and the “Happy Birthday” card offers retail, dining, and entertainment options. In addition to the traditional use of gift cards as a gift for others, research from the Blackhawk Network also underscores the idea that gift cards are increasingly being leveraged for personal use and “do-it-yourself” moments. pleasure “.

Ultimately, gift cards help businesses keep the customer more engaged with their rewards programs. Wright said that while 87% of Americans belong to at least one loyalty program, with the average consumer enrolled in six, the typical consumer only actively participates in one or two.

“Loyalty program spending is about keeping the customer in your ecosystem so you can capture that overspend while rewarding them at the same time,” Wright said. “And the more engaged the customer, the less likely they are to migrate to other competitors.”

The future of loyalty

Going forward, gift cards will form part of consumers’ digital wallets, which will also include traditional debit and credit cards as well as airline miles and cryptocurrency, Wright said, adding that this future scenario will unfold. will translate as “making money ubiquitous”.

“We’re already moving rapidly toward that reality, with 88% of consumers using some form of digital wallet,” Wright said. Additionally, “by the end of 2022, half of all digital payments will be made using non-traditional payment methods,” Wright added.

Consumers increasingly view all forms of payment as currency, and gift cards will play a key role in this new payment reality.

“We are moving into a future where consumers will use a single digital wallet where all currencies will be deposited and can be used collectively at the point of sale,” Wright said. “And the outlet may offer the option to use rewards to pay for an item.”

To learn more about the Blackhawk Network wallet and how it can support your loyalty program, click here.

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