Should companies use gift cards in a rewards program?

It’s the billion-dollar sector that sees hundreds of thousands of businesses around Australia investing millions into each year. Now, gift cards, used as rewards in rewards programs have been found to often leave a bad taste in recipient’s mouths.

A Melbourne University survey found corporate businesses were spending an estimate of $329 million on gift cards annually, yet it was revealed by Fair Trading that 20% of gift cards remain in drawers never to be used. The report by Fair Trading found 89% of gift card receivers have experienced an issue when trying to redeem them, with 79% of the end-users admitting to becoming frustrated after the gift card unexpectedly expired.

Now, the findings have raised the question, are gift cards the best option for your business’ program? Are gift cards the best option for your business? Well, gift cards are easy to source, cost-effective to deliver or mail out and some of your members find them somewhat convenient.

However, a rewards program’s primary objective is to provide your customers with a positive and emotional connection to your business and its brands. Although gift cards are easy, they are not necessarily a positive experience and do not often create the emotional connection you are trying to achieve. They are often lost, forgotten or expire before your customers have a chance to use them.

With the explosion of online shopping and home delivery, there has been a sustainable reduction in the cost of distribution of physical items. With 20% of your gift cards potentially unredeemed, it begs the question as to whether the unspent card balances you have invested in to reward customers, could be used to enhance your program in other ways. What are the alternatives?

When a customer has supported your business enough to earn a reward, they are clearly important to your business. If these customers are important to your business shouldn’t you make them feel important? Who can forget the thrill of ripping the packaging off a well-thought-out gift on Christmas morning? Shouldn’t you be aiming to deliver that same sense of excitement when you reward your important customers? And I hear you say, “What can you expect for $50 – it’s hard to make a silk purse out of a sow’s ear”.

True, $50 may not go a long way but we have seen school canteen conveners shriek with delight when they received a tea towel. We even know a managing director of a $1 billion company that loves the fact that every computer printer in his office was provided to him as a reward from a supplier’s loyalty program. The key to rewarding your customers and creating that emotional link to your business and brands is providing something well-thought out. Remember, it’s not about the value or size; it’s about the relevance of the reward to your customer.

A reward, such as a personal gift, or a dinner or a weekend away, creates a lasting positive memory that attaches them to your company or brand. Quite often gift cards, when redeemed, are used to purchase household items or fuel, which are often not remembered. If you are now considering whether you should incorporate some physical gifts and experiences, alongside your gift cards as part of your rewards program, then here are some tips:

1. Relevance is the key. Think about your customer and try and determine what they would really want to receive.
2. Provide a variety and test to see what is redeemed most frequently.
3. Review what your competitors are doing. If they are only offering gift cards, then physical gifts and experiences could provide you with a unique point of difference.
4. Keep all rewards up-to-date with new on-trend items.
5. Leave a little in the budget for surprises to reward those most valuable customers, unexpectedly.