Jul 18, 2022

Rewards Earn Loyalty, and Loyalty Earns Rewards

Rewards programs have always been important to shoppers. But today, with inflation, surging gas prices and a possible recession, they’re more critical than ever. People are determined to get more out of every purchase and be more careful with every dollar. And retailers need to understand that.

With rewards and loyalty programs, shoppers get more for their money and businesses have a tool that helps them meet all kinds of objectives, from attracting new customers to increasing basket size to bringing in additional revenue. Businesses only need to put together the right rewards program and deliver the right rewards-gift cards.

To get the latest on loyalty and rewards, PaymentsJournal talked to Aimee Wright, Blackhawk Network VP of Strategic Relations, Loyalty & Digital Commerce; David Southwell, Blackhawk Network Head of Strategic Relationship Management; and Brian Riley, Mercator Advisory Group Director of the Credit Advisory Service.

One business benefit of gift cards-increased spending

As brought up by Riley, gift card use tends to be associated with increased spending overall. Depending on the gift card value, up to 90% of gift card recipients are willing to spend more than the amount on the card, according to the latest Blackhawk Network research. And overspend can range anywhere from around $50 for a $10 gift card to more than $100 for a $500 gift card. “There’s a real benefit to the merchant,” Riley added.

Store-specific gift cards, Riley continued, also provide the benefit of allowing the merchant to bypass the typical interchange fees associated with debit and credit card use.

Another benefit of gift cards is their flexibility. Riley discussed the current environment of sky-high gas prices and how grocery stores are offering discounted gas gift cards to customers who spend a minimum amount at the store.

“There’s a component where consumers can get a gift for themselves as they give a gift,” Riley added, bringing up the increasingly popular self-usage of gift cards. “They may spend $100 on a gift card and get a $20 gift card back. For the retailer, that’s a win with two potential customers now.” Of course, when both customers overspend the card value, that’s a bigger win.

The real attraction of loyalty programs

Because of all the reasons above-and many more-gift cards are an attractive reward for consumers participating in loyalty programs. Blackhawk Network’s Wright pointed out how “cash back has always been king in the realm of loyalty programs,” but now, gift cards are taking over that mantle. For merchants, gift cards not only invite shoppers to spend within their ecosystem, they also cost less than cash back programs to manage.

“For businesses, gift cards help manage the cost of loyalty programs,” Wright said. “Cash back is the most expensive reward for businesses, then travel, then gift cards. So, it’s a much more appealing reward to give consumers than cash back or travel.”

Gift cards make consumers more engaged with a specific brand, Southwell added, and they usually spend more time on that merchant’s website. Consumers also tend to spend their gift cards more quickly than other rewards. It’s no surprise then that many merchants and businesses have begun to embrace gift cards.

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

Engaging more customers longer

With the drastic shifts in consumer behavior as a result of the COVID-19 pandemic, it helps that gift cards can be distributed physically or digitally. When people were stuck in their homes during lockdowns-not able to visit friends and family for birthdays, holidays and special occasions-use of digital gift cards soared, Wright said.

Loyalty programs need to be robust, of course, but it’s also important that rewards are delivered “in whatever channel consumers want and as timely and as fast as possible,” she added.

Customer engagement is always a priority, and the gift card user experience fits right in. In that regard, Wright noted that Blackhawk Network has seen great success with its line of Blackhawk Originals, like its Choice multi-brand gift cards that bring different brands together onto one themed card. For example, the “Retail Therapy” card can be used at a variety of fashion, beauty and home stores, and the “Happy Birthday” card offers retail, restaurant and entertainment options.

As mentioned earlier, the increase in self-use also increases engagement; Blackhawk Network research shows gift cards are being purchased more and more for personal use and “treat yourself” moments.

Simply put, gift cards are keeping customers more engaged in their rewards programs. Wright stated how 87% of Americans belong to at least one loyalty program and the average consumer is enrolled in six. The typical consumer, however, only actively participates in one or two of these programs.

“Loyalty program spending is all 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 is, the less likely they are to migrate to other competitors.”

Gift cards used as payment vehicles

Thanks to today’s digital-focused consumers (and new payment technologies), gift cards are already showing up as payment options in digital wallets, right next to traditional debit and credit cards, airline miles and cryptocurrency, Wright said. And these nontraditional payment methods are growing quickly.

“We are already rapidly moving toward this reality,” Wright said, “with 88% of consumers using some form of digital wallet.” By the end of 2022, she continued, “half of all digital payments will be made using nontraditional payment methods.” It appears gift cards will play a key role in the future of payments.

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

Listen to the podcast

To learn more about loyalty programs and gift cards, listen to the entire PaymentsJournal podcast here.