It’s a well-known fact that customer loyalty is becoming increasingly difficult to achieve. However, it remains a strategic challenge for any brand. Loyal customers provide a fertile ground for consistent long-term revenue. Moreover, given the current situation, customer retention has proven to be one of the most cost-effective ways to increase revenue.
Acquiring new customers costs between 2 and 5 times more while yielding a lower return on investment (184% compared to 195% for customer retention). It’s clear, in this case, that focusing on customer retention is more advantageous than relying solely on discounts and promotions to attract new customers, which can ultimately reduce revenue.
However, customer loyalty has become more volatile. 38% of customers have tried a new brand, and 60% will abandon a brand if they have a negative experience. So, how can we create sustainable customer loyalty?
Loyalty programs are not the only solution
Firstly, it’s important to emphasize that brands must focus on developing their brand identity, maintaining a consistent brand universe, and delivering a great customer experience. They should also work on their value proposition, ensuring that the quality and price align with their positioning, to create an initial desire for customers to stay.
Then, it’s essential to offer a loyalty program that provides value both to the customer and the brand, in order to foster long-term loyalty. This is precisely the point we will delve into in this article: the use of e-gift cards as rewards and motivational tools through digital channels.
E-gift cards have the ability to leverage the three main drivers of customer loyalty: awareness, consideration, and intention. Research shows that 38% of customers who receive an e-gift card tend to place more orders on the brand’s website, 44% return to the site more frequently, and 35% are willing to try out new products and/or services.
Step 1: Enrolling the Customer in the Loyalty Program
To encourage customers to place their first order or to express gratitude for completing their initial purchase, a brand can utilize the promotion based on reward mechanism with e-gift cards. Instead of reducing prices on products to motivate action, the brand offers a reward once the desired action is completed.
Here’s how it works in practice:
- If you reach a cart value of €50, you will receive a €5 e-gift card.
- Alternatively, an email can be sent right after order confirmation, thanking the new customer and including a €5 e-gift card.
The advantage of this type of reward is that it doesn’t solely rely on price to drive the initial purchase. This approach avoids targeting customers solely focused on finding the best price by visiting multiple e-commerce sites, who may exhibit volatile loyalty. With the reward-based promotion, we target and engage customers in the shopping experience and brand universe.
Since e-gift cards are customizable, from the visual design to the message, they serve as an ideal starting point for a long-term relationship. Moreover, the e-gift card given to the customer encourages them to return to the store or website to redeem it, generating additional revenue*. This represents an extra opportunity for the brand to foster customer loyalty.
(*Additional revenue refers to the positive difference between the total purchase amount and the e-gift card value.)
Step 2: Accelerating the Customer Lifecycle with the Loyalty Program
Once the customer has enrolled in the loyalty program or has made at least two purchases, what should be done next?
It is crucial to determine profitable actions for the brand while providing genuine benefits to the customer. The profitability of the action should always outweigh the customer’s benefit.
The e-gift card serves as a great option in this regard. It provides the customer with additional purchasing power and is attractive enough to create an incentive. Meanwhile, the brand can adjust the amount and expiration date of the e-gift card based on the objective and the profitability requirements of the action.
The challenge now is to find ways to engage and re-engage the customer to strengthen the relationship. The ideal approach is to accelerate the customer loyalty lifecycle by creating well-chosen and regular incentives. As loyal customers become increasingly cost-effective and generate more revenue, it becomes essential to focus on fostering their loyalty.
Here are some mechanics:
- The points system: The more specific behaviors a customer exhibits, the more points they earn, which they can then convert into a gift card—a motivating reward.
- Celebrate customers’ birthdays with a gift card.
- Encourage customers to shop during holidays like Christmas and Mother’s Day by offering a small-value gift card valid for a few days after the occasion.
- Drive adoption of an app or a new product collection by offering an e-gift card only if customers have made a purchase on the app or bought the specific product.
- Raise awareness about eco-friendly practices by creating a system where customers can return their used (non-perishable) products in exchange for an e-gift card to spend.
By implementing these mechanics, brands can effectively engage and reward their customers, fostering loyalty and driving sales.
Step 3: Stay Top of Mind with the Customer
The e-gift card serves as an extension of the brand. When a customer saves the card on their phone or computer, the idea of using it remains in the back of their mind.
Even better, the e-card can be saved on a mobile wallet such as Apple Wallet, Samsung Pay, Google Wallet, and more.
Through this channel, the brand can send push notifications to the customer and maintain an active relationship. For example, they can send reminders like “Don’t forget to redeem your e-gift card” or “We’ve just released a new collection, it’s the perfect time to use your e-gift card”.
In any case, customers who possess an e-gift card are more likely to use it quickly and spend more than usual since they will be engaged in a pleasurable shopping experience.
Step 4: Expand Your Customer Base Through Loyalty
Now that we have a solid base of loyal customers, wouldn’t it be time to grow it even further? And no, we’re not talking about customer acquisition, at least not directly. We’re going to discuss the power of referral programs. It’s a customer acquisition technique, but with controlled and measurable costs.
Now that the brand has built a strong customer base, it can leverage the power of recommendations. However, it’s important to note that while 83% of consumers are willing to recommend a brand, only 29% actually take action. We need to find a way to motivate the remaining 54%.
This is where the e-gift card comes into play once again. Whether it’s a one-time referral campaign or an ongoing program, both the referrer and the referred can receive an e-gift card of a predetermined value. It’s a win-win-win situation. The referrer receives a reward, the referred gets an extra incentive to make their first purchase, and the brand gains a new customer.
This new customer will also enter the loyalty process, and the cycle continues. When properly configured, the brand creates a virtuous circle in which customers become loyal, then refer new customers who, in turn, become loyal themselves. And all of this is achieved with the help of e-gift cards.
Step 5: Nurturing Customer Knowledge and Cleaning Data
One important aspect of managing loyalty programs or processes is customer knowledge and data.
Through the use of e-gift cards, the brand can gather valuable insights about its customers. When and where did they redeem the gift card? What was the purchase amount? Which products did they choose? It’s important to remember that the e-gift card is a form of payment, granting access to relevant data.
Additionally, the e-gift card serves as an incentive for customers to provide additional information. For example, the brand can offer an e-gift card in exchange for completing a satisfaction questionnaire to determine the Net Promoter Score (NPS). It can also encourage customers to leave product reviews. The possibilities are endless.
By leveraging the e-gift card as a tool for gathering data and encouraging customer engagement, the brand can enrich its understanding of its customer base and refine its marketing strategies. This data-driven approach helps to improve customer experiences and build stronger relationships with the brand.