Driving delight. Why should you consider a loyalty programme using digital gift cards?

Insights
Posted on 21 January 2022 Read time 6 mins
Author Natasha Hemmings

Delight is an interesting thing. It can be fleeting and hard to achieve - but businesses of all kinds rely on creating this feeling for their customers. 

HubSpot defines customer delight as “the process of exceeding a customer’s expectations to create a positive customer experience with your product or brand to improve loyalty.”

This is different from “customer satisfaction” where you are simply meeting a customer’s expectations. 

Delight is about going above and beyond!

A loyalty programme is a highly effective way to create a memorable customer experience and foster an emotional connection or sense of goodwill with customers.  

Most of us have engaged with a loyalty program at some point in our lives, whether that’s Amazon Prime, Tesco Clubcard rewards, or even an employee rewards programme. 

Evidence shows that consumers do use the loyalty programs they sign up to (in fact 84% of loyalty program members have made a redemption from the program) - and this in turn benefits brands.  

But why are loyalty programs worthwhile for organisations? What’s the psychology behind why digital gift cards feel like more of a reward than a cash payment?

 

The case for loyalty: 5 benefits of loyalty programmes 

Rewarding customers, clients and even employees is obviously a cost to your organisation. However, here’s why investing in the business of delight is worthwhile:

1. Retain customers for longer

There’s heaps of research to support the idea that retaining existing customers is just as important as, if not more important than, acquiring new ones. 

Customer lifetime value is a key metric for the growth of any business. 

Here are five stats that might surprise you: 

  • Acquiring a new customer is five times as expensive as retaining an existing customer. 
  • Increasing customer retention by 5% can increase profits from 25-95%
  • The success rate of selling to customers you already have is 60-70%, while the success rate of selling to a new customer is 5-25%. 
  • US companies lose $136.8 billion per year due to avoidable consumer switching. 
  • A 10% increase in customer retention yields a 30% rise in the value of the company. 

 

A strong loyalty program can help you create delight - and make customers feel valued, recognised and rewarded for giving you their business - to keep them engaged and loyal for the long term. 

2. Incentivise new customers

Even though maintaining your existing customer base is key, loyalty programmes can also help you acquire new customers. 

And if you can deliver a better customer experience, you can gain evergreen customers as well as incentivise customers away from your competitors.

According to the GCVA, almost one in five shoppers said they had become a regular customer of a brand after being given a gift card - with 31% of Millennial/Gen Z shoppers having done this. 

Loyalty programs can be a significant pull factor. 58.7% of internet users worldwide state that earning rewards or loyalty points was one of the most valued aspects of their retail shopping experience. 

Of course, as rewards are so important to customers, your loyalty programme needs to be well executed - the last thing you want is to frustrate customers when the experience is supposed to create delight. 

One of the most common ways for consumers to cash out loyalty rewards points is onto digital gift cards so that they can choose where they’d like to spend them - so ensure the process is smooth, quick and simple. 

loyalty programme stats

Source: 3 Tier Logic

3. Reputation, Reputation, Reputation!

Your reputation is ultimately in the hands of your customers. Word-of-mouth recommendations have always been essential for growing and retaining customers. And in such a crowded marketplace, you want your brand to be a unicorn when it comes to loyalty.  

But not all loyalty programmes are created equal. 

If you can create a loyalty programme and customer experience that makes customers so satisfied and happy that they go out and sing the praises of your brand - well, there’s nothing better than turning your customers into brand advocates. 

And with social media, it’s easier than ever before for customers to share their experiences online - both good and bad.  

loyalty programme quote

4. Be better than your competitors

Consumers who participate in high-performing loyalty programs are 80% more likely to choose the brand over competitors and twice as likely to recommend the brand to their friends. 

In some industries, it’s a case of keeping up with competitors as most already have a loyalty program and you need one to be able to compete. Did you know that more than 90% of companies have some kind of loyalty program?  

However, in some industries the use of loyalty programs hasn’t really taken off yet - and that’s an incredible opportunity to get ahead of the game.

There are multiple use cases for introducing loyalty into your customer lifecycle so being creative or finding a new loyalty avenue could really benefit your bottom line. Loyalty leaders grow revenues roughly 2.5x as fast as other companies in their industries (HBR).

5. Drive increased spend

The value exchange between brands and consumers in a loyalty programme also means that brands can drive increased basket spend by offering customers rewards and offers. 

In Kelton Research survey, 40% of respondents said they’d spend more overall and/or (28%) purchase a more expensive product with an exclusive offer, and a Bond report showed that 66% of consumers modify their brand spend to maximise loyalty benefits. 

Purchase decisions are all about emotions. From a psychological perspective, consumers can have unpleasant emotions when contemplating the monetary cost of making purchases - so making customers feel positive about their purchase is critical to brand loyalty. 

Loyalty programmes ultimately play to the “dopamine effect.”

Dopamine is a neurotransmitter made in the brain that is released when your brain is expecting a reward (food, shopping and other pleasurable things trigger dopamine); this is significantly amplified if there’s some sort of reward or deal wrapped up in the transaction, especially if gratification is instant. 

loyalty programme proof

Source: Bond

It’s all about perception: the psychology of gifting

So now you’ve seen why loyalty programs are important, you might be wondering how best to reward customers. Here’s why you should focus on digital gift cards to reward consumers rather than cash benefits. 

There are two main reasons why gift cards trigger more and long-lasting delight:

1. Gift cards are more memorable

68% of consumers actually expressed that gift cards are their preferred type of incentive, over coupons or bonus bucks. 

This is largely because when given cash, most recipients find that the cash ends up being used to pay for bills, daily needs or household essentials - it just disappears “into the pot” - so no emotional connection or associated memory is generated. 

However, with digital gift cards, recipients feel that they’re receiving more of a gift that they can use to “treat themselves” with!

According to research for the Society for Personality and Social Psychology, “When paying with a gift card, people forgo buying everyday items in favour of buying indulgent items.”

Gift cards feel more like a gift than cash as recipients are more likely to purchase luxury items that are meant to bring pleasure - and therefore create a more long-lasting memory. 

2. There’s less of a guilt factor

Gift cards = guilt free spending! 

According to research, “individuals experience less guilt when paying with a gift card, compared to credit cards of cash.”

Knowing that the gift card was intended to be indulgent, people don’t feel that they need to spend it on necessities. 

Gift cards can be used on luxuries that people normally can’t justify purchasing for themselves (if they spent the cash they’d probably feel guilty about it). 

People are also more likely to share their experiences of the loyalty programme with others as gift cards, and the items they purchase with it, are easier to talk about than money. 

Most people don’t want to talk about cash but enjoy talking about an amazing meal, vacation or a new coffee table they just purchased for their home, especially when they got it essentially for free through a loyalty programme gift card. This effect is often known as “viral value” - the extent to which the experience will be shared by word of mouth. 

Gift cards ultimately have the flexibility of cash and the benefits of merchandise, giving users choice over what they spend on - without the anxiety of spending their hard-earned money.

Powering delightful digital experiences

Loyalty programs are ultimately a win-win for consumers and brands; brands see an uptick in spend, customer retention and reputation and consumers get delightful benefits in return for their loyalty. 

Any business or integrator that is making a profit for its services can consider starting a loyalty program to incentivise and retain new customers.

To sum up you can use a loyalty program to:

  • Motivate existing customer engagement
  • Reward valuable actions taken by your customers
  • Inspire long-term commitment as well as win new customers
  • Delight customers and improve your reputation 

See success with digital gift cards in 2022

To unlock loyalty with digital gift cards, you need the right partnerships - and unrivalled access to the world’s most popular brands. We connect the world’s most popular global brands to our partners through one award winning API platform with unrivalled user experience across multiple markets at scale, simply plug-in and go. 

At Tillo, one of our core values is to create added support and delight, and treat customers with love. We care about the experience of the organisations using the platform as well as those receiving the rewards; rewarding should be delightful from start to finish. 

Make your loyalty programmes more cost-effective with exclusive brand discounts via the Tillo network. 

If you’d like to learn more about how our platform works, you can request a demo here

 

Sign-up to our mailing list for the latest rewards, incentives & gifting insights