Discounts are a staple of the retail landscape. But just because discounts are popular doesn’t mean they’re smart. Consider:
- A big discount will likely bring customers through the door, but will they come back?
- Not only do discounts tend to de-value a product in a customer’s mind, they also train the customer to expect that lower price.
- Even as a discount helps a business move product, it’s also cutting into sales revenue and margins.
For service providers, discounts have additional drawbacks. They can often be difficult to implement, especially for businesses with recurring monthly payments. And they don’t really provide the best value for the service provider or the customer.
Our clients find a more meaningful and sustainable way to grow their businesses with digital gift cards. Not only do digital gift cards create a lasting impact with customers that extends beyond a one-time purchase, they can do so in a way that actually benefits the bottom line. Here are seven ways to consider using digital gift cards as an alternative to discounts.
1. Supplement Existing Price Promotions
Service providers can add a digital incentive to an existing discount promotion to get even more traction with customers. For example, a company already offering a discount on a customer’s electrical bill for switching to a smart home thermostat can spur even more engagement by adding a digital gift card as yet another incentive to make this change.
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2. Motivate Shoppers Without Lowering the Average Purchase Total
By reducing revenue, a discount naturally lowers the average purchase per shopper. For companies looking to protect this metric, a digital incentive can appeal to customers without the same revenue hit.
3. Reward Actions Both Before and After the Purchase
Discounts tend to be a one-and-done proposition, effectively beginning and ending at checkout. Digital gift cards, on the other hand, can help reward actions both before and after the purchase, allowing a company to affect more of a shopper’s journey beyond the initial purchase.
A salon, for example, might open a promotional window to offer extra points on its points-to-rewards punch card that customers can then exchange for a gift card. In doing so, the salon is encouraging customers to spend more during this period – something that a simple price discount might not do.
4. Offer an Immediate Incentive
A gift card taps into a truism of human nature – namely, that people tend to be wired for instant gratification. This is why digital gift cards make more sense than one type of discount service providers often rely on – the rebate. Customers receive a digital gift card instantly at the time of purchase, as opposed to waiting weeks or months for a rebate.
5. Make an Emotional Impact
Unlike a discount, a digital gift card provides a more emotional impact by allowing customers to treat themselves to something meaningful. With a gift card, they may do something a little less pragmatic – a date night dinner or some fancy perfume – that sticks in their memory long after that purchase. That positive memory is then associated with the brand that issued the gift card – a win-win.
6. Offer More Choices
Digital incentives that offer a choice can not only expand the appeal of a promotion beyond your own company, but possibly pair with complementary brands as well. A hotel chain, for example, might offer a choice reward or an open-loop card for restaurants or entertainment experiences that would appeal to travelers.
A dry cleaner, meanwhile, might offer a digital gift card for a clothing retailer (or a choice of several) instead of discounting its services. Many dry cleaning customers probably shop at these types of stores.
7. Build a Long-Term Loyalty Programs
Participants in long-term loyalty programs with multiple payout opportunities may see digital gift cards as a more satisfying incentive for participation than a one-time discount. This is especially important to consider for service providers that experience high churn rates, such as cable companies (at 25%, a high churn rate).
Other than bad experiences, one of the big factors that drives customers away from a brand is a lack of personalization. Digital gift cards with plenty of choices can help personalize the relationship.
Digital Incentives can Make an Impact Beyond the Sale
Discounts may be the go-to choice for many retailers, but there is an opportunity to make a bigger impact. The key is to get the most from your digital incentive program by:
- Giving customers a choice by opting for incentives that allow them to decide where to spend.
- Using technology to make the process of issuing and redeeming incentives seamless.
- Focusing on digital incentives that don’t force customers to keep track of a physical gift card.
By building your promotional plans around digital incentives instead of discounts, you’ll end up with the win-win of better value for both you and your customers.
Leif Baradoy is the CEO of Giftbit. He is a seasoned executive in the digital incentives/payments space and cofounded Giftbit in 2011, leading the business through its early startup days, pivots and growth, most recently leading the platform’s expansion. Baradoy also led Lightrail – an API payment infrastructure for customer value – as CEO from 2016-2020. He is a former professional triathlete and was most recently a captain of Team Canada for the 2023 Multisport World Championships in Ibiza, Spain.
