The Differences Between Loyalty Programs and Gift Cards

Gift cards and loyalty programs are common aspects to businesses.  By now, you’ve likely purchased or have been given and have used at least one gift card.  In fact, statistics show that you’ve likely done this in the past 3 months.  Gift and loyalty cards have grown exponentially in popularity over the course of the last 5 years.   And it’s no wonder:  it’s been proven that they work in growing a merchant’s sales and as such, growing the business as well.

But gift cards and loyalty cards are not synonymous with each other.  In fact, they are succinctly different, both with different benefits.  And one program can run quite effectively independently of the other.

Gift Cards:  Explained

Gift cards are cards that have replaced the old paper voucher.  And there are now gift card programs for even the smallest of merchants.  You can subscribe to a basic gift card program where you receive pre-designed cards for a minimal set up fee.  Or you can go big with custom designs and extensive reporting and tracking programs.

So why should you consider offering a gift card program?  There are quite a few compelling reasons.

1)  It guarantees return traffic into your store.  Whether the customer is purchasing the card for themselves or more likely as a gift, you are guaranteed another visit into your store.

2)  Statistics have also proven that customers rarely ever spend the actual amount available on the gift card.  They will likely go over, in which case, you’ve now increased the amount of the original sale.  Or they will go under, in which case, you’re carrying the remaining amount on the card as a float that can help to go towards paying for other aspects of your business.

3)  It’s also advertising for your business.  Every time that customer opens his or her wallet and sees your gift card, they are reminded of your store.  You can’t get that type of eyeball count with standard print and online media.

4)  Gift cards are easily tracked.  Because they are electronic transactions, they will show up on your reporting available through the acquirer.  And if a card is lost or stolen, you can easily deactivate the card. Paper gift cards are basically like cash.  It’s not easy to track them; in fact, it’s a rather manual process and once they’re gone, they’re gone.

Loyalty Programs:  Explained

Loyalty programs are key to driving return business to your store.  It’s been proven, Canadians love their points.  Canadians are willing to drive out of their way to shop at a store that is giving away some type of points as opposed to one that is not.

There are different types of loyalty programs you can participate in.  There are larger ones, like Air Miles or Aeroplan, that are very popular.  In these instances, you as the merchant will need to purchase the points or the miles from the head organization in order to give out to your customers.  While this could be costly, these programs are very popular with customers and some devoted collectors will specifically shop at your store to receive these points.

The alternative is to run a smaller loyalty program in your own store.  By giving away points that can be redeemed for discounts at your location, you’re guaranteeing the return traffic back to your store for when the customer wants to cash in their points.

Add Gift Cards or a Loyalty Program to Your Business

As you can see, both programs have very compelling reasons for you to offer them to your customers.  Which one is the right fit, of course only you can decide.  But I urge you to give both gift cards and loyalty programs consideration when looking for ways to grow your business.


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Matthew Hunt has been helping small businesses get set-up with Canadian Merchant Account Services since 2007 and helped 1000's do so. Join Matthew on Google+.

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