Brand currencies such as loyalty points or e-gift vouchers can be considered as an advance sale or a pre-sale, without the customer even being in the brand’s catchment area
The retail industry thrives on transactions. Players in the retail space are constantly looking to adopt innovative practices that can boost their end-user purchases and, subsequently, increase their revenues. Brand currency is one such method being adopted by leading retailers across the globe to get consumers to transact more, while also driving brand loyalty.
By definition, brand currency is any brand-owned purchasing instrument that can be used only to shop for products from that brand. Any person in possession of brand currency is also obliged to use it for making a purchase within a set time frame. Brand currencies such as loyalty points or e-gift vouchers can, therefore, be considered as an advance sale or a pre-sale — without the customer even being in the brand’s catchment area.
For instance, customers looking to purchase a product that is available at both Shoppers Stop and Lifestyle will look into several considerations — pricing, distance to the nearest retail store, previous shopping experience, etc — before making a purchase. However, if these same customers are offered Shoppers Stop vouchers, the dynamic completely changes. Brand loyalty kicks in here to tilt the purchase decision; even those customers who typically prefer to shop from Lifestyle will now be inclined towards redeeming their Shoppers Stop voucher. The sale is sort of complete without the customer even setting foot in the brand outlet.
The example highlights the role brand currencies can play in guaranteeing customer loyalty and getting them back into outlets, in an age when online shopping is gaining prominence. This is why every leading brand has a loyalty program in place that rewards customers for shopping.
However, regular loyalty programs are pure overhead costs for brands. Whether it is free lounge access, free products or just discounts, everything translates into a cost. So how do brands ensure that they retain customer loyalty without burning a hole in their pockets?
Upselling with vouchers
This is exactly where new-age brand currencies such as e-gift vouchers step into the picture. Let’s say Bata ties up with an O2O digital gifting platform and gets access to its partner online catalogues which include HDFC. Now, if an HDFC customer converts their loyalty points into a Bata voucher, the cost for the voucher is borne by the bank. Additionally, Bata is able to reach out to HDFC’s massive online customer base to provide enriching shopping experiences at the cost of the latter’s loyalty program.
This makes e-gift vouchers powered by a robust digital gifting ecosystem a more cost-effective option for retail brands, especially when compared to direct discounts. In fact, the cost of driving brand loyalty with e-gift vouchers is 2-5% — almost half of the 5-10% that conventional loyalty programs accrue.
Further, brand currencies facilitate upselling by increasing the amount spent by customers in a very simple and effective manner. It is very unlikely for a customer to buy a voucher at the outlet itself; it is much more probable that he bought it earlier or received it from someone else as a gift. Let’s suppose this customer walks into an outlet with a `1,000 gift voucher. If he had set aside a shopping budget of `2,000, it is likely that he would end up shopping for `3,000 by using the gift voucher to augment his original purchasing ability. Such upselling facilitated by e-gift vouchers can typically increase the average bill value by 15-20% in most cases.
This is one of the major reasons why brand currencies are omnipresent today, bringing down the cost of customer loyalty for retail brands while driving better business results.
The author is CEO and co-founder, GyFTR