The retail industry thrives on transactions. Players in the retail space are constantly looking to adopt innovative practices that can boost their number of end-user purchases and subsequently, increase their revenues. Brand currencies are one such method that is adopted by leading retailers across the globe to get consumers to transact more, while also driving brand loyalty.
How Brand Currency Works?
By definition, the brand currency is any brand-owned instrument which 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 timeframe. 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, then 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 complete without the customer even setting foot in the brand outlet.
Brand Currency and Loyalty Programs
The aforementioned 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. For instance, Marks & Spencer gives its customers a 10% discount if they shop at its physical outlets.
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?
This is exactly where new-age brand currencies such as e-gift vouchers step into the picture, delivering the same impact at a much lesser cost. Allow me to elucidate with a working example.
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 born 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 an INR 1000 gift voucher. If they had set aside a shopping budget of INR 2000, more often than not, they end up shopping for INR 3000 by using the gift voucher to augment their original purchasing ability. Such upselling facilitated by e-gift vouchers can typically increase the average bill value by 15-20% in most cases.
As the above examples highlight, brand currencies can drive brand loyalty and boost sales for brands. To further amplify this value-addition, brands are now offering e-gift vouchers as an end-result of shopping. Loyalty feeds loyalty here; customers loyal to a brand have a chance to win e-gift vouchers that will encourage them to shop even more. In a sense, loyalty itself is being translated into brand currencies. 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 article has been penned down by Arvind Prabhakar, CEO & Co-Founder, GyFTR (Vouchagram)