The Double-Edged Sword of Gift Vouchers in Trade Loyalty Programs

With the increasing penetration of internet usage in our country comes the growing comfort of the citizens with online transactions. This has led to a massive surge in gift voucher/card led transactions across the board. As loyalty programs involve making pay-outs to multiple parties at high frequency, gift vouchers have become the staple reward choice for trade loyalty/reward programs. While there are lot of benefits associated with gift vouchers, there are a few hidden challenges as well. In this post we cover the pros and cons of including gift vouchers as an option in your trade loyalty programs.

The various benefits associated with the gift vouchers are as follows.

Greater choice

  • Customers who receive the gift vouchers have higher choice in terms of the reward they get which leads to greater satisfaction
Ease of operations
    • As there is no actual movement of physical goods, it is much easier to handle voucher rewards at large scale

But these benefits come along with certain pitfalls of using vouchers which are as follows.

Higher cost

    • For the same perceived value at customer’s end, vouchers come at much higher cost than physical rewards. There are hardly any promotional or bulk discounts available and physical rewards will always come at lesser price than vouchers. This can potentially lead to huge savings which can further be utilised to offer additional benefits to loyalty partners
    • Giving out cash equivalent and easily cash transferable rewards would definitely lead to undercutting in the market. Trade partners might choose to cut the price of the product to stay competitive and in certain industries this will lead to immense channel conflict and price wars in the market. Physical rewards are not easily cash transferable and would bring down the level of under-cutting significantly
Cash flow management
    • While in physical rewards it is easy to get credit for the goods and pay after the delivery is complete, there is absolutely zero credit provided by any gift voucher supplier. This leads to huge headaches in cash flow management and incurring lot of cost of capital
Lower call-back opportunities
    • A Television or a car given out as reward would stay in the household for years and will forever be remembered as a gift from a certain brand. A voucher however will quickly be converted to goods and will be lost in the transaction. Hardly anyone would remember the reward given by you after a few weeks of the transaction
Lower control
    • By relying too much on the vouchers, companies tend to lose the control they have on the operations of a program. Putting too many eggs in the basket of ever changing dynamics of eCommerce business is frankly not advisable.

It is important to keep these points in mind when putting together reward catalogs for trade loyalty programs. If you want us to help you out with the perfect catalog and smooth operations of your program, do leave your details in the form in the link below.


Topics: Loyalty Programs

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