New media extends the reward industry’s reach

Voucher and coupon providers are defying the recession by expanding into new channels to keep up with the fast developing needs of the consumer and business markets.

Asda

Treating someone to a voucher or gift card is increasing in popularity despite difficult economic conditions. In 2009 the market was worth £4bn, split between consumer sales (55%) and business sales (45%). And last year voucher sales increased in every quarter in both the business-to-business (b2b) and business-to-consumer (b2c) markets, according to the UK Gift Card and Voucher Association (UKGCVA).

For the b2b sector, vouchers help retain and motivate staff, explains UKGCVA director general Andrew Johnson. “Employers acknowledge the cost of recruiting new people is high,” he says. “If you allocate money to keeping the people you’ve got happy, they’re more likely to stay, saving you recruitment and training costs.”

Asda Businesses Rewards saw double-digit growth year on year as companies and agencies passed grocery vouchers on to employees and clients. Getting money off the supermarket shop is a welcome reward, believes Asda Business Rewards corporate sales manager Joanne Taylor. “They’re going to be doing a shop anyway, it’s not a luxury purchase, it’s a necessity.”

The development of a secure online system also allows corporate customers to manage staff rewards themselves. “It gives you the flexibility to recognise somebody in the workplace for a specific achievement,” explains Taylor.

On the consumer side, coupons are also enjoying a boom in popularity, largely thanks to the rise of daily deal sites such as Groupon, which now has a multibillion-dollar valuation, and its biggest rival LivingSocial (see Brand in the Spotlight, below).

Spreading the word: Websites dedicated to offers have a loyal following
Spreading the word: Websites dedicated to offers have a loyal following

Acorne, the company that manages vouchers for the Virgin Group, is using similar tactics to consumer sites like LivingSocial by putting a deal of the day on its website.

This keeps Virgin’s numerous offerings for the consumer and b2b market at the forefront of people’s minds, says Acorne marketing director Chris Smith. “There are more than 1,000 experiences on our Virgin Experience Days website, so if you don’t know we do something, it’s hard to search for it.”

These techniques are also being adopted elsewhere by the b2b sector, with many companies promoting voucher deals on their intranet sites. Social media sites such as Facebook are also useful tools for marketers.

Smith at Acorne notes that both businesses and consumers are using social media to spread the word about Virgin Experience days. “The beauty of Facebook in our arena is that if you have an extraordinary experience, such as going to drive a Ferrari, you tend to put it on Facebook. We are seeing companies put employee of the month prizes on their internal websites. When people look at it and see what they’ve done, it brings social media into their intranet,” he says.

The next year or two will be about who successfully launches electronic and mobile vouchers

The way people use social media and the internet in general is also increasing the use of evouchers and mobile vouchers. This trend is predicted to accelerate this year, especially on the consumer side.

Students are particularly fond of evouchers; 94% of this demographic expect companies to provide special offers for them, according to the SixthSense student lifestyle report by YouGov and discount website Studentbeans.com.

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Asda: Believes money off the supermarket shop is a welcome reward

The website’s co-founder James Eder says: “Deals and vouchers are synonymous with the student audience. It’s not just about adding value but about brands being able to build a relationship with students. They’re the ABC1s of the future.”

Eder cites banks and mobile phone providers, which target students at the start of the academic year, as examples of brands that are thinking ahead with enticing deals. “Once they’ve got them, banks are hoping that these students are going to be with them for life. That kind of deal or promotion can really help intensify loyalty.”

With nearly 80% of 13- to 18-year-olds now owning a mobile phone, according to research by Carat and Stardoll, mobile vouchers are also rising in popularity among young people, and are being looked at by Eder as a possible area to expand in to.

Aurora Fashions, which owns high street fashion stores Warehouse, Coast, Karen Millen and Oasis, launched a mobile voucher scheme for Oasis in 2009 and Karen Millen and Coast in 2010 in a bid to improve customer experience and remove some of the impact that paper vouchers have on the environment.

Customers can log onto Aurora’s transactional websites to buy a voucher and pay for it online. A voucher code that can be redeemed in store is then sent to the customer’s chosen mobile phone.

Andy Tudor, senior technical development manager at Aurora Fashions, says: “We are seeing a shift towards the use of mobile technology to transact with our business. In parallel with putting the mobile voucher solution in place, we’ve also developed things like iPhone apps and mobile websites for our brands. We are seeing an increased take-up of mobile vouchers and predict that that is where the technology trend is going to go.”

Brand in the spotlight – Q&A

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Livingsocial

Peter Briffett

UK managing director

Marketing Week (MW): There’s a lot of hype around brands like LivingSocial providing daily deals offers. But are these deals a new phenomenon?

Peter Briffett (PB): They’ve always been popular – everyone loves a great deal. The difference in today’s world is the amount of people able to
communicate on social networks. The number of people on the web means that ideas travel a lot faster. We can create a word-of-mouth buzz very quickly and that means that we’re able to transfer a voucher business into a proper local marketing effort. We’re driving real customers into local businesses. Friends talk to friends online and that in itself is a very powerful communication tool. It’s the presence of that which allows the platform we’ve got to be so successful.

Daily deals: Help increase levels of engagement
Daily deals: Help increase levels of engagement

MW: How does the social element increase the level of engagement?
PB:
It’s massive because we’re putting these things out on social networks. On your walk to work you’ll probably see ten adverts for a film, but if one of your friends recommends you see a particular movie, you’re much more likely to think about that proposition.

All our subscribers are socially networked. When they do something they tell friends about it and that in itself creates a huge level of engagement. That’s the whole premise behind the power of it. Word of mouth between those sorts of peer groups is by far the most powerful means of communication.

MW: What makes this business model successful?
PB:
It’s very much about the quality of the deals that you’re putting out there, as well as the type of subscriber base you’ve got. Restaurants or spas want real customers to come in and spend money and become loyal customers.

MW: How do you ensure you stand out from the growing crowd of operators in this area?
PB:
If you’re there, you’re established, you’ve got a brand name, that’s a significant advantage. We’ve been operating a while, we’re successful, we’ve got deep pockets and we’ve had some serious investment. That allows us to step away from the rest of the pack in terms of the deals we can do, the amount of subscribers we’ve got on board and that just generates economies of scale.

Fact focus

What’s the difference between vouchers and coupons?
While vouchers and gift cards store monetary value, to be spent at specific locations, coupons typically offer discounts on products, such as a two-for-one deal.

How are vouchers used in the b2b sector?
Vouchers are typically used by businesses to motivate or reward staff. They can be spent within the company or on experience days.

Top tips

  • Be multichannel in your approach. Different channels appeal to different demographics and consumers typically get their information from more than one source.
  • Reloadable gift cards allow companies to manage their own incentive schemes. It cuts the cost of distribution and values can be assigned and spent instantly.
  • The rise of social media now means that online coupons can go viral so a good deal can be picked up by a large audience.
  • Despite new technologies and innovations, paper vouchers are still popular so should be considered as part of the brand’s offering.
  • Tailoring coupons and discounts to certain geographies or demographics will increase uptake.

Top trends – 2011 predictions

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Andy Tudor
Senior technical development manager
Aurora Fashions

The method of interacting with retailers and businesses will become more prevalent on mobile devices but I don’t think that paper vouchers are dead and buried at this stage. There will be a transition away from them as retail customers become more technologically savvy. It will depend on the demographic. In our space, ladies fashion, the demographic that we target is pretty technology savvy, so I think it might happen faster in our business than a market targeting an older demographic.

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Rob Bostock
Group head of ecommerce
The Dune Group

We partnered with Linkshare six months ago to explore opportunities available through online promotions and voucher sites such as Moneysupermarket. Mobile is really exciting because you can target and that’s going to be something that we’re going to be looking at in the future. We’d be looking at a combined approach using paper, mobile and social. Our customers don’t get all their information from one place. They are multichannel. They are extremely savvy about where they shop and where they talk to people, so we wouldn’t want to limit ourselves to just one channel.

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Rob Froome
Head of business solutions
New Look

We’re keeping an eye on things like mobile vouchers and evouchers but it’s not something we currently offer. That’s a relatively small market at the moment but it has the potential to take off. There’s lots going on within social media but it’s still a relatively small part of the gift card and voucher industry. Paper and cards still dominate the market and it’s interesting that even though the gift card has grown so significantly, it’s still vouchers that dominate the corporate sector. Maybe that demonstrates that even with changing trends, some things take a long time to shift.

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Chris Smith
Marketing director
Acorne

Plastic gift cards have been coming for a long while but a lot of people, including big players like John Lewis, still like paper. People like to receive something. All of our vouchers come in a gift pack, with a picture of, for example, a Ferrari or a weekend away on it. It’s nice to have something tangible in your hand.

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Andrew Johnson
Director general
UK Gift Card and Voucher Association

If you offered a paper gift voucher five years ago, you were sorted. Today, you still need the paper vouchers because there are channels, particularly in the b2b sector, that still want paper. However, most retail stores are now selling gift cards. Equally, if you have a big online offering and want to be successful, you need evouchers and mobile vouchers. The big question is, can you pull all these vouchers together to sit on an online account, on a card or on your phone? The key is taking advantage of every distribution channel in order to capture different groups of customers.

One of the great innovations from a gift card perspective is the fact you can now buy them for a range of retailers in one place. So you can go into Clinton Cards and buy a Debenhams gift card. It means that gift cards can be put in front of people alongside other merchandise and gifting options rather than having to ask for them at the till.

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