Can retailers vouch for vouchers’ effectiveness?

Marketing and incentives experts talk to Marketing Week about their use of the ever-popular gift voucher, as well as trends for next year.

panel

The panel (l-r above)

Max Jennings, co-founder and marketing director, VoucherCodes.co.uk
Andrew Johnson, director general, UK Gift Card & Voucher Association
Milly Glaister, online marketing manager, Liberty London
Melissa Littler, marketing and PR director, BrandAlley UK
Philip Rooke, chief executive, Spreadshirt
Shireen Alvis of Lee, senior sales manager, Odeon & UCI Cinemas
Martin Alden, B2B and partnership controller, Wickes

liberty
All lit up: Liberty has seen digital incentive usage increase

Marketing Week (MW): How do consumers feel about vouchers as an incentive to buy?

Max Jennings (MJ): They’re very positive about them. A recent study conducted by Forrester Consulting on our behalf shows that 78 per cent of voucher-users feel positive towards a brand offering vouchers as an incentive and 62 per cent feel that offering vouchers improved a company’s brand image.

Andrew Johnson (AJ): Our figures have shown that like-for-like voucher sales were up by more than 12 per cent in the fourth quarter of last year, reflecting a pronounced Christmas sales peak across the board.

Milly Glaister (MG): Our target audience responds well to occasional incentives. We see this in data from Liberty.co.uk. When we offer incentives there are higher average order values, higher quantities in the basket with ultimately a stronger conversion.

Melissa Littler (ML): Vouchers can act as a tipping point in the decision-making process. What they don’t do is engage people who have no intention of buying from BrandAlley.co.uk in the first place. People are way too savvy for that. If they’re not in a “purchase” frame of mind then doing so just because vouchers are on hand makes them feel guilty. We also know that when the voucher amount is too high they shop once and are less likely to return. Lower voucher amounts have higher repeat purchase rates and means a customer is engaged with us for the right reasons.

Philip Rooke (PR): Used in the right context and with the right message, we feel that vouchers can be a very helpful incentive. Whenever we do campaigns to show our range [of printed T-shirts and other items] we can see an immediate uplift in sales, which usually lasts several weeks after the initial promotion has ended. But there are also limits. When we organised a special offer on customised cups as a consolation prize after England were kicked out of Euro 2012, it didn’t work as expected.

Shireen Alvis of Lee (SAL): We are quite lucky in that our product is a cinema ticket, which has a set value in people’s minds. This enables us to sell both cash vouchers in the form of gift cards and cinema tickets in the form of ticket vouchers. Our gift cards allow use across all of the products we sell, while ticket vouchers offer good discounts against the retail price of tickets and are therefore popular.

MW: How do you use vouchers and incentives?

Moleskine

ML: A key use is for customer acquisition. We offer exclusive offers to members who have yet to purchase as well as affiliate promotions. We often find that combined cashback and voucher offers can work well to drive the first purchase. We also use incentives such as free postage and packaging to help increase basket size and to encourage engagement on social media.

Martin Alden (MA): Wickes is launching online voucher sales this month and consumers will be able to buy vouchers for themselves or as gifts for friends or relatives. We use them to promote creative thinking within our own marketing team, via a ‘hero of the week’ – somebody who the team wants to recognise for going above and beyond their duties.

SAL: We use them in various ways, one of which is through a deal with our agency, Filmology. This means employees of organisations we work with can access discounted vouchers for their local Odeon cinema. We also use them short-term to fill business ‘troughs’. Currently we are using a 40 per cent off voucher online via a viral campaign.

MW: If you offer vouchers as incentives to other businesses, how do you leverage the consumer brand of your parent company?

MA: We do this by aligning ourselves, as closely as each campaign demands, to the retail redemption experience in Wickes’ stores. Our B2B positioning focuses on “investing to improve” and the idea that the home is a great motivator. Ultimately incentive recipients still want great products and the best range.

PR: Our vouchers are most often used by partners as part of a white label solution. As a white label provider, most of our partners do not use our brand. If they do, they use it as a ‘trust mark’. This is mostly done by celebrities who are not businesses and therefore wish to convey a level of business backing.

SAL: We maximise our strategy by incorporating both Odeon’s and our partner Filmology’s branding. We strive to be innovative and ensure that what we offer is both current and takes into account how our customers want to fulfil this demand.

MW: Some big companies, for example Tesco, are pulling away from vouchers. Can you see more brands following this path?

AJ: This is obviously something that is down to individual retailers’ strategies, but generally we would like to see fewer money-off vouchers as they cloud the market in terms of perception. This is because consumers often get confused over the difference between a full-face-value gift card and money-off coupons.

MJ: Tesco’s more targeted approach may prove effective with the wealth of customer data it has available. However, for the majority of retailers, strategic discounting remains a far smarter way to reward customers and attract new shoppers. VoucherCodes.co.uk has seen the number of vouchers issued by retailers increase 31 per cent year-on-year as brands recognise the value that discounts bring.

ML: I’m glad to see Tesco take the lead on this. Bespoke offers are always going to win out as they are more rewarding for the customer. Companies don’t want one-offs, they need to encourage repeat visits and purchases. Conversely customers need to feel they are shopping with a company that knows what they are doing with them.

SAL: I don’t believe that Tesco is “pulling back from vouchers” per se, rather it is using its ClubCard data to better target the offers it makes to customers. It isn’t fewer vouchers, it’s more targeted vouchers and, yes, I think that’s certainly the way to go. We implemented our Odeon Premiere Card a couple of years ago and now have over two million card holders. I can certainly see us using data to provide more appropriate offers for our customers and would expect most brands to do the same.

Odeon
Odeon and UCI Cinemas use discount vouchers and gift cards

PR: In general, we can see that vouchers only work when used as a trigger and economically that’s why we can see more retailers moving away from offering a wide range of daily vouchers. However, as a provider of 150 different items, we are in a different position to Tesco. We need to make customers aware of new products, so when we promote niche products or new listings, we usually don’t do it for the discount alone, but for the awareness with customers these products get when in the spotlight.

MG: I do see brands moving away from using generic vouchers and incentives and adopting a more considered, data-led strategy. The one-size-fits-all approach works for quick wins but in terms of long-term engagement with customers, a more tailored technique receives a more positive response.

MW: Do you find that digital vouchers, incentives or rewards are successful compared to plastic cards, for example?

PR: Customers prefer digital vouchers as they are increasingly familiar with dealing with digital transactions. There is no real need for physical forms of vouchers nowadays. The exception to this rule, however, is in consumer-to-consumer gifting, where a physical voucher is still an important part of the emotional transaction.

MG: Over the past three years, we’ve seen a dramatic increase in uptake for digital incentives and rewards that supports our activity in Liberty stores. We are seeing more customers wanting to interact with our loyalty scheme online and have recently launched a portal where loyalty card customers can check their points balance as well as view and redeem any vouchers they have not yet used.

MW: What other trends do you see happening next year?

MG: With more of our customers spending more time online, it’s not just the uptake of offer codes on Liberty.co.uk that we’ve seen rising, but also the number of in-store vouchers customers are redeeming that we’ve communicated to them digitally, using both email and mobile. It cuts down on costly direct marketing campaigns and is great for customers because showing a printout or voucher that can be scanned from their smartphone is so easy for them.

AJ: We’re anticipating a big increase in digital from the perspective of email and mobile and we will continue to see an increase in non-traditional retailers entering the market as digital will become a lot more cost-effective for small retailers and restaurant groups to issue them. A small number of retailers are launching mobile vouchers, but we expect to see more during the Christmas period and into next year.

MW: So is mobile the next big thing in vouchers?

AJ: It’s still fairly limited. There is lots of talk of digital and mobile, but the majority of retailers have yet to launch a product. There are definitely opportunities, but there is a lot of misunderstanding in the market. Once it is clear what the opportunities with mobile truly are, we will get greater participation and uptake.

MJ: The mobile incentives space is still relatively immature and there is a great deal of opportunity. With myriad smart solutions already available and swathes of the general public owning a smartphone, the final barrier to adoption of mobile incentives is retailers themselves. The integration of sophisticated mobile solutions into retailers’ point of sale tills requires serious investment and we won’t see change occurring overnight.

PR: We see an increasing numbers of people using mobile devices and vouchers are a great way to interact with them. We combine offline vouchers (for example from our catalogues) with mobile (through a QR code), which works quite well. However, since our T-shirt design software currently relies on Flash [which doesn’t work on iPhones], we need to provide alternatives to this before further investigating mobile offers.

Wickes
Wickes is launching online voucher sales

SAL:

We have a new system which allows vouchers to be emailed or sent to a smartphone. With the growth in smartphone ownership, there’s extensive scope in terms of the delivery of vouchers.

MA: We are developing a range of mobile voucher and card capabilities, across both the business and consumer sectors. These cover staff reward and recognition, incentives and motivation schemes and consumer-to-consumer giving. But it is also about context. Newer technology must still be relevant and users have greater power than ever to engage or disengage. It’s never been easier for consumers to discharge a promoter to the SMS promotional graveyard -even the plethora of clever marketing can’t beat that.

MW: What kinds of download rates are being achieved? How can they be improved?

ML: If the offer is free postage and packaging for the day then usage is high as customers are not necessarily changing their behaviour. It’s a perk. Where you are asking people to purchase for the first time or come back and buy something again within a short space of time, things are different. Our redemption rates are improved by ensuring that the site has really strong brand offers at the time of incentive.

MG: Ensuring continuity in design between the landing pages and the original marketing communication has improved the customer journey and the conversion rate. We continually remind the customer of a specific offer through the website, maybe on the header or footer, as well as the basket, to ensure we are converting potentially wavering impulse buyers.

MJ: We’ve seen traffic from mobile devices grow by almost 200 per cent in the past year. We can also expect to see new technologies such as credit card-linked offers emerging. This technology allows consumers to load store vouchers and offers to their credit card, which are redeemed automatically at point of sale.

Sponsored viewpoint

MS logo
John Bohan

John Bohan
Head of sales
M&S for Business

In terms of trends, at M&S for Business we have seen a real switch from paper vouchers to cards or digital in the past 12 months. About 90 per cent of our business was in paper vouchers, but over the past year we have seen about 40 per cent being sent out digitally or via gift cards. For example, our client Sky uses digital vouchers and Orange (now EE) too – they prefer the speed of delivery and security of doing so.

Our clients can also use our online tools: they can then see the gift cards they have, the value that is loaded on to them and they can track the orders going out to the end consumers – so it is giving people the right information that is going to be useful to them.

We can tell our clients whether their recipients have opened or downloaded digital vouchers and they can also send personal messages. Sky, for example, can see in real time when vouchers have been sent out to a customer and if they haven’t downloaded them, they can resend the voucher at the push of a button.

We have always been fairly strong with private sector clients, but the public sector is also looking to use us, maybe with smaller value staff rewards. Pay rises or bonuses are harder to give at the moment, so companies might choose our £10 Dine In gift card as a one-off reward.

About a third of our clients are using M&S vouchers to reward consumers – both for signing up to a service and to retain them. For example, we have just done a campaign with The Times, which wanted to increase its subscriptions. We have seen a strong move to people saying that keeping customers is as important as recruiting new ones.

Looking to the future, mobile vouchers are expected to be a big area for us over the next 12 months as new technology such as the iPhone 5 drives expansion in the market and we will look to deliver cards in different currencies to support our international growth.

What we’ve seen recently is people gravitating towards M&S because of the trust in the brand: when you have a retail business that has been around for 125 years, that is important to clients who are gifting but also companies that are leveraging our brand to put promotions together.

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