Use it or lose it: How to encourage gift card redemption

Gift cards are increasingly becoming the most popular gift on the market. Sales were up 43% during the 2021 holiday season, and they’ve long remained at the top of peoples’ wishlists. They benefit everyone involved - gift buyers get a convenient option that’s sure to be a winner, recipients get the opportunity to choose the item they’d most like, and merchants get the chance to flex their store experience on both buyer and recipient. 

In spite of all this, just under 50% of US adults have at some point missed out on using a gift card. Moreover, an average $3 billion worth of gift cards go to waste in the US every single year. If you’ve ever forgotten to use a gift card, you’re most certainly not alone. 

This common situation comes up time and again, for a whole host of reasons. Physical items are obviously difficult to ignore and are the end of the gift giving process. Cash gifts go straight into wallets to be freely used next time someone is at a store. Gift cards however aren’t always used right away, and therefore are more easily forgotten. Even if a customer frequently shops with a brand, they may forget they even have a gift card especially if it’s a lower value. 

The worst part? Recipients forgetting to use their gift cards has a negative impact on their experience with your brand and that may discourage not only the recipient but the original gift card customer from placing an order in the future. 

The best way to ensure that doesn’t happen is to be proactive and engage customers to encourage gift card redemption. 

Why gift card redemption is important

Encouraging people to redeem their gift cards has benefits not just for the customer, but also for merchants. 

For merchants

Due to the nature of having a fixed value, the vast majority of consumers end up spending over the value of the card when they go to make their purchase. 75% of UK consumers do so, and US consumers spend an average of $59 above the card’s value. Merchants then have an opportunity to increase total cart value for those using gift cards - the original order may have been for a $30 gift card and that was all the original customer was willing to spend, but the recipient may be willing to spend more if it’s a brand they like. By encouraging the recipient to redeem the card, the value of that order has the potential to be worth much more than if the original order was for a physical product. 

Another benefit to merchants is there’s a much stronger chance to build a relationship with the gift card recipient, who has a higher chance of becoming a repeat customer. The customer who purchased the gift card may be unfamiliar with your brand or products, and is therefore less likely to make a repeat purchase. The recipient on the other hand may be more engaged with your brand, and show a greater level of interest in your products and experience. In fact, chances are they already know your products - in one survey, 83% of respondents said they’d received a gift card for a brand they’d previously tried in the past. 

That being said, there is still plenty of opportunity to engage new customers. In that same survey, 23% of Gen Z and 18% of Millennials said they’d received gift cards for brands they had not previously shopped with. Merchants can then delight both new and existing customers with their store experience, boosting chances for retention on top of the increased cart value.

For customers

There are many reasons why gift cards are at the top of wishlists everywhere, but perhaps the most important is that they’re the gift of choice. If you really want something from a brand you love, you don’t need to rely on a family member or friend picking up on your hints and potentially buying something you either already have or don’t want. By receiving a gift card, you can spend it on the exact item you want and the gift giver can know they gave a gift that was well received. People love an excuse to get something they really want - 76% of those who have received a gift card say they see it as an excuse to treat themselves. 

It stands to reason then that they want to make sure they redeem that card. No one likes to forget they received a gift card, only to find out that it has expired or they have a very short window to redeem it. Perhaps they wanted to wait for something to come back in stock, or they were waiting for a new product launch. Maybe they just forgot because they got the email with the gift card code so long ago and never got a reminder. They then may wonder why you didn’t remind them, and if it has expired they see it as your store pocketing the cash that they should have been able to spend. Therefore by being proactive and making an effort to encourage the customer to redeem their gift card, you’re providing them with a much better customer experience. Even if they aren’t ready to redeem right away, regular engagement with them will give them a positive impression of your brand. 

How to engage recipients and encourage gift card usage

Prior to redemption, you may have limited touchpoints with a gift card recipient depending on whether or not they’re an existing customer. The touchpoints you do have, however, are very valuable - email and SMS. Using these channels carefully alongside store data are the key to providing an excellent experience and encouraging redemption. 

Send automated email/SMS reminders

The most basic and effective way to tempt a recipient into using a card? Simply remind them that they actually have one to use. People forget about cards for a myriad of reasons, and if the card was sent directly to their inbox then by the time they go to use it there’s a strong chance it’s buried under a pile of other emails. 50% of cards are redeemed within the first month alone, and over the next 6 months it will only rise by a further 20% to 70% redeemed. This slow down demonstrates that tendency to forget - when the gift card is first received, people are more likely to remember but as time goes on, the likelihood of the customer remembering decreases. 

That’s why you need to send reminder emails to gift card recipients. Sending at different intervals based on email activity will allow you to send the right number of reminders. You want to strike the right balance where your reminders will be helpful and engaging, rather than overwhelming and pushy. 

Use segmentation and automation to tailor the messaging your gift card recipients get:

Segment based on if they have or have not yet opened the gift card. 

If they’ve already opened it, they won’t need the same messaging as someone yet to open it. For instance, you may want to have subject lines that read “Reminder: You’ve received a gift card!” for someone who hasn’t opened the original email, whereas it may read “Don’t forget about your gift card!” for someone who has already engaged with gift card emails.

New vs Returning customers

Experience with your brand will change the kind of messaging a customer will expect to receive. Tailor emails to acknowledge the customers’ experience with your store, for example returning customers get more “welcome back” style messaging with updates since they last shopped alongside their gift card reminders, whereas new customers may get a more brand education led experience. 

Set up an automated flow for time intervals

Once you’ve segmented your audience, it’s time to decide which time intervals will work best for sending reminders. We know that half of gift cards are used in the first month, so you may want to set up a reminder for 1 week after the card is sent, and again at the end of the month. After that you may want to increase the time between reminders - 2 months, 4 months, 6 months and so on. You may also want to add complexity to your reminder flow by tailoring messaging based on whether or not a customer has opened any of your reminder emails, but is yet to place an order. 

Remaining balance

Not all gift cards will be used on one order - especially if the card value is higher, it may be that a customer chooses to use it across multiple orders. Set up reminders for 3 months, 6 months, etc. after their last order to remind them that they’ve still got a balance on the gift card to use.

As for how to incorporate SMS into your flow, use this sparingly as part of your reminder timeline with succinct messaging. For example if you send a reminder 1 month after the original email, send an SMS a few days later along the lines of “Treat yourself! You’ve got a gift card to spend - check your email for our top recommendations”. 

Offer extra incentives 

Everyone loves a freebie, and they have a habit of catching our eyes when we see a discount or surprise in our inbox. If you want to encourage recipients to use their gift cards, offering small incentives can be a great way to push them to place an order. 

One attractive option is to offer free shipping on their order - you can do this via a code or automatically applied at checkout. 90% of customers say that free shipping is their number one incentive to shop online more, and 93% say they’re likely to buy more products if free shipping is offered. Including this in your automated gift card reminder email flow may be what tips the scales for a customer redeeming their gift card. Another similar option is to offer a one-off, limited-time discount code for gift card recipients i.e. 10% their order if they place it within the next month.

If your store has a loyalty program in place, engaging gift card recipients using loyalty points and perks is a great way to promote not only redemption, but also membership of your program. For existing customers, you may offer bonus points or perks, a tier upgrade, etc. when they use their gift card. If they’re a new customer, it may be a starting bonus e.g. “Start with 500 points when you place your first order with your gift card”. This then encourages future use of your loyalty program, further engaging the customer and delivering more value beyond that initial gift card redemption.

Use store data to deliver personalized recommendations

As many as 99% of email users check their inbox every day, but 40% of consumers say they have at least 50 unread messages at any given time. We’re sent brand and marketing emails every single day, round the clock - a sale here, a new launch there, it feels endless at times. The same goes for your customers, you may only send a few emails but multiply that by however many brands they’ve shopped with online in the past and it’s no wonder your campaigns go unopened. 

That’s why personalizing your email campaigns is so important. 72% of consumers say they only engage with personalized messaging, and 80% are more likely to shop with a brand that offers personalized experiences. The best way to leverage personalization to engage gift card recipients is by offering tailored recommendations based on the data you have collected from your store, email platform, and any other platforms you may use such as customer service. 

Some personalization points to consider include:

  • Previous email campaign engagement - Which style of campaign do they typically open and engage with?

  • Browsing history on your store - Show them products they’ve been checking out recently on your store, alongside similar products that may interest them instead.

  • Cart abandonment - Did they start an order and then leave their cart? Include recommendations in reminder emails based on these items, and include mention of their gift card in cart abandonment emails.

  • Previous order history - Which products would complement those which they ordered previously? Any new launches? If they haven’t yet ordered, which products are most typically purchased by newbies?

  • Average order value (AOV) or lifetime value (LTV) - You may want to tweak messaging based on if the customer is high or low value to your brand. A higher value customer may get bonus credit on top of their gift card, whereas a lower value customer may be offered loyalty perks instead.

  • Loyalty program membership/engagement - If the customer is a frequent user of your loyalty program, they may prefer to receive emails about perks and points over regular campaigns.

This will allow you to tailor the recommendations and products you show to gift card recipients. Include these recommendations in your reminder flow, as well as creating unique campaigns that are targeted toward recipients outside of reminders. For example if you typically send out personalized recommendations for sales or new launches, you may include a section on that campaign that mentions their gift card balance still to be used. These emails will then capture their attention with content that they’re actually interested in as well as reminding them of their gift card balance, giving them ideas of what they could use their card to purchase. 

Gift cards are a great part of any ecommerce strategy, but it doesn’t just end when a customer buys a card. In order to make the most of the unique opportunity they present, merchants need to find interesting ways to encourage redemption so that they can build a positive relationship, show off their customer experience, and increase their chances of turning a gift card recipient into a loyal customer.