Everything in ecommerce is powered by data. You may use sales data to determine the success of new products, or to forecast demand during key sales periods. You analyze metrics from email marketing and social media campaigns to assess your marketing strategies.
Data allows you to make the best decisions for your business based on evidence, rather than guesswork. So, the same should apply to decisions you make about your store’s gift products. Data can turn what can often be considered seasonally relevant products into year-round moneymakers. That is, if you know what to look for.
Today we’re going to look at what having a gifting strategy is essential, and the kind of data points you can analyze to improve it.
Why a gifting strategy is of high value to your store
The real value of a gifting strategy lies in the opportunity offered by gift products. The global gift card market was estimated to be worth $845 billion in 2022, and is expected to reach $2021 billion by 2027, growing at a CAGR of 19.05%. They’ve also continued to be the most popular gift US consumers want to receive over the holiday season, with NRF data showing gift cards were the most desired gift in 2022 for the 13th consecutive year.
Why is this the case? According to consumer data, more than 50% buy gift cards as they allow the recipient to choose their own gift, and over 25% say it’s because they’re simply easier to buy. The subscription gift market also continues to demonstrate promise, with 63% of consumers expressing they’d give a subscription as a gift and 70% would like to receive one as a gift. Not only are gift card and subscription sales on the rise, but they’re also valuable for boosting AOV - the average consumer spends $59 over the value of a gift card.
Many merchants typically focus the promotion of gift products around key gifting periods. Black Friday and the holiday season in Q4 are typical focal points, as well as other holidays scattered throughout the year such as Mother’s Day and Valentine’s Day. However, only catering to these specific periods means many may miss out on the year-round opportunity of gift products. Birthdays, anniversaries, housewarming, a new job - there are a variety of more personal dates and reasons for a customer to purchase a gift. And in all these cases, you need to be ready with a tried and tested gift strategy to seal the deal.
5 different gifting metrics to track and analyze
Now let’s take a look at some data you can analyze, what it may be able to tell you, and how you can use it to enhance your gift strategy.
#1 - Gift card and subscription sales, and sales over time
One of the more obvious metrics you can analyze is the rate of sale of your gift cards and subscriptions. You can look at how many units were sold i.e. how many individual gift cards were purchased, as well as the total dollar value. You can then compare these figures quarterly, as well as year-on-year, to get a clear picture of the sales rate for your gift products over time.
What can this data tell you?
Sales growth over time as well as units sold can give you a solid starting point for your gift product strategy. It tells you about your customers’ buying habits at different times of the year, and when you could be doing more to promote your gift products. When are the most gift cards and subscriptions sold? Why might this be? Are there are any periods where you’d expect higher sales, but seen minimal or no growth?
If, for example, you have really strong gift card sales in Q4, then what more could you do to promote this at other times of the year? It could also indicate that if sales are high in Q4 but much lower in Q1, you should focus instead on retention strategies.
#2 - Most common gift card and subscription value
Offering different options for gift cards and subscriptions gives customers the benefit of choice. They can spend to their budget, and select a gift their recipient will enjoy. From their selection, you’ll be able to see over time what the most popular options are for gift products. You can compare the sales rate for each option, and then against other gift products.
What can this data tell you?
By analyzing the most popular variants for gift products, you can develop a more focused approach to gifting. It will tell you what your customers are actually buying, and therefore which options aren’t worth offering. Reducing the number of options isn’t necessarily removing choice from the customer, you’re just giving them a more curated list of options based on the data you have at hand.
Say your cheapest product is $30, and your AOV is around $60-80. You offer gift cards in denominations of $10, $20, $50, and $100. However you notice that most customers don’t order just a $10 or $20 gift card, or that you actually have customers ordering both in one order to the same recipient essentially creating a $30 gift card. This tells you that it’s perhaps more valuable to offer a $30 option, and remove the $10 option altogether.
#3 - AOV on redeemed gift cards
Average Order Value (AOV) is one of the most important pieces of the ecommerce puzzle. You may have high traffic and high order volume, but if AOV is consistently low then it can be more difficult to increase revenue. You’re then relying on bringing in high volumes of low value orders, rather than being able to bring in fewer high value orders. Gift cards can increase AOV, but you need to understand what that figure actually looks like before you can start to boost it.
There are other related figures you should consider in order to get a more complete picture of your customers’ habits:
- - Most common spend bracket on orders using gift cards (i.e. your AOV might be $50 but the most common spending bracket is $20-40)
- - How much on average customers spent over the value of a gift card
- - How much on average customers spent over the value of different gift card denominations (i.e. how much did those who received a $20 gift card spend over those who received $50)
With the latter two data sets, it may be helpful to also look at these are percentages for a better comparison.
What can this data tell you?
In short, this data can tell you the value that gift cards are adding to your store. It can also highlight where you may be missing the mark on your gift card strategy. Lower AOV may mean you need to engage customers more with recommendations - these might be in emails, or on-page such as making it easy to add complementary products. For example if the product is a sports bra, then a quick-add option for the matching leggings.
By segmenting customers based on the gift card denomination, you’ll also be able to get a clearer picture of which audiences are thriving or underperforming. After all, if you only look at the AOV of gift cards altogether, then it might look less impressive. However once segmented, you may realize that in fact, those who used $50 gift cards had a much higher than average AOV but were being dragged down by the average amount spent using $20 gift cards.
#4 - Retention rates on gift cards and subscriptions
A gift card or gift subscription is a great foot in the door to customers with high potential. Essentially, they’ve been gifted a “free trial” of your products and customer experience. Get it right, and you could see a wave of newly loyal customers and subscribers that will serve your store for years to come. However, you’ll only know if this is the case if you analyze retention data.
Look at the number of returning customers vs one-off orders using gift cards after a specific time period. If you sell gift subscriptions, look at the churn rate on gift orders. Compare these figures to those for customers who did not come to you via a gift. If there’s a significant difference, then it may be worth looking into.
What can this data tell you?
Essentially, this data will tell you where you need to improve. Gift orders are prime for retention, after all they don’t need to spend anything in order to receive something. If retention is low, it indicates that you could be doing something more to keep those customers coming back. Is it more engagement? More personalization? Maybe you need to look at order incentives for gift customers, or improving your subscription user experience.
#5 - Returning vs new customers buying gifts
Of course, in order for someone to receive a gift, someone has to buy one first. The original customers for your gift products are worth diving into, so you can better understand how people interact with your gift products. We’ve already looked at sales rate and common denominations, but how about who those customers are?
Segment customers who purchased gift products based on whether they were a returning customer, or new to your store. If looking at subscriptions, you can take this a step further and also look at if they were an active subscriber at the point of purchasing a gift.
What can this data tell you?
Healthy acquisition and retention rates are all about balance. Analyzing the number of new vs returning customers buying gifts helps show that you’re not only bringing in new customers through gifts, but retaining customers too. It can also act as a gauge of how you should approach promoting your gift products. If you see a lot of new customers, but not a lot of returning customers then it may be worth investing more time into promoting to those customers. After all, they should be your most loyal brand advocates, so you want them to share the brand love with likeminded friends and family.
As for new customers, it can help show if your acquisition marketing efforts are effective. Look at sources for these new customers - search, organic, paid, social, email etc. Which channels do you invest in, versus those that are bringing in new customers?
Why you should incorporate split testing to your gift product analysis
So, you’ve dived into all your data, and you’ve learned some things about your customers and gift products. You have some ideas now about how to improve your strategy, but how will you be able to assess which will be the most successful? The answer lies in split testing.
Split testing in ecommerce is where you divide your audience to test variations to your store. For example, say you want to test product recommendation placement on product pages. You could split your audience down the middle, showing Group A recommendations underneath the “add to cart” button, and Group B recommendations further down the page. You’d then run the test, and at the end analyze to see which placement resulted in more sales.
Here are some ideas for split testing with gift products:
- Offers for existing customers - Send a different exclusive offer to different segments of customers and subscribers that encourages them to buy a gift card or subscription, e.g. buy one, get one free. Analyze CTR, and conversions to see which is effective.
- Site placement - In order for customers to buy a gift product, they need to know it exists. Show site visitors different placement for the link to your gift products e.g. in the main navigation, as a sub-category, or in the sitemap.
- New customer engagement - Create separate workflows for new customers who place their order using a gift card. Have one that has more content, and one which has less. Analyze open rates and engagement to see which is more effective, and over a longer period of time analyze conversions.
- - Incentives for new customers/subscribers - Finding the right incentive can not only save your brand money, but result in higher retention rates. Send new customers and subscribers different types of incentives to see which they pick up on, and which go ignored.
This testing combined with segmentation will give you even more powerful data evidence you can use to enhance and strengthen your gift strategy. This will be hugely beneficial not just for those key gifting periods, but throughout the rest of the year.
Designing a gifting strategy that works for your store isn’t a one-fits-all situation. Best practices will only get you so far, as they won’t be specific to your products and customers. Combining these with your store’s data and split testing will result in a strategy that’s specific, unique, and effective.