How to Encourage Shoppers to Redeem Gift Cards

gift card redemption

Gift cards were the most popular holiday request in 2021. Gift cards are convenient both for gift-givers and recipients because they’re easy to ship and they take out the guesswork of holiday shopping—gift recipients are sure to get something they like when they make the purchase themselves. Gift card purchase rates continue to rise, with pandemic restrictions possibly aiding, but certainly not hurting, that surge. 

Plus, in a year impacted by major breakdowns in the global supply chain, gift cards are an attractive option for holiday gift-givers who want to ensure they don’t show up for the holidays empty-handed.

Companies know that selling gift cards is an excellent way to drive more revenue –– but how can sellers encourage shoppers to redeem their gift cards?

Unredeemed gift cards are common

Over half of adult consumers have unredeemed gift cards. Millennials and Boomers, in particular, are known for having unused gift cards –– sometimes for years. 

Gift cards go unused for several reasons:

  • People forget about or lose their unused gift cards
  • People don’t like the store or restaurant that the gift card came from
  • People can’t use their gift cards because of location or for other personal reasons
  • People use only a portion of the gift card balance
  • People don’t use their gift cards because they’ve expired or they come with restrictions
  • The business that issued the gift card closed before the recipient could use the gift card
  • The recipient doesn’t know what the gift card balance is

Most shoppers have a firm intention to use their gift cards, but after six months, gift card redemption rates decline, and after one year, they plummet. That means retailers should encourage shoppers to redeem their gift cards quickly.

Why would you want customers to use gift certificates or cards at your store?

Many people believe that unused gift cards represent “free revenue” for businesses –– money comes in, but no goods or services go out, which means that unused gift cards have a profit rate of nearly 100%. 

However, those forgotten gift cards and vouchers actually represent lost additional revenue potential. In fact, when shoppers redeem gift cards, sellers often make more money than the value of the gift card. Increasing revenue in this way may seem counter-intuitive, but gift card redemption has more benefits than just incremental revenue.

Gift card redemption increases AOV

When shoppers redeem gift cards, they often end up spending more than the value of the gift card. For example, a shopper may receive a $25 gift card and apply it to a $60 purchase, resulting in low-cost marginal revenue. When shoppers don’t redeem their gift cards, there’s zero chance that they’ll end up spending extra on your product or service.

Additionally, shoppers are more likely to purchase items at full price when they shop with a gift card. That means that sellers can capture more profit by making sales after the holidays on full-priced items. Instead of raising your prices or pushing deep discounts, consider encouraging gift card sales to existing customers.

Gift cards can attract new customers and expand your customer base

People often receive gift cards for stores they haven’t visited, or maybe haven’t even heard of. Because just 2.17% of eCommerce visits end in purchases, a gift card incentive makes it far more likely that the visit will end in a sale.  

In that case, a gift card serves as brand awareness to attract a customer who hasn’t found your store through other channels. After the customer makes their first purchase, they may become loyal to your brand. Eventually, they might even give gift cards that will win you more customers!

Gift card redemption can generate return customers 

Customers who purchase gift cards for someone else are likely to do so again if they hear positive things from the recipient. Not only does gift card redemption increase AOV, but it can create loyal customers out of those giving and receiving the gift cards. 

Shoppers are often creatures of habit. They tend to return to the same places they’ve gone before because they’ve had pleasant experiences, because they like the products, or because they’re not sure about other options. Return customers spend more than new ones and provide a much higher lifetime value. Turning a new customer into a loyal one is one of the most valuable things a business can do to increase revenue, but it’s often hard to convince new customers to try your products. 

Gift cards can bridge the gap between interest and commitment. When a new visitor is unsure about making a purchase at your shop, having a gift card decreases their price sensitivity and makes them more likely to “take a chance” on your products. After the purchase, you may well have gained a loyal customer for life. 

How to encourage shoppers to redeem unused gift cards

So, what are the best ways to get customers spending their gift cards?

Remind shoppers of their remaining balance

One reason shoppers don’t spend their gift cards is that they don’t remember their balance, and it’s too much trouble to check the card online. For physical cards, always let customers know what their remaining balance is by either printing it on the receipt, or, better yet, by sending an email confirmation. Then use email automation to periodically remind them of their remaining balance.

Send reminders via email and social media

Once per season, push a short marketing campaign to your email list and social media followers reminding customers to redeem the gift cards they received on their birthdays, at events, or during the holiday season. 

Offer bonus incentives for shoppers who redeem gift cards

Every once in a while, offer bonuses to shoppers who pay with gift cards: add an extra item to their order, give them a small discount, or offer double points in your loyalty program. Unique gift card programs can also help you retain customer interest and increase the rate of redemption.

Publish gift card guides to highlight your top-selling products

Gift card guides are a great way to highlight products and bundles at different price points –– especially for new customers who received gift cards but don’t know what to buy. Create digital and physical brochures promoting your most popular items in common gift card price ranges, like “Top Sellers Under $25.” People’s natural inclination is to spend above the gift card amount to finish off the card, so this will increase your revenue generated by each card-redeeming customer.

Don’t miss a sale because of stock outs and low inventory

With new shoppers coming to your online store, you want to make sure they have a great experience spending their gift card. The biggest let down for a gift card shopper is if they can’t buy your most popular product because you’ve stocked out. Stay in stock with an Instant Advance, Instant Advance provides immediate access to up to $250k in growth funding for businesses that are ready to scale. Qualification and approval are fast and easy with no credit checks required. Apply online with your marketplace and get funded in as little as one business day.

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