5 Insights on Leveraging Gift Cards for Guest Engagement

Key Takeaway: When strategically integrated into an operator’s broader marketing initiatives, gift cards can address the evolving needs of guests while boosting the restaurant’s bottom line.

Despite reports of cooling inflation and lower unemployment numbers, most Americans are still feeling the pinch. While the rate of inflation may have slowed, prices haven’t come down. While current economic conditions haven’t stopped people from dining out, it has made guests more conscious about how they’re spending money. 

According to CNBC, savvy diners use multiple strategies to stretch their dollars, such as joining loyalty programs for perks, opting for appetizers over entrées, and taking advantage of discounts. This shift in behavior presents a key opportunity for operators to leverage an underutilized asset in their customer engagement arsenal: the gift card. Far from being just a simple transaction, gift cards serve as a powerful tool for attracting new customers and driving customer lifetime value (CLV).

1. Gift cards—The Gifts that Keep on Giving 

The gift card market continues to experience impressive growth across industries. In the United States alone, it’s forecast to reach $214.3 billion in 2024, with projections indicating a compound annual growth rate (CAGR) of 5.7% from 2024 to 2028. This surge is even more pronounced in the digital gift card sector, with the North American market expected to grow at a CAGR of 14.7% through 2032.

For restaurants specifically, the numbers are equally encouraging. Bank of America reported that 78% of gift card buyers obtain cards related to food and beverages. The report also found that physical gift cards are still more popular than digital gift cards and that Millennials buy more gift cards than any other generation: 35% of Millennials plan to spend more on gift cards in 2024, followed by Gen Z (23%), Gen X (18%), and Boomers (13%). 

Source: Bank of America 2024 Consumer Gift Card Trends 

Source: Bank of America 2024 Consumer Gift Card Trends 

Bank of America’s 2024 Consumer Gift Card Trends report showed that while all generations love gift cards, Millennials are the most enthusiastic––with 35% planning to spend more on gift cards in 2024. 

Gift card growth is fueled by a desire for flexible dining options and a conscious effort to spend money more strategically. According to the Bank of America study, 47% of consumers said their friends and family members prefer gift cards over physical gifts more now than they did just a few years ago. Such widespread enthusiasm for gift cards opens new avenues for operators to boost their customer engagement strategies. 

2. Gift Cards Can Help Operators Expand Their Brand Reach 

As branded marketing tools, gift cards offer restaurants a unique opportunity to get noticed in a crowded marketplace. Bank of America found that 49% of consumers use gift cards to try new places, presenting an excellent opportunity for restaurants to acquire new patrons.  

To maximize their reach, operators should adopt a multichannel approach to gift card sales. This strategy may include:

1. In-store sales: Promote gift cards at the cash register, on tables, and through server recommendations. This caters to impulse buyers and guests who want to share positive experiences with friends and family.
   
2. Online sales: Offer digital gift cards through your restaurant website and mobile app, appealing to those who prefer the convenience of online shopping.
   
3. Third-party partners: Use providers like Blackhawk Network and InComm Payments to distribute gift cards in supermarkets, drug stores, and big-box stores, increasing visibility and accessibility.
   
4. Digital partnerships: Explore innovative collaborations like Venmo’s recent partnership with InComm to offer digital gift cards within the Venmo app, tapping into new customer bases.

The key is to make gift cards highly visible and irresistible. Running promotions like “Buy a $100 gift card and get a $20 bonus gift card” can incentivize purchases, as can targeted campaigns distributed via email or your mobile app. 

Because studies show that nearly half of gift card recipients spend more than the value of their gift cards, operators may want to optimize revenue by promoting different gift card denominations to different audiences. Gift cards worth $50 and $100 may be more suitable for loyalty program members, for example, while gift cards worth $25 may be more effective for attracting new guests. 

Of course, your specific strategy will depend on your concept, the products you sell, and your gift card tax strategy. The point is that by diversifying distribution channels and consistently promoting gift cards, you reach a wider range of guests who are already predisposed to the gift card concept.

3. Gift Cards Give Brand Loyalists a Reason to Share the Love (Even with Themselves) 

Promoting gift cards to your high-value, loyal guests is an excellent way of engaging your most enthusiastic brand advocates. This audience is more likely to buy gift cards—not only to share their love for their favorite restaurants with friends and family members but also as treats for themselves. Interestingly, there’s a projected 19% growth in people buying gift cards for themselves in 2024. 

Word-of-mouth marketing by loyal guests through gift cards is invaluable for your restaurant. You can encourage this behavior by:

• Integrating gift card messaging into loyalty programs year-round: On average, shoppers buy five gift cards outside of the busy Christmas season, covering birthdays and other occasions.
  
• Making it easy for loyalty program members to order gift cards and reload their balances online: User-friendly interfaces and mobile app integrations add conveniences that increase gift card sales, especially among impulse buyers.
  
• Offering special deals to loyalty members, such as double points when they purchase a digital gift card online: These promotions can be tailored to specific times of the year, creating a sense of urgency and exclusivity.
  
• Promoting contests that encourage social sharing and reward loyalty members for posting about their gift card experiences: Design fun and creative challenges that align with your brand, such as photo contests of memorable dining experiences purchased with gift cards. 
  
• Encouraging loyal guests to use gift cards to support causes they care about and promote their businesses: Offer gift cards in bulk to organizations so they can meet fundraising goals and reward employees with a special treat. This not only strengthens community ties but also expands your restaurant’s reach to new potential customers.

4. Gift Cards can Become a Cornerstone of Your Guest Loyalty Strategy 

While leveraging your biggest fans to promote gift cards is vital to the success of your gift card program, it’s just the beginning of how you can integrate gift cards into a comprehensive loyalty marketing strategy. 

Gift cards have the potential to attract new customers to your loyalty program and foster long-term program membership at every tier level. 

Here are seven creative ways you can use gift cards to increase customer lifetime value: 

1. Bridge the gap to loyalty program membership: Gift cards serve as a gateway for new loyalty program members. Consider implementing a tiered welcome experience for gift card recipients who join your loyalty program. You could offer a small perk (like a free appetizer) on their first visit, a more substantial reward (such as a discount on their entire meal) on their second, and a personalized offer based on their dining preferences on their third. 

2. Encourage online gift card management: Implement a user-friendly online platform that allows customers to quickly reload their gift card balances, report lost or stolen cards, and view their transaction history. You could even offer features like digital wallet integration, balance-low notifications, and convenient reloading through automated gift cards.

3. Incentivize repeat visits: Some restaurants have found success providing enhanced rewards for gift card usage. For instance, a coffee chain might offer double points when customers pay with a gift card. 

4. Re-engage lapsed guests: Comp cards (essentially gift cards that the restaurant pays for) can be strategically used to re-engage at-risk loyalty members. Operators can also use comp cards as a service recovery tool, turning a potentially negative experience into an opportunity for the guest to give the restaurant another chance. 

5. Remind guests to use their gift cards: Operators can use their loyalty data to reach out to guests with unredeemed gift card balances. A personalized reminder about their available balance, coupled with a limited-time offer, can reignite their interest in your restaurant.

6. Surprise and delight: Occasionally surprise your most loyal customers with small-denomination comp cards. This unexpected gesture can significantly boost positive sentiment and encourage more gift card purchases.

7. Provide feedback incentives: Offer small-value comp cards in exchange for completing customer surveys or leaving reviews, ensuring another visit from the customer. Use the feedback gathered to personalize future offers for these engaged customers.

By integrating gift cards deeply into your loyalty strategy, you create an enduring cycle of engagement that keeps customers coming back and encourages them to bring others along.  

5. The Gift Card Process Can Lead to Greater Guest Engagement 

While gift cards are great in and of themselves, operators can unlock even more value from them by improving every aspect of the gift-card-giving journey. Here are four ideas for elevating the gift card experience:

1. Personalization and customization:
   The demand for personalized experiences has led to increased customization options for gift cards. Gift card buyers can now add personalized messages and designs, enhancing recipient appeal and strengthening customer engagement. 
   
2. Multi-use and partnership gift cards:
   Some brands are partnering on multi-restaurant gift cards that can be used at more than one destination. One example is a “Dinner and a Movie” gift card offered by a restaurant and a movie theater. Restaurants could also consider partnering with local businesses for themed gift cards, like a “Date Night” package. Creative partnerships can expand your restaurant’s reach and provide added value to gift card purchasers
   
3. Interactive gift card experiences:
   For special occasions or high-denomination gift cards, operators may want to develop an engaging unboxing or reveal experience for physical gift cards. This could include creative packaging, a branded gift alongside the card, or even an augmented reality component accessed via smartphone. For digital gift cards, consider animated reveals or interactive elements that make receiving the gift card an event in and of itself. 
   
4. Post-purchase engagement:
   To keep momentum going, you may implement a follow-up strategy for gift card purchasers and recipients. This might include sending recipe ideas, chef’s tips, or exclusive content related to your cuisine. Ongoing engagement keeps your establishment top-of-mind and encourages quicker gift card redemption. 

With these gift card approaches, your restaurant can transform gift cards from simple monetary tokens into experiences that customers look forward to having. This not only increases the likelihood of gift card purchases but also ensures your recipients are more engaged and likely to become repeat customers. 

Unwrap the Full Potential of Your Gift Card Program 

Even in the face of economic pressures, the allure of dining out remains strong. In 2023, the National Restaurant Association reported that 84% of consumers prefer going out to a restaurant with family and friends over cooking and cleaning up at home. Gift cards offer your restaurant a versatile and effective way to capture this demand, while also connecting with loyal patrons, attracting new guests, and building lasting relationships.

By viewing gift cards as more than just a sales channel, you can expand your reach, empower your brand advocates, drive loyalty, and create personalized experiences that keep guests coming back for more.

As the restaurant industry continues to face challenges, operators who fully leverage the potential of gift cards in their customer engagement strategies will be better positioned to thrive. To learn how Paytronix can help you make the most of your gift card program, from seamless loyalty program and mobile app integration to data-driven insights for targeted promotions, contact us today for a personalized demo.