The Hidden Power of Gift Cards in Your Loyalty Strategy

Key Takeaway: In an industry where high-frequency transactions are vital for success, gift card programs offer restaurant operators several opportunities to attract and keep loyal guests. 

Consumers are increasingly turning to gift card promotions as a smart way to stretch their dining budgets. Fiserv’s 20th Annual Prepaid Consumer Insights Survey, conducted in November 2022, reports that promotions influence 67% of consumers to buy more gift cards:

Source: Fiserv 20th Annual Prepaid Consumer Insights Survey

These promotions, which include complimentary bonus cards, discounts, or extra rewards points, are an attractive hedge against inflation that keep people in a dining-out mood. Recipients get a nice gift and a reason to indulge, and givers can use the extra points or bonus cards for their own dining experiences. 

While loyal patrons continue to give gift cards to friends and family, more customers are purchasing gift cards for personal use. According to Blackhawk Network, 45% of consumers plan to buy gift cards for themselves in 2024, up from 26% in 2023. Self-gifting is another opportunity for restaurants to use gift card programs to foster brand loyalty and more frequent visits. 

In this article, we’ll explore how restaurants can leverage gift card programs to attract and retain loyal guests. We’ll explore the psychology behind gift card purchases, discuss strategies for creating meaningful promotions, and examine how digital innovations are reshaping gift card programs. We’ll also look at ways to integrate gift cards into broader loyalty initiatives, measure the success of these programs, and adapt them to changing consumer behaviors.  

Turning gift cards into brand currency: The power of stored value

Savvy restaurant operators are discovering the power of integrating stored value into their loyalty programs through innovative gift card strategies. When guests have a gift card balance earmarked for your establishment, it's like having their own personal brand currency—and the result is often increased sales and deeper brand engagement. 

Research shows that 47% of consumers spend more than the face value of their gift cards. This overspend creates a natural incentive for guests to continually reload their balances, fostering a cycle of engagement. What’s more, the convenience of paying with a branded gift card, whether physical or digital, cultivates a stronger emotional connection to your restaurant than using a credit card or cash. 

A stored value approach helps transform every transaction into more of a personalized experience, making guests feel like members of your restaurant’s community rather than just another patron. It’s a subtle but powerful shift that can significantly impact guest loyalty and engagement. 

Supercharging sales: The art of gift card incentives  

Strategic incentive programs can significantly boost gift card sales and usage, creating a virtuous cycle of engagement and revenue. Allowing loyalty program members to purchase gift cards with points—and earn extra points when buying or using gift cards—effectively encourages this profitable behavior. 

A prime example of innovative gift card promotion comes from Duffy’s Sports Grill. Duffy’s successfully created urgency and excitement around gift cards through special gift card Flash Sales. On just three days throughout the year, Duffy’s offers physical and digital gift cards with bonus dollars, driving a surge in gift card purchases. 

The results speak volumes about the effectiveness of this approach. Between launching the program in 2020 and 2022, Duffy’s saw 10% year-over-year growth in their physical gift card sales and a 21% overall increase in sales thanks to adding eGift. 

31% of their total annual gift card sales occurred on their three Flash Sale days alone. By offering added value during strategic periods, Duffy’s not only receives a healthy revenue spike but also sets the stage for future visits and continued customer engagement. 

Turning Transactions into Relationships: The Emotional Power of Gift Cards 

While gift card programs are effective at generating recurring revenue, their true power lies in their ability to foster brand affinity and emotional loyalty, the foundation of long-term business success.

When guests give your restaurant’s gift cards to friends or family, they’re doing more than just offering a meal—they're putting their personal stamp of approval on your brand. Recommendations like this carry significant weight, so the more satisfied guests who become passionate, gift-card-giving brand ambassadors, the better. 

For recipients, gift cards offer a low-risk opportunity to explore your establishment’s full range of offerings. Whether it’s a quick coffee and muffin or an elaborate multi-course dinner, gift cards provide a sense of freedom to experiment and indulge. This exploration often leads to pleasant surprises and newfound favorites.

Guests dining with a gift card are more likely to step outside their usual habits. They might be inclined to try new menu items, visit during different times of day, or splurge on that special dessert they normally wouldn’t order. Each of these experiences has the potential to deepen their connection with your brand.

To maximize the impact of gift cards on loyalty, consider these strategies: 

1. Capture new gift card users in your loyalty program, turning one-time visitors into regulars by encouraging gift recipients to create a loyalty account. 
2. Use data from gift card usage to personalize future marketing efforts. 
3. Create special “welcome” experiences for first-time gift card users to make a strong first impression. 
4. Leverage special occasions to deepen emotional connections. For example, send a special gift card offer to loyalty program members on their birthday. Whether they treat themselves or auto-load their balance and throw a party, including an extra bonus can make them feel truly valued and appreciated.

The Digital Revolution: Reimagining Gift Card Programs 

As technology evolves, gift card programs are undergoing a dramatic transformation. Forward-thinking restaurants are embracing digital gift cards, offering seamless purchasing, sending, redemption, and reloading experiences through mobile apps and websites.

The convenience of digital gift cards cannot be overstated. With just a few taps on a smartphone, customers can purchase and send personalized gift cards instantly, making last-minute gifting a breeze. For recipients, the ability to store and access gift cards digitally eliminates the risk of lost or forgotten physical cards, ensuring their gift is always at hand when needed.

But innovative restaurants aren’t stopping at mere digitization. They’re leveraging technology to gamify their gift card programs, turning transactions into engaging experiences. 

Imagine purchasing a digital gift card and being invited to play a virtual “scratch-off” game, with the chance to win bonus perks, discounts, or even additional gift card value. These interactive elements add an element of excitement and unpredictability that can boost customer engagement and purchase frequency.

Some restaurants are taking it a step further by integrating augmented reality (AR) into their gift card experiences. Picture receiving a digital gift card that, when viewed through a smartphone camera, transforms into a 3D representation of the restaurant’s signature dish or a virtual tour of the dining space. Immersive experiences like these not only delight recipients but also create memorable brand interactions that extend well beyond the initial purchase. 

By embracing digital gift card innovations, restaurants are: 

1. Tapping into new market segments 
2. Increasing gift card sales through frictionless purchasing processes 
3. Improving engagement through interactive and gamified experiences 
4. Gathering valuable data on customer preferences and behaviors 
5. Creating shareable moments that amplify word-of-mouth marketing 

As we move further into the experience age, the restaurants that successfully blend technology with their gift card programs will be well-positioned to build stronger customer relationships and drive long-term loyalty. 

Data-Driven Loyalty: Measuring and Optimizing Gift Card Success 

To harness the power of gift card programs for brand loyalty, operators must embrace a data-driven approach. By closely monitoring key metrics, you can gain valuable insights, refine your strategies, and maximize the loyalty-building potential of your gift card offerings. 

Key metrics to track include: 

1. Redemption Rate: The percentage of gift cards redeemed provides insight into program effectiveness and customer engagement.
   
2. Overspend: The average amount spent above the gift card value indicates additional revenue generated and customer willingness to invest in the experience.
   
3. Time to Redemption: How quickly gift cards are used after purchase can inform promotional timing and expiration policies.
   
4. Return Visit Frequency: Tracking how often gift card users return helps measure the program’s impact on customer loyalty.
   
5. Cross-Selling Success: Monitor if gift card users try new menu items or services, indicating expanded customer engagement.
   
6. Guest Acquisition Cost: Compare the cost of acquiring customers through gift card promotions versus other marketing channels. 

Beyond basic metrics, operators can leverage advanced analytics to uncover deeper insights, such as seasonal trends for peak gifting, optimal guest segmentation, and promotion effectiveness. Armed with these insights, you can fine-tune your gift card programs for maximum impact. 

The key to a successful gift card program is continuous refinement. Regularly review your data, test new strategies, and be willing to pivot based on results.  

From Gifts to Growth: Harnessing the Power of Gift Cards 

Gift cards have evolved from simple presents into potent loyalty tools that offer convenience, value, and personalized experiences. 

Paytronix is your outcome-oriented leader offering loyalty-driven gift card solutions, providing unparalleled expertise in integrating gift cards, loyalty, and online ordering into a cohesive, customer-centric ecosystem. 

Contact us today for a personalized demo and discover how we can help you create one-of-a-kind experiences with your customers, one gift card at a time.