We have been getting a lot of queries from merchants willing to understand the difference between Gift cards and discounts. In this article, we will explain the clear difference between both and which one should you choose to refund your customers.
Let's understand how gift cards are different from discount coupons/codes:
Until balance is over
Use as a wallet
Order Level (Includes shipping amount too)
Only on Subtotal
Pay for complete order
Only 1 discount code per order
You must have realised by now that Gift card is a clear winner in all aspects from a consumer perspective. Let's now understand what makes sense as a business "Refunding via gift card or discount code":
1. In case of returns, consumers either expects a complete refund via their original mode of payment or a way they can enjoy their future purchase with complete freedom. Any business should not make it complicated for them to get a refund under any circumstances.
2. We have seen an increase of up to 27% in repeat purchase rates for brands who provide a seamless and quick refunds in case of returns. At scale, this impact is huge.
3. With discount codes having a limitation of just being used for once and in full, customers feel stuck with their own money. This makes them feel stuck and a lack of trust towards the brand.
4. Gift cards on the other end allows the customers to make the future purchase even of lesser amount and use the remaining balance on their next purchase again.
Let's walk through a real life scenario:
Kat buys a beautiful Red Gown worth $100 dollars from XYZ but found the size to be a misfit and decided to return the item. Upon raising the request, XYZ arranged for a return and processed a refund of $100 immediately to Kat via gift card. Kat is now impressed with the proactive approach of brand and has already attracted her to browse for next purchase.
After few days, Kat decides to buy another product worth $50 and used her gift card of $100 received from last refund to pay for this order. Kat still has $50 with her as gift card balance which can be used on her next purchase. XYZ has gained Kat's trust with proactive action and right refund mode which means increased LTV and a super happy customer :)
Conclusion: Gift card is anytime a clear winner over Discount code :)