Latest / The Retention Marketing Podcast with Fexingo: Email, SMS, and Loyalty for Repeat Customers / How One Brand Uses Gift Cards to Drive Repeat Purchases
Transcript
- Lucas: So a beauty brand we've been following — they sell direct to consumer skincare — started using gift cards not as an acquisition play, but as a retention tool. And it boosted their repeat purchase rate by 25 percent in four months. Luna: Okay, that's a big jump. But when I hear 'gift card', I usually think 'we're giving away margin'. How did they make it work? Lucas: That's exactly the question. They were careful. The gift card was small — ten dollars on a forty-dollar first purchase. And it wasn't triggered by the purchase itself. It was sent via email exactly 21 days after the first order. Luna: So they timed it to when the customer might be running low on the product. That's smart. Lucas: Right. The average skincare product — a serum or moisturizer — lasts about three to four weeks if used daily. So day 21 puts you right in that window where the customer is thinking, 'I should reorder.' And the email says, 'Here's a ten-dollar gift card to use on your next purchase.' Luna: And what was the redemption rate? Lucas: Forty-two percent. Which is high for gift cards. Most brands see single-digit redemption on promotional gift cards. But because it was timed well and the amount was meaningful relative to the product price, it worked. Luna: I want to dig into the psychology here. Why does a ten-dollar gift card drive a second purchase more than, say, a ten-dollar discount code? Lucas: There's a few reasons. First, a gift card feels like found money — it's not a discount, it's a reward. Second, it's not tied to a specific product, so the customer can buy whatever they want. And third — this is key — they made the gift card expire in 30 days. Luna: Scarcity. That makes sense. Lucas: Exactly. The expiration window created urgency. But they also made it usable on any product, including full-priced items. So the average order value on those gift card redemptions was actually higher than the initial purchase — around fifty-two dollars. Luna: So they're not cannibalizing margin. They're actually getting a higher AOV on the second purchase. That's the dream. Lucas: And here's the twist. After the second purchase, they didn't send another gift card. They just sent a standard 'thank you' email with a loyalty program invite. The gift card was only for the first-to-second purchase bridge. Luna: Because by then, the customer has already demonstrated they're willing to buy again. The gift card was a nudge, not a crutch. Lucas: Exactly. And their data showed that customers who redeemed the gift card had a 60 percent higher likelihood of making a third purchase within 90 days compared to those who didn't redeem. Luna: So the gift card effectively 'locked in' the repeat habit. That's beautiful. Lucas: Now, the obvious question is: how do you fund this without wrecking your margins? In their case, they modeled it out. The ten-dollar gift card cost them about eight dollars in actual cash outlay — because some gift cards are never redeemed. But they set the average redemption rate at 42 percent, so the actual cost per customer was about three dollars and thirty cents. Luna: And if the second purchase has a 50 percent margin on a fifty-two dollar order, that's twenty-six dollars of gross profit. So you're spending three bucks to get twenty-six. That's a no-brainer. Lucas: Right. And they tracked that the gift card cohort had a 30 percent higher customer lifetime value over six months compared to a control group that got no gift card. Luna: I'm curious: did they test different gift card amounts? Like, would a five-dollar card have worked as well? Lucas: They did. Five dollars had a 28 percent redemption rate — significantly lower. Fifteen dollars had a 55 percent rate, but the incremental cost ate into the margin more. Ten dollars was the sweet spot. Luna: So the lesson is: test the amount, but also test the timing. Day 21 might not work for every category. Lucas: That's exactly right. For a consumable product, you want to hit that reorder window. For something like apparel, it might be longer — maybe 45 days. But the principle is the same: use the gift card as a bridge, not a reward for loyalty. Luna: One thing I love about this approach is that it's not a 'subscribe and save' play. It's just a smart, one-time nudge. Lucas: And it's scalable. They did it via email, but you could also do it via SMS or even a postcard. The key is that it feels personal and timely. Luna: Alright, I'm sold. I think this is something a lot of brands could implement this quarter. Lucas: And if you're thinking about trying it, start small. Pick your top-selling product, test the timing and amount, and measure the repeat rate carefully. You might be surprised. Luna: Honestly, if today's episode sparked an idea you're going to test, that's exactly the kind of thing that keeps this show ad-free. If it was worth a coffee to you, you know where to find us — buy me a coffee dot com slash fexingo. Lucas: Yeah, listener support is what keeps these conversations going. No pressure, just if it's useful. Luna: Exactly. So back to the brand — I think the other interesting piece is how they handled the gift card's design. They made it look like a physical card in the email, with a unique code. Lucas: That visual touch probably helped. It felt more like a real gift than a discount code. And they branded it with their logo and a warm color palette. Luna: Small details that make a difference. Alright, I think we've got a solid takeaway here. Test a timely gift card bridge for your first-time buyers. Lucas: And remember, it's not about giving away free money — it's about creating a habit. Get that second purchase, and the third often follows. Luna: Thanks for listening, everyone. We'll be back next week with another retention deep dive.