In conversation with Zalando: Connecting the dots between branded currency, customer experience and loyalty

by Sabrina Carlton

Gift cards have had an unassuming presence in our lives for the last two decades. We’ve all bought and received them as (often last-minute) gifts for our favourite brand or an experience. But these seemingly innocuous little cards hold a mighty amount of unlocked potential to bring more value to customers and meet their ever-changing needs as part of wider branded currency strategy.

Branded currency is a form of value and an alternative method of payment for the goods and services of a specific brand or merchant. It can take both a physical and digital form, such as coupons, loyalty points and, of course, gift cards.

In recent years, the retail market has undergone immense transformation: from offline stores to an ever-increasing online landscape, including omnichannel. Such digital developments have been accelerated by the coronavirus crisis, generating increased complexity when addressing customer needs. However, when using the right tools, these challenges can also represent great opportunity.

To dig into this topic further, we spoke to Soren Hoj Thomsen, Senior B2B Lead at Zalando, Europe’s leading online fashion and lifestyle platform as well as pioneers and leading players in changing the gift card game. Zalando’s branded currency strategy is one of the most innovative and disruptive in the European landscape.

Not just a gift, not just a card

To kick things off, we asked Soren how Zalando sees the positioning of branded currency as part of a brand’s overall commercial strategy.
“The starting point here is to reimagine what truly creates value for our customers […] At Zalando, we see all these different incentives – whether it’s vouchers, different offers, gift cards, a payment method – merging together to provide an integrated and seamless experience for the customer.”
We truly support the mindset of re-thinking branded currency: seeing it as not just a gift and not just a card, but as an operational tool that can be combined to create a holistic approach to respond to both different consumer segments and specific situations.
Instead of thinking conventionally about gift cards by using traditional external sales channels such as selling gift cards in supermarkets and as part of employee benefits programs, Zalando strives to explore more innovative applications for branded currency.

Putting branded currency into action: 2020 challenges called for 2021 solutions.

In light of the coronavirus crisis, Zalando experienced a huge surge in new customers during Q2 of 2020, with new types of customers such as older customer groups. This posed the challenge of retaining such new customers, using meaningful methods that this customer segment could relate to.

“We wanted to create offers that present the highest value for customers so that they want to continue shopping at Zalando” shares Soren, “So we started using gift cards: sending them to the customers with a note, thanking them for having their first experience with us and basically incentivising them to come back and stay with Zalando.”

This example seamlessly connects the dots between branded currency, customer experience and loyalty and how branded currency can be used as an effective tool to respond to a specific challenge.

Why was a gift card seen as a more effective incentive than a discount voucher in this particular situation?

“From a value and a customer point of view, a gift card is a gift, so it comes with no strings attached,” shares Soren, “I think that is a different customer experience and comes with a different customer engagement as well, rather than saying ‘If you do xyz, we will give you a discount’”.

Using a gift card as a gift (but also a hidden incentive) was effective for this particular situation, especially in the context of this specific new customer segment, who may not be as used to shopping online. Offering a gift card allowed us to deepen the relationship with those new customers and, was an innovative way to respond directly to the particular situation of retaining new customers of an older age bracket.

Staying relevant in the gift card future

Gift cards, particularly for ecommerce stores, have seen an interesting growth rate this year due to the customer shift from offline to online. But what needs to be done to maintain this growth in the years to come?

“Rather than seeing gift cards as a separate activity or promotion, it comes down to looking at branded currency as a whole. Really shifting the optics from a gift card to branded currency”, Soren explains, adding the crucial observation that, “especially during COVID, digital gift cards are definitely winning”.

Soren pinpoints two examples of maximising gift cards as branded currency in the context of the current and future digital wave:
Pay-outs: “Billions are just not being claimed because the user experience and the whole process around it is extremely painful.” Soren sees pay-outs as a “vastly unexplored space” when it comes to using gift cards outside of conventional sales channels.
Digital wallets: Contactless payment methods, seen in examples such as Revolut and Starbucks are vital in light of the current crisis, as customers prefer to spend less time at the checkout and avoid touching appliances that other people have touched.

“I think we’ll see a lot of B2C solutions that are solving for convenience for customers”, Soren predicts. While he acknowledges that it’s more the tech-savvy customers using digital wallets at the moment, Soren anticipates that these will become mainstream in the next 3 years.
We maintain a creative mindset with branded currency in order to alleviate these increasingly common customer pain points which have only been emphasised by the pandemic. This is the way for brands to stay relevant in the coming years.

What simple trick can brands use to enhance their branded currency strategy?

Put simply: listen to customer feedback!

“We need to double down on customer engagement and create enduring relationships, where we actually really solve problems for the customers.”
Soren reveals that typing in complex codes in order to redeem gift cards had the potential to negatively affect customer satisfaction scores. He shares that Zalando is now adapting to working with URLs and QR codes, “So it’s possible for those who are more digitally savvy to have a much smoother experience.”

It’s simple: listen to your customers, respond to what they want and make your branded currency digitally up-to-date and easy for them to use. This, in turn, will connect the dots between branded currency, customer experience and loyalty.

Soren Hoj Thomsen

Soren Hoj Thomsen is Channel Lead B2B – Gift Cards at Zalando. With a decade of experience in the luxury industry and mass market leaders like L’Oreal, Soren joined Zalando in 2015, building the B2B Gift Cards & Branded Currency team in Zalando for its 17 markets. On top of his focus on strategic partnerships, scalability through continuous testing and forming insights from big data, Soren is currently engaged in evidencing how companies can benefit from making branded currency integral in their overall strategies. When not scaling a business, you can find him enjoying a glass of good wine or trying to lock you down for a game of tennis or golf.

Rocio Liebana

Rocío Liébana is the Founder and Managing Director of RL Consulting, a leading European gift card consulting and management firm that provides coaching across all strategic and operational aspects of gift card and incentive strategies. RL consulting supports numerous brands and retailers in creating new and maximising existing branded currency strategies to expand their reach on a pan-European level through powerful partnerships and effective solutions that bring greater value to their customers.