When Promotions & Incentives (P&I) carried out its last voucher survey in June 2008, the economic storm clouds were arguably still on the horizon. Now consumers are getting used to the recession, there are some intriguing questions to be answered. Will thrifty consumers use their vouchers to pay bills and supplement the cost of living? Furthermore, how will the all-important corporate end of the market be affected as companies look to make savings in their own schemes?
To answer these questions, P&I teamed up with Maximiles, operator of online loyalty scheme iPoints.co.uk, for the third consecutive year to ask its members how they view vouchers. In all, more than 1000 people, from within a range of income, gender and age groups, were polled.
One big finding this year is that the popularity of retail vouchers has risen by 9%, with 81% of people now saying that they regularly receive them, up from 68% in 2007. This demonstrates that the high-profile collapse of Woolworths and Zavvi, among other high-street brands, has done little to dampen consumer enthusiasm for retail vouchers, and that this area of the market is continuing to evolve.
This evidence of the popularity of retail vouchers is backed up by Francis Goss, head of motivation at incentives provider Grass Roots. He notes that members of staff taking part in its schemes are switching to vouchers for well-known high-street brands and supermarkets.
Andrew Johnson, director-general of the UK Gift Card & Voucher Association (UKGCVA), is not surprised by the findings. 'I expected (the popularity of) retail (vouchers) to increase,' he says. 'It's reflective of the fact that retailers are being more savvy about what consumers can buy from their stores. Supermarkets have a wide range of products, which is different from five years ago.'
Maximiles managing director Guy Keeling says the growth in retail vouchers has been driven by retailers realising that they are an excellent way to boost sales. 'This is not surprising given that marketers are desperately trying to motivate consumers to make purchases in these more challenging economic conditions,' he adds.
However, the biggest issue in the sector is the stand-off between paper vouchers and gift cards. When the survey was first carried out in 2007, consumer preference was evenly split between paper vouchers and gift cards, with little deviation when it came to gender or age. Little changed last year, and 2009 is no different. If anything, paper vouchers are more popular, despite the prevalence of gift cards within the consumer space.
Format fluctuations
House of Fraser business manager Catherine Forrest says that underlying this apparent stasis there is constant movement between the two fields of vouchers and gift cards. 'For us, there has recently been a big switch to gift cards but we have introduced fresh designs; perhaps there is a correlation there,' she explains. 'On the subject of plastic versus paper, one important thing to remember is that paper has changed with the times and moved away from its old-fashioned image. Paper vouchers can now be redeemed online and can even be cancelled, so there are no security issues.'
However, the impasse between the paper voucher and gift-cards sectors could be about to end. Johnson says that the gift-card market only became generally available to everyone last year, and consumer attitudes could be ready to shift as shoppers become more familiar with the format.
'There was a significant increase in 2008 in the number of gift-card programmes launched,' says Johnson. 'It was only then that retailers started taking advantage of them. In two or three years, we'll be talking about digital in the same way.'
As Keeling points out, there is a slight gender split on the issue, with men seeming to have a greater affinity with paper vouchers. 'The gender split is quite revealing, with 55.6% of men preferring paper, compared with 46.8% of women,' he says. 'Overall, 51.4% of all respondents prefer paper vouchers to plastic. Maybe this is because the redemption of paper vouchers is easy to understand; they are perceived as being easier to redeem than gift cards.'
Another area of significant change is the way in which consumers are redeeming their vouchers. The number of people who want to use them for treats has risen from 67% to 77% of respondents. There was, however, a fall in the number of people using them to pay for household bills and food. It is worth making the point, though, that a 'treat' could be defined as nearly anything, from an MP3 player to a bar of chocolate. Nonetheless, consumers view vouchers as a guilt-free way of spending on themselves without dipping into their savings or their salary.
However, the survey brings bad news for experiential vouchers, with little more than 1% of respondents saying they were likely to receive one. 'That's reflective of where we are in the economy,' says Johnson. 'People are being cautious of (passing on these vouchers). The perception is that a friend might be better off with, say, Marks & Spencer vouchers because they're going to be able to spend them on a number of things.'
It would still be wide of the mark to predict the end of experiential vouchers, though. According to Forrest, House of Fraser's experiential packages have not been adversely affected by brands using such promotions in their marketing. For example, McVitie's recently launched a promotion with Virgin Experience offering vouchers as prizes.
One area that has taken a hit is workplace incentives. The number of people who receive vouchers as a reward or incentive from their employer has fallen from 15% to 9%, while there has been a shift in how companies deliver them. Last year, 71% of respondents said they received the vouchers on an ad hoc basis; this year, that figure fell to 31%.
Times are hard for many, but the vouchers market is moving with the flow. Retailers want to use them to grow market share, and consumers covet them as a special treat. All this suggests that the £3.2bn voucher sector is as well placed as any to withstand the current economic downturn.