Acquiring a new customer costs up to five times more than retaining an existing one. Yet many businesses still focus on attracting new buyers rather than maximising the value of their current customers. Customer lifetime value (CLV) is one of the most important metrics for long-term profitability, but how can businesses increase it effectively without constantly discounting products or offering costly incentives?

One solution that many companies overlook is gift cards. Unlike discounts that train customers to expect lower prices or cashback that delays gratification, gift cards encourage immediate spending while locking customers into your brand ecosystem. They drive repeat purchases, strengthen retention, and introduce new customers in a way that feels natural and compelling. We asked Eugene Mischenko, President of the E-Commerce & Digital Marketing Association, his thoughts on the use of gift cards. 

Why gift cards matter for CLV

A well-executed gift card marketing strategy can:

• Encourage repeat purchases

• Increase average order value

• Introduce new customers via word-of-mouth gifting

• Boost customer loyalty without discounting margins

"Gift cards create a pre-commitment to spending, encourage repeat purchases, and lock customers into a brand’s ecosystem without devaluing its products," says Eugene Mischenko. "Unlike discounts, which can weaken pricing integrity, gift cards ensure customers return to spend within the brand, often spending beyond the card’s value."

Gift cards vs. discounts and cashback. What’s best for driving retention?

Businesses use various incentives to retain customers, but not all strategies have the same impact. Here’s how gift cards compare to other common approaches:

Discounts:

• Lower perceived product value.

• Train customers to wait for the next sale instead of buying now.

• Reduce profit margins without guaranteeing long-term loyalty.

Cashback programmes:

• Require complex tracking and delayed rewards.

• May not create the spending urgency needed to drive immediate action.

Gift cards:

• Protect pricing integrity while ensuring customers spend with your brand.

• Encourage immediate purchases while boosting CLV.

• Keep 100% of spending within your business.

Eugene says, “While discounts and cashback programmes can be effective in some cases, they can also create habits that are hard to break. Customers accustomed to discounts may delay purchases until the next sale, reducing margins over time. Cashback often lacks immediacy, meaning customers may forget to use their rewards or feel less urgency to spend. Gift cards, on the other hand, create a commitment to purchase and keep spending within the brand, reinforcing loyalty without diminishing product value.”

Implementation strategies for businesses

Businesses can leverage gift cards in several strategic ways to maximise customer lifetime value:

• Loyalty rewards – Reward frequent buyers with gift cards instead of discounts to reinforce retention.

• Referral programmes – Incentivise word-of-mouth marketing by offering gift cards as a bonus for referring new customers.

• Service recovery – Use gift cards to turn negative customer experiences into positive ones, building long-term loyalty.

• Bundled promotions – Encourage repeat transactions by including a small-value gift card with purchases.

• Corporate gifting – Tap into new high-value customers by integrating gift cards into corporate gifting and employee rewards programmes.

"The key to success is making gift cards easy to use, flexible, and well-promoted," says Eugene Mischenko. "Digital gift cards, in particular, remove friction in the redemption process. Adding incentives, such as a bonus credit for purchasing a gift card, can significantly accelerate adoption and increase repeat spending."

With Rewardable, businesses can seamlessly integrate digital gift cards into their customer retention and acquisition strategies. By automating rewards and making redemption effortless, companies can create a frictionless, high-impact loyalty programme that drives real results.

Start increasing your CLV with gift cards today

Gift cards aren’t just a transactional tool, they are a strategic asset for boosting retention, increasing spend, and protecting pricing integrity. Unlike discounts that cut into margins or cashback that delays rewards, gift cards create an immediate reason for customers to return and spend more.

Ready to start using gift cards to drive revenue? Sign up to Rewardable, for free, today and see how effortless customer retention can be.