Gift Cards Tips

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How do gift cards work as an alternative payment solution?

What is gift card "breakage"?

How do gift cards build brand awareness?

What are some customizable features of gift card programs?

How can gift cards increase customer loyalty?

How do gift cards boost incremental sales?

How can gift cards boost my cash flow

What can a gift card do for my small business?

What are the advantages of reloadable gift cards?



How do gift cards work as an alternative payment solution?
Besides creating positive awareness of your brand, gift cards offer a convenience to customers in a variety of situations. The customer who might be low on cash, but in possession of a gift card, will patronize your business first. For Internet retailers, gift card solutions can help draw new customers, even those who don't have credit cards. They can also be used as purchasing cards in situations where a customer wants to allow someone else to buy in your store, but not to have free rein with cash -- a parent subsidizing a teen-ager, or an employer who wants to let certain employees buy office supplies, for example.

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What is gift card "breakage"?
In the world of gift-card marketing, "breakage" refers not to broken products, but to gift cards that are purchased but never used. So in this case, having a lot of breakage can be a good thing -- the merchant gets to keep the money but never has to provide any goods or services. In some states, this money must be declared "unclaimed property" and held by the state government. Even where this is not the case, accounting rules prohibit declaring this money as revenue until the gift card is either used or expired. Experts say that about 10 percent of all gift card dollars are never spent, and the merchant does get to enjoy the "float" (interest earned on the unspent money) on that money until it is redeemed. There's a downside, though. Breakage means your company has lost opportunities to use gift card services to build its customer base. Worse, you've probably missed out on more than the value of the card -- studies show that gift-card customers often spend more than their cards are worth.

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How do gift cards build brand awareness?
Gift cards are an excellent way to build brand awareness -- after all, you're putting your logo and marketing message right into the customer's wallet. A properly-run gift card program, backed with rewards and promoted in your advertising and in your in-store displays, can raise awareness of your name and product line with a relatively small investment in gift card processing services. In addition, a gift card's very nature makes it a double marketing tool -- the customer who buys your card and the customer who receives your card both receive a strong marketing message which they associate with a positive event (gift-giving) and, usually, warm feelings.

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What are some customizable features of gift card programs?
Your gift card program can be customized in several ways. The first, and most visible to your customers, is the appearance of the cards themselves, which can use standard templates or be custom-designed to match your logo, color scheme and marketing message. You can also choose various forms of card envelopes, in-store displays and gift card marketing signs to make the most out of your gift-card services. One final customizable feature of your gift cards is the reports that you, the merchant, receive on gift card purchases and spending. For instance, you can track purchases and sales across several locations, or discover whether a gift-card marketing program actually did drive traffic to your stores during a slow period.

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How can gift cards increase customer loyalty?
Use your gift cards in various creative ways to attract customers -- attractive displays, special in-store promotions, as a promotional tool at events, or as a way for nearby businesses to reward their employees. Each gift card sold represents an opportunity to build your brand recognition and create more loyal customers for your business. Of course, you'll need to combine the gift card program with other important elements of customer loyalty -- friendly, competent staff, attractive interior and exterior appearance, excellent products and prompt service. Gift cards help your regular customers get their gift shopping done easily. A hungry shopper who has one more gift to buy at 1:30 p.m. will choose a restaurant she knows offers gift card sales, so she can kill two birds with one stone. Once the gifts are given, your business already has a positive image in the recipients' minds -- after all, they can get something free! If you capitalize on that advantage with a positive buying experience, you've created another loyal customer.

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How do gift cards boost incremental sales?
Gift cards boost your incremental sales time and again. Gift card recipients tend to buy regular-priced items, increasing the merchant's margins. By investing in gift-card processing services and deploying them as part of your marketing and promotional campaigns, you can build revenue and customer visits. Try offering a $20 gift card to anyone spending $100 or more during your slowest day of the week! Position your gift-card display so that the cards become an impulse purchase for your customers, easily available at the point of sale.

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How can gift cards boost my cash flow
Prepaid gift cards are a boon to merchants who need a little extra cash on the bottom line. Because it often takes weeks or months for the recipient to redeem the card, the merchant gets the benefit of having the revenue in advance. They can also be useful in stemming frivolous or fraudulent returns -- simply make it your store's policy that returns are compensated with a gift card. Finally, gift card sales are a great way to bring more money into your business. More than half of all gift-card customers spend at least $20 over the value of their cards, and if the gift recipient has never visited your business before, you've got an opportunity to win a new customer.

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What can a gift card do for my small business?
Gift cards are a great way to increase name recognition in your target market. Today's merchant accounts often include access to gift card processing services, so that even small businesses can offer the option of a prepaid gift card. To get the most out of your gift card program and help your business stand out from the pack, try some of these marketing ideas:

  • Offer a sweepstakes with an attractive prize, available only to customers who shop with gift cards.
  • Offer coupons to gift-card holders to drive traffic to less popular days or times, or as a reward for reloading a cash-substitute card.
  • Use your knowledge of your customers' desires to offer a premium for gift-card users -- a chance to win a free drink or dessert, a free knitting class, a reserved parking spot.
Using your gift cards as part of your overall marketing plan can build and sustain your best customers' loyalty.

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What are the advantages of reloadable gift cards?
From the merchant's point of view, a reloadable gift card is a great idea. Not only do you get the benefit of the first gift, but recipients can then add more money to the card and spend it in your business at a later date -- in essence, giving themselves a gift. Reloadable cards also cut down on the fraud potential of easily-copied gift certificates, and make it easy to synchronize gift-card processing across a chain of franchises. The cards may make less sense from the consumer's point of view. After all, if I have cash now, I can spend it anywhere I like, but if I convert it into your gift card, I've put my money into a walled garden that can only be spent at your location. For this reason, reloadable gift cards need to be marketed in ways that offer a benefit to your specific audience. For instance, you might use advertising and store displays to suggest that parents reload their kids' gift cards so they spend their snack money in your whole-foods store rather than a fast-food chain. A recent Wal-Mart campaign suggested that customers use their cards to budget their spending money. They also cut down on cash-handling problems at businesses that used to run on coin-operated machines -- Laundromats, for example, or game arcades.

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Services by Ignite Payments.

The Ignite Payments name, trademark and logo are owned by Ignite Payments Corporation. All other trademarks, service marks and trade names referenced in this material are the property of their respective owners. The Ignite Payments Agent Program is operated by Ignite Payments International, Inc. Ignite Payments International, doing business as Ignite Payments, is a registered ISO/MSP of Wells Fargo Bank, N.A., Walnut Creek, CA. American Express requires separate approval. Ignite Payments Ventura County is an independent agent for Ignite Payments International.
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