How We Use Gift Cards
No matter how we give or receive gift cards, they carry a warm touch – and it’s getting even better, thanks to technology. Gift cards, delivered physically or via the internet, give us the ability to recognize people on birthdays, at holiday time, and for personal milestones and achievements. In the 21st century, gift cards are the quintessential feel-good prepaid asset and incentive.
This article focuses on closed loop cards and discusses a number of trends in the sector. We will compare traditional gifting to digital (eGifting), B2B gifting, and gifting as promotional currency. We will also take a look at rewards, because loyalty programs personalize the buying experience and bring consumers back to the store or website.
Gift card packaging is also adding to the gift card experience, making it more personal and longer-lasting. Brett Glass, CEO of Gift Card Impressions, a provider of gift card packaging and personalization, sees dramatic growth in the $110 billion gift card industry. Today gift cards make up 14 percent of all money spent on gifts. “There is dynamic growth in all different formats, both digital and physical. It is considered the #1 gift because it is a gift that brings choice to the recipient,” said Glass.
Besides gift card malls in retail stores, gift cards are popping up in emails and blogs, in fundraising programs, and in the office to motivate employees. Religious organizations use gift cards to raise money.
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Kroger supermarket chain offers gift card programs to large and small nonprofit organizations. In Jackson, MS, Beth Israel Congregation raised funds with a program called: “Give back to Beth Israel with a Kroger card.” A life-long temple member said that 80 people so far had bought the Kroger gift cards, worth $5 each.
The Kroger card could be used for anything that Kroger sells: groceries, gasoline or pharmacy. Kroger donates 5 percent of all purchases made with these cards back to the temple.
Fashion bloggers are offering gift cards to promote luxury brands. Writer Erika Brechtel got to give away $50 gift cards to highlight Luxe Link on her blog “small shop,” when readers bought clips to hang up their stylish handbags on counters and tables.
Traditional Gifting versus Digital Gifting
The number of physical cards purchased in 2013 showed a slight dip. According to a survey conducted by First Data, the number of physical gift cards purchased by people interviewed dipped from 88 percent in 2012 to 84 percent in 2013.
Michael Hursta, VP, prepaid category manager at First Data, said there has been a change in the growth of closed loop prepaid cards. He noted, however, that the number of people self-purchasing gift cards rose from 14 percent to 20 percent.
“More consumers have been buying gift cards for themselves and those people are more likely to send them digitally,” said Hursta. “The self-purchaser is more likely to eGift to himself than when he is sending a gift card to someone else, because giving a gift to a friend is more of a social experience.”
First Data’s preference survey showed that in 2012, 64 percent of consumers preferred plastic cards; that declined to 52 percent in 2013. The preference for eGift cards rose from 7 percent in 2012 to 15 percent in 2013.
Render Dahiya, Arroweye Solutions CEO, believes that the gift card market will remain strong in 2014, particularly in physical cards. “eGifting is still relatively new and has added selling days to the holiday season – when the most gift cards are sold – which has been positive for retailers and other closed loop card issuers. But most consumers still prefer to give and receive a physical gift, so they’re still ordering plastic gift cards.”
Generally, consumers are becoming more comfortable with electronic gift cards that are purchased on websites, via mobile apps, and through daily deal sites. “Still, there is a long runway for plastic,” said Hursta. “Plastic is still a powerful vehicle for delivering value.”
eGifting Goes Mainstream
According to David Stone, co-founder and former CEO of CashStar, eGifting is becoming more mainstream; first adoption is growing and consumers increasingly feel more at ease sending an eGift. “Second, increasingly, gift cards are being used as promotional currency,” Stone added.
Stone noted that B2B is also taking off and fueling new strategic alliances like the Transaction Wireless, SVM and SVS one. With so much content to choose from and the massive convenience of eGifting, all of the incentive players are witnessing rapid growth in digital gifting.
eGifting, as it becomes more widely accepted, has spawned a whole set of innovative companies across a variety of verticals. “One nice example is the hyper-local focus of new companies like Yiftee,” said Stone. They have built a platform running on the MasterCard rails enabling small local merchants to instantly offer eGifting.
Promotional marketing using incentive gifts has been around for decades, when big brands started coming up with ways to sell their products. Mary Potter Kenyon, author of the book Coupon Crazy: The Science, the Savings, and the Stories Behind American’s Extreme Obsession, wrote, “Perhaps one of the more creative promotions of all time was in 1969, when a marketer with the Procter & Gamble Company came up with the idea of giving away goldfish with each purchase of a king-size box of Spic and Span.”
Gift cards as promotional currency is now part of tens of thousands of everyday programs. “If you get a haircut, you get a gift card; subscribe to a wireless carrier, get a $50 gift card,” said Stone. “The reward aspect of a promotion is increasingly a gift card, and with eGifting it is so much easier and less costly for the retailer. Of course, we all know that Starbucks broke all kinds of records with its Living Social and Groupon offers.”
Dahiya told us that there are more retail promotions of bonus cards. Retailers are offering consumers who buy a gift card for a certain value get an additional card back with a value anywhere from $10-$20. “It’s an enticing incentive. Retailers are also offering other benefits for gift card purchases,” said Dahiya. “Faster and free shipping are becoming a popular option when ordering gift cards online and it’s typically offered when the consumer orders a custom greeting card to accompany the gift. The greeting card is one more avenue where the retailer can provide another level of customization and integrate their brand.”
Gifting for Fundraising
Different types of organizations such as schools, churches, and non-profits have large expenses and look for ways to raise money. Retailer Kohl’s works with schools and nonprofit organizations to buy fundraising gift cards at a discount, sell them at face value and use the profits to raise funds for their organizations. The profits can be used to buy books or computers or uniforms for teams.
For example, Kohl’s Fundraising Gift Cards are available in denominations of $10, $25, $50 and $100. Kohl’s provides a 5 percent discount for purchases of more than $1000 and a 3 percent discount for purchases between $500 and $999.
Since 2000, more than 12,500 organizations have participated in the Kohl’s Cares Fundraising Gift Card Program, raising more than $35 million in fundraising dollars.
Tying Gift Cards to Loyalty
Hursta points out that the rise in self-purchasing of gift cards has led to a rise in the number of people reloading. Self-purchasers like to get rewards for reloading. “This is the first phase of connecting loyalty to gift cards,” said Hursta. “The consumer gets a bonus load on the card. He reloads $25 and gets a bonus of an extra $5.”
Sephora’s Beauty Insider rewards program is a good example of how to keep members coming back. The program offers deluxe samples, first-to-buy access and connections with top beauty influencers. Member privileges are also available on the new Sephora To Go App.
During certain time periods, Sephora offers double point purchases, and triple and quadruple points for specific frequent buyer groups. Product reviews are also a valuable component of the shopping experience.
Retailers may soon be able to direct rewards to get a better sense of who the consumer is. They will deliver an offer in the form of a gift card, but specify what time the card can be used, or what category of products the gift card can be used for. The concept is to get retailers in a place where they can direct spending and get the consumer to try a new product. It requires a technology platform that can direct consumer spending.
“Retailers will be able to direct the value of the card by controlling what products go into the basket,” said Hursta. “This is the beginning of a trend.”
Adding a Layer to Gift Cards
One of the biggest advances in the gift card industry is the personalization of gift cards. Gift Card Impressions, a Kansas City based company, is a provider of gift card packaging and personalization, working with big name retailers and leaders in the gift card industry. The company recently announced the launch of a patented platform called GCI Digital that will allow more personalized delivery of gift giving messages.
“People who think the gift card is too impersonal are combining gift cards with warm gifts, such as candles, chocolate, flowers and coffee,” said CEO Brett Glass. “The combination of gift card and other gifts bring a warmer, personal feeling, making it a complete gifting solution.”
Glass said that 41 percent of givers combine to make the gift more holistic; 84 percent give the card in a holder or specially designed wrapping. “The average consumer takes four seconds to open a gift card,” said Glass. “You can increase that time to 40 seconds by using a wrapping and make the gift more memorable.”
On the digital side of gifting, the transformation of gift cards continues. While physical gift cards are more suited to national brands, digital gift cards enables more localization. “Digital gifting is a game changer. You can add boutique local brands and send last minute gifts,” said Glass.
The GCI Digital platform offers B2B and B2C messaging solutions for a wide variety of industries. Its patented technology allows for digital and physical communication to be more personalized in unique ways using photos, sound, music, animation and video with various types of interactivity.
“Imagine a 30-second movie for your birthday gift, and you are the star, as a prelude to the birthday gift card,” said Glass. “You can elicit laugher and emotion.”
Gift Card Apps
Teri Llach, chief marketing officer at Blackhawk Network, said that last holiday season she noticed a change in consumer’s expectations. “When Blackhawk first started in the gift card sector, consumers wanted a physical card in a physical location, then they got used to going on digital properties, like Amazon or eBay, and order physical cards mailed to them, and then consumers started to accept digital products from digital locations.”
Now, Llach sees a merging of digital and physical. She noted that what retailers want is to make it possible for consumers to get full value from their gift cards. Mobile apps, like GoWallet, enables people to store gift card information on their mobile devices. The app provides access to gift card balances, consolidation of gift cards, gift card purchases, and special offers.
Regardless of criticism about gift card breakage, really, retailers want consumers to get every cent off of their gift cards. An app makes it easier to maximize the use of a gift card.
“Retailers want to get customers into their stores and be able to unleash the full value of their gift cards,” said Llach. •