Gift Card Promotions Campaigns put Retailers Back in the Driver’s Seat
The trajectory of gift card sales is a true testament to their importance at given points in the calendar. Smart retailers have ramped up their gift card offerings both in the store and online; and from the recipients’ point of view, we know from our consumer research that gift cards rank as the No. 1 preferred holiday gift, and have done so for the last eight years — above and beyond any other gift — because they offer customers unlimited selection, pure convenience and personal choice.
Enter promotions
Now retailers are becoming aware how gift cards can be turbocharged when used in the context of a specific promotions campaign. Not only can they improve sales, but they can change customer habits and get them to behave in new ways. When a retailer has a great brand and a loyal customer following, even a sluggish economy and periods of slow sales can be overcome by harnessing this captive, interested audience in driving growth.
If customers are effectively engaged and appropriately motivated, a smart, targeted promotional approach using gift cards can hedge potentially declining sales by providing a strong motive to adjust purchasing behavior. Our research shows that:
• The average redemption rate for our promotional cards is 32%, compared to an average of 1%–7% for paper coupons.
• Gift card promotions are preferred by 45% of consumers over email or text offers, loyalty programs and paper coupons.
• Consumers place a higher perceived value on a promotional gift card than any other incentive-based offer.
• Incentive-based offers increase gift card sales by an average of 24%, create unplanned purchases, and change planned purchase behavior.
How do gift card promotions work?
A “bounceback” promotion can work in several ways: A promotional gift card for, say, 15 to 25 percent of the desired spend threshold can be given when a customer buys a gift card of that amount. Or promotional cards can be given when customers spend a certain dollar amount in the store or online, or both. Promotions can also be timed to intersect with slow periods, or if you are trying to increase store traffic in a particular location, or even if you are trying to get mostly online customers to the physical store.
Purpose-driven campaigns
Promotions campaigns can be used to effect consumer behavior changes of all types. To mention a few roles they can play: Promotions can be done around new store openings, to increase branded credit card spend, or as an adjunct to an existing loyalty rewards program. They can come in very handy to appease an upset customer, or alongside registering a customer as a reward for collecting their contact and demographic information.
In addition, promotions can drive traffic, boost a particular product, even attract a customer away from another retailer. They will almost invariably surprise and delight — providing a loyal customer with the unexpected treat of a gift card is a great way to show appreciation. And usually these promotions increase gift card sales. They are easy to personalize to your specific retail needs, as there are various control settings you can use to manage card behavior — such as defining the start and end dates, specifying the redemption location, quantifying the number of redemptions and checkouts per card and, as we’ve mentioned, setting the minimum qualifying spend.
Large retailers can track promotional gift cards to determine not only whether customers are using them, but how they’re using them, and the effect this has on business. Take for example a well-known retailer of storage solutions. After determining their slowest periods, they distributed 500,000 promotional $15 gift cards — a reward for spending $100 in the store during these slow times. Data from the cards showed that there was a 37% redemption rate on the cards, and the average lift on all promotions—meaning the amount people spent above and beyond the promotion — was 250%. This can add up to millions of dollars in additional revenue for a company of this size.
When and why would you want to run a promotion?
Many retailers find that using gift card promotions proactively will boost even strong and even sales. But if you have a dip in sales at a specific time every year, or if overall sales have been flat for a long period, those would be ideal times to run a gift card promotion. They offer a way to boost your bottom line without whittling away at your margins through discounting. Unlike coupons and mailer offers, gift cards, as we’ve mentioned, offer the added benefit of trackability. If you’re able to run promotions for several seasons or for a few consecutive years, you’ll be able to see the accrual of success metrics in a linear way.
Gift card promotions can also allow you to connect with rewards plans for even more subscribership and more successful outcomes. Ultimately they can help retailers regain some control over customers’ spending behavior — especially during slow periods—without having to wait around for social media ‘likes’ or other patron recommendations to their circle of friends. All while improving the bottom line.
If you already have a gift card program in place, it may benefit you to take the next step and set up some gift card promotions. Take stock of your existing sales patterns — are there slow periods? Can they be improved? And if you don't have a gift card program in place, this would be a great time to instigate one.
Mark Schatz is head of global marketing and product management for Louisville, Kentucky-based Stored Value Solutions (SVS), and can be reached at [email protected]. Jenny Parris is VP of global marketing and product stored value solutions (SVS), and can be reached at [email protected]. Stored Value Solutions works with top retail brands worldwide to optimize their stored value programs, both physical and digital.