Gift Card Consumers Love Gift Cards… Should You?

Gift cards continue to grow in popularity, with huge potential for merchants who understand how to promote and manage strong gift card programs.

Consider the following…

· Over $27.8 billion was spent by consumers last year on gift cards during the holiday season alone2.

· Over 93% of consumers purchase or receive gift cards every year.1

· Over 71% of consumers report spending more than the value of their gift cards.

· And 31% of gift card recipients say they are more likely to buy a full-price item than an item on sale3.

The Benefits of a Well-Run Gift Card Program

· Revenue increases. Vendors experienced uplift, or amounts spent over the value of the gift card, in 72% of gift card redeemers. Also, gift cards attract new customers, with 11% of recipients indicating that they never or rarely visit the issuing merchant’s locations1.

· Higher margin sales. 31% of gift card receivers say they are more likely to buy a full-price item rather than an item on sale when using a gift card3.

· Decreases in returned merchandise. According to the National Retail Federation, 8.8% of holiday gifts will be returned. Because gift card recipients choose their own gifts, gift cards may reduce returned merchandise and the high costs associated with handling returns2.

· Increased security and better reporting. Gift cards are more secure than gift certificates and they enable you to use many of the same reporting tools and practices as your credit card program.

Gift Card Market Trends

We all know there are many factors that impact consumer purchases of gift cards. Key insights into recent gift card trends include4:

· The economic outlook for gift cards is good. During the last six months of 2011, the average gift card dollar volume increased 10%. Further, financially stable consumers shopped earlier in the holiday season for prepaid cards and added more value to their purchases than in 2010.

· Reloads and redemptions grow rapidly as fuel rewards programs catch fire. In 2011, the typical U.S. household spent a record $4,155 on gasoline—about $1,300 more than the 10-year average. By leveraging prepaid reloadable cards in new and existing fuel rewards programs, retailers gained a greater share of consumer spending, more repeat visits, and improved customer loyalty. While fuel rewards programs may be a unique opportunity for some merchants, gift card issuers in all industries can take a page from this playbook and consider alternatives on how to align their prepaid strategies to respond to customer needs.

· An evolution of gift card strategy links payments and loyalty in a unified retail experience. The dramatic impact of the omni-channel shopper (i.e., a shopper who uses mobile, eCommerce, social media, and physical stores) requires retailers to reevaluate their gift card strategy. A new generation of gift cards that act as spending cards link payments and loyalty in a unified retail experience. Merchants offering gift cards as the cornerstone of their retail experience generate the highest gift card activations, redemptions, and reloads.

Seven Tips for Building a Great Gift Card Program

Like any product you sell, gift cards require a thoughtful, consistent marketing effort. Here are a few tips for building a great gift card program:

1. Use in-store merchandising to promote your gift card program including neat, organized displays and signage.

2. Align your card design(s) with your brand and consider designs for occasions that have significant importance to your business (i.e., Christmas/Hanukkah, birthdays, etc.).

3. Stay on top of card inventory levels.

4. Get your employees involved in gift card promotions including assigning a “gift card champion” who will ensure that the displays are stocked, signs are posted and employees are trained in selling gift cards.

5. Make sure to put special effort into holiday campaigns. Many merchants report that they sell approximately 40% of their cards during the holiday period and during other popular gift giving occasions, such as graduation, Mother’s Day and Father’s Day.

6. Cross-promote your gift cards and offer customer incentives. “Buy this item and receive a free gift card!”

7. Promote and sell gift cards on your website.

Having an understanding of your payment acceptance options certainly helps in the decision-making process. Keep gift cards in mind as one of the ways you may be able to positively impact your business.

With a little effort, gift cards can reap short-and long-term rewards for your business.

12010 First Data Gift Card Consumer Insights Study

2National Retail Federation (NRF) – Consumer Intentions & Actions® Survey, Nov ‘11

32011 First Data Prepaid Consumer Insights Study

42011 Year-End Prepaid Gift Card Market Analysis

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