Gift cards continue to grow leaps and bounds allowing retailers which have implemented a program for his or her stores to reap vast benefits. In fact, total spending on gift cards in 2012 nearly reached $30 billion with around two-thirds of all American consumers having purchased at least one gift card.
It is mainstream and it’s really not for the holidays anymore. While nearly 2/3rds of all consumers have purchased gift cards for someone around the holidays, over 80% of all consumers have purchased something special card as a birthday gift. No longer should retailers simply depend on the holidays because of their sales – though sales at the moment are concentrated – the sales are available throughout the year.
Gift cards are convenient, secure, and become a branded “billboard in a wallet”. In multi-unit retail outlets, they keep the money within the store network sufficient reason for gift cards, retailers will gain more name recognition and exposure in the marketplace, further widening its existing customer base. To help expand the case, it’s not simply for the brand awareness, it increases the top line because the average gift card user ends up spending a supplementary 20% beyond the value of the card.
Why Gift Cards? Some retailers may still use punch cards or paper certificates and while these programs could have advanced their loyalty program to date, plastic gift cards outsells paper certificates from 2 to 10 times as much. The electronic concept has become the medium of preference for retailers and merchants in the united states. On the list of significant reasons are:
No Cash Back – the value remaining after partial redemption stays on the card ensuring additional opportunities to solidify the guest relationship.
Real Time Processing – virtually eliminates both losses associated with paper gift certificates and costly tracking and accounting.
Offering a gift card is very similar to supplying a new product item – and never have to learn complicated handling procedures, training procedures, and tie up valuable space for storage. It will help gain new customers – friends or associates of your existing customers – and the card program ought to be seen as a revenue generator.
Logistics: A processing terminal is needed to run the gift card program. Usually your charge card company can help you choose a terminal that will meet your needs and budget. Most gift cards use a host-based computer system to store the worthiness of the cards as they are sold and redeemed. Simply load and redeem the cards with a charge card terminal that accesses the host computer. This host-based system enables the gift card to be sold and redeemed at all participating locations (if applicable for multi-unit operations). Here is generally how it operates:
Consumer purchases the gift card for just about any amount using cash or charge card – the clerk executes the sale via normal payment procedures on the register
Level of the “gift value” is loaded and stored on the host database by swiping a magnetic strip card through a credit card terminal
Customer receipt shows balance on card – updated instantly
The card can be reloaded and may be used multiple times
Swiped through credit card terminal for host authorization
No cash back – customer receipt shows real-time card balance
Pooling: For multi-unit operations, as your cards are redeemed within other participating stores along with other stores’ cards are redeemed within your store, the redemption amount is transferred at a specified time electronically. That is called pooling. All transactions are accounted for electronically in the database and activity reports. All pooling activity is documented, itemized by card having an overall summary and redemption amounts are transferred between locations via the Automated Clearing House (ACH) network from each location. The ACH network may be the same system banks use to move money as regulated by the Federal Reserve. All activity is recorded electronically on the terminal and host computer with time and date stamp for audit purposes. A terminal gift card batch report itemizes transactions for reconciliation.
Marketing & Merchandising: With suggestive selling and merchandising, the gift card will generate additional revenue. The demand is strong year-round, especially at the various holiday times throughout the year. Birthdays are the hottest reason to buy a gift card – each day is someone’s birthday! Much like activation, the cardholder can purchase extra value or “reload” the card for any amount at any participating location. That is great for regular guests. The gift card can also be used internally for credits. For instance, in lieu of cash return on a purchase return or a customer complaint, it is possible to issue a card for the worthiness of the credit. This keeps the purchase profit the retailers network.
Loyalty Programs: A loyalty card program uses exactly the same host-based computer system to store the value of the loyalty cards as the gift card. You can load and redeem the cards with a credit card terminal similar to the gift card with the only real difference being that you could only add/redeem points to a loyalty card, not dollars. Similar to the gift card, the loyalty card earns points and is redeemable at all participating locations. An average loyalty program works something like this:
Enrollment – Consumer enrolls by completing a loyalty application.
Staff reviews for eligibility and ensures the loyalty card number is recorded on the application.
Consumers will earn X point per $ spent if they initially enroll and ongoing.