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Gift Cards: 5 Things You Need to Know
Gift cards can be a great way to drive retail sales and keep customers loyal. How to set up a gift card program.
Posted 8/ 17 10 at 2:00 PM | 5 Things You Need to Know, Money, Advertising & Marketing, Sales, Business Products & Services, Consumer Products & Services, Financial Services, Retail
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It looks so easy from the other side of the cash register. Somebody gives you a gift card. You take it to the store. You pick out some merchandise. You give the cashier your gift card. You walk out of the store with something you want. Just like magic.Except it isn't magic. Somebody had to make the decision to use gift cards for his or her business. Somebody had to order those gift cards. Somebody had to make sure the gift cards were put in a spot where customers would see them and buy one.
If you have a business and you're considering offering gift cards, it can be a great way to drive additional sales -- especially during the holidays. But it takes a lot of work to get things going on the back end. Here are five things you need to know.
1
It isn't free.
Most businesses get their gift cards through their credit-card processor -- the company or bank that helps you gain merchant status with credit cards like Visa and MasterCard. In fact, if you have a small business and take credit card, your processor has likely already made you aware that you could be purchasing gift cards through them. Expect to pay $1 to $3.50, or more, per card, although that number drops considerably the more cards you want. If you order 1,000, for example, you may pay $1 per card. There also may be a one-time set-up fee of several hundred dollars, although if you have a good relationship with the company or salesperson, you might be able to knock that down or eliminate it entirely. And expect a transaction fee every time the customer makes a purchase with his or her gift card. Every credit-card processor is different, of course, and there are no hard and fast rules here.
2
The process takes time.
You can't decide on Nov. 19 that you really should have gift cards for sale in time for Black Friday. "There is a calendar to follow," says Mike Hursta, vice president of gift cards at First Data, one the world's largest providers of merchant-processing services. "We recommend merchants order their merchandise in September to have an October delivery. Then you can get your cards in the store by early November, so they're visible in the consumers' minds."
3
Remember the display.
Once you order the cards, you need somewhere to put them. You can buy signage and display racks from the credit-card processor that sells you your gift cards -- or come up with some other way to showcase them to your customers. Whatever you do, you'll increase your odds of selling them, even if you do something as simple as put a sign near the cash register.
4
Gift cards can be a marketing tool.
"That gift card, especially if you customize it and your store's name is on it, is like a little billboard for your store," Hursta says. "It's a way to attract customers. I'd recommend that business owners think about gift cards as part of their marketing budget." Note, he didn't say anything about thinking of gift cards as a way to make big bucks. Not that the gift cards won't earn you money, because they almost certainly will if you do everything right. But you never know. What if you order 10,000 cards and only sell 500? Or what if you sell 1,000 $50 gift cards, and six months later, your finances are tight, and customers keep coming in your store and walking away with $50 worth of inventory? Think through the worst-case scenarios, and don't use gift cards as a strategy for bringing in some quick cash. And when people buy your cards, put that money away for a while and don't spend it all at once.
5
The customer is still always right.
Credit-card processors will point out in their marketing that a significant number of gift cards are likely to be purchased but not redeemed. In fact, Adam Hanft, a branding guru who has helped top-tier companies like Viacom and Reuters with their marketing, says an estimated $8 billion gift cards are purchased every year, and retailers "make tens of millions from unused gift cards and from not returning small amounts of cash -- under $10 -- when the cards are used." That's great for you but not good for your customer, and what ultimately is bad for your customer will end up being bad for you. So make sure, after all the work you've put into bringing gift cards into your store, that it's a good experience for the customer. After all, the whole purpose of a gift card is to make a customer feel warm and fuzzy about your store, not to have them storm out, vowing never to do business with you again.
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Comments (Page 1 of 1)
I have to think that the average person reading this article is not a business that's considering offering gift cards. A better article would be about the best way for a consumer to purchase the gift card, or even a better way to redeem the card. How about this - Take your change to a CoinStar machine, and instead of losing 9.1% in fees by redeeming it for cash, get a gift card instead. That way, ALL of your change is credited to the gift card. Then, join a website that pays a cash rebate for your online purchases, and pay for the order with the gift card. That way you turn your spare change into a gift card, and the gift card earns you cash-back in your Paypal account. It may take a little planning at first, but when you get into the habit of logging into your cash-back account before you shop online, the benefits are well worth the learning curve. Check out http://bit.ly/9hz0Ga.
I agree with everything this article says. As the owner of a small business, I could not justify the costs associated with selling personalized gift cards, as much as I really wanted to. It is absolutely no cost to print up a Gift Certificate, which affords your customer the same opportunity, at no cost to the store.
I hadn't even thought of the aspect of all the cards being redeemed at the same time, thereby depleting inventory with no revenue coming in. This is an excellent article!
I offer Gift cards for my business WWW.Giftsjust4you.com. it is a small web site that offers 150 items for $19.95 or less. But I have other catalogs that offer over 3000 items so what do I do for this type of business? I have ordered some gift cards but as of today only one woman ask about them and when I sent her the gift card number I NEVER heard from her so I had to deactivate it. I am a small business trying to help my family out but can't figure out the next step and what you put here didn't really give me any more ideas then what I have.
yes i know
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