How Gift Cards Could Save your Business
Gift cards, you love them or you hate them. They’re the extra cards that you hang onto that contribute to your wallet making the complete transition into a dad/mom wallet. Nevertheless, we all continue to use them. For some of us the question remains… what’s the point of a gift card on the retailers end. How do businesses use gift cards to generate more revenue? You’re just exchanging real currency for in-store credit. Fear not my friend, for I shall address this mind boggling conundrum.
Low CAC?
How do businesses generate money through the use of gift cards? Ideally, an individual will give a gift card to someone that doesn’t shop at that location very often. This will incentivize the recipient to expend the gift card at that store. If the recipient likes the products and the transaction experience, they will likely be converted into a returning customer. This opens the gates for relatively inexpensive methods of customer acquisition.
Gift Cards are Worth More Than Their Value
Gift cards usually come in denominations of $10, $20, $25, $30, $50 and $100. It is not very often that you see a product for sale at a nice even round number like that. On top of that you also have to consider taxes, something most customers don’t take into strong consideration when making the types of purchases they would make with a gift card. As a result, the situation of a consumer trying to entirely expend the gift card’s value arises and in order to do this, they will likely have to overspend on the value of the gift card. The statistics also back this up. According to Blackhawk Network’s State of Consumer Gift Card Preferences in 2018, 59% of consumers spend more than the stated value on the gift card. It’s pretty easy to see that on average, consumers are driving more revenue to businesses through the use of gift cards. Customers overspending the value on the gift card is one of the main principles of using them.
Following the Crowd
Most individuals shop with a partner or in groups with other people. If one individual wants to visit a store they have a gift card for, the rest of the party will most likely tag along. Essentially, the more people that enter a store, the more potential sales a business will have. Having first time customers buy a store’s product may convert them into buying more in the long run whether or not if they have gift cards.
They’re the Most Requested Holiday Gift
According to the National Retail Federation 2018 Holiday Spending Survey, conducted by Prosper Insights & Analytics, gifts cards remain to be the most requested holiday gift item for the 12th year in a row. Gifts cards were requested by 60% of those that were surveyed followed by clothes & accessories at 53%. A report by QYR Research stated that the global gift card market was valued at US $320B in 2017. It is estimated that the global gift card market will rise to a value of US $510B by 2025 at a CAGR of 5.8%. It’s evident that the future gift card market will continue to grow and in the near foreseeable future. From this, a business utilizing gift cards will always prosper compared to a company that is not using them with regards to customer interaction, engagement, loyalty and revenue.
At the End…
Gift cards allow a business to build their brand through exposure and interaction, thereby facilitating the growth of customer loyalty. They create an incentive for customers to come and shop at the business and use up the entirety of the value of the gift card with most people will spending a little more than the face value on the card. The use of gift cards within your business is a fool-proof way to increases revenue and customer loyalty, provided that they are implemented properly. Main point is gift cards can be used creatively in different ways to facilitate interaction and engagement with consumers while having a positive ROI. The potential revenue a business can make by not utilizing gift cards in their current business model is a lost opportunity. It could ultimately save your business.
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