Skip to content

Gift Card Promos Can Change Consumer Behavior

Table of Contents

How many times have you heard your customers in a panic say that today was someone’s birthday, or an important holiday, and they hadn’t even mailed a card, much less knew what gift to buy?

How many times have you heard your customers in a panic say that today was someone’s birthday, or an important holiday, and they hadn’t even mailed a card, much less knew what gift to buy?

Many smart retailers have gotten savvy to this habitual “blindsided” consumer behavior, and have responded with broader and better merchandised gift card offerings both in the store and online.

From where we sit, we’re able to view gift card sales in aggregate, as well as by category. And we can clearly see the spike on the graph in the days leading up to major gift-giving holidays, particularly where sales peak a couple of days before — whether it’s Christmas, Hanukkah, Valentine’s Day or Mother’s Day.

At given points on the calendar, spikes in gift card sales are a barometer of their importance to retailers. But they’re also important to the recipients. People love to be given them. We know from our consumer research that for the last eight years gift cards have ranked as the No. 1 preferred holiday gift — above and beyond any other. The reasons are many, but it probably boils down to giving the gift of unlimited selection, multichannel convenience and branded, but personal, choice in a thoughtful and tasteful way.

All the retailers we work with — and it’s hard to imagine this isn’t true for merchants across the board — are looking for ways to improve their sales, especially during slow periods, or in under-trafficked locations. Gift card promotions campaigns can do this. And in doing so, they can change shopping habits, getting consumers to behave in new ways, as prescribed by the retailer. Merchants are just becoming aware of how gift cards can be turbocharged when used in the context of a specific promotions campaign.

Customers who are effectively engaged and appropriately motivated will become an interested, captive audience when presented with a smart, targeted promotional gift card campaign. Retailers sit up and take notice when they see how promotions can hedge potentially declining sales by providing customers strong motivation to adjust their purchasing behavior. Our research shows that:

• The average redemption rate for our promotional cards is 32%, compared to an average of 1% to 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 on 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.

As gift card promotions campaigns are a relatively new tool, it’s worth explaining how they work.

Where we usually start is helping the retailer to determine what the need is and set specific goals for improving performance. The next step is to establish the parameters of a "bounce-back" promotion. That’s where customers are given a 15% to 25% incentive card for spending, after making a purchase over a certain amount. We have found that this basic type of promotion can make customers shop more, increasing the number of sales as well as how much is spent during a given visit.

A bounce-back promotion might take one of a few different shapes: When a customer buys a gift card for a certain amount, a promotional gift card for 15% to 25% of the desired spend threshold can be given, or promotional cards can be given when customers spend a certain dollar amount in the store or online, or both. Promotions can be timed to intersect with slow periods; they can be used to increase store traffic in a particular location; or they can even serve to get mostly online customers to come and shop in the brick-and-mortar store.

There are multiple varieties and forms of promotional campaigns, and they can serve different purposes. Effecting consumer behavior changes of all types is right up at the top of the list, along with boosting sales.

Here are a few ways retailers can use promotions: to appease an upset customer or to provide registering customers with a reward for supplying their contact and demographic information. They can also come in very handy for new store openings, to increase branded credit card spend or as an adjunct to an existing loyalty rewards program. Promotions can drive traffic, boost a particular product, even attract a customer away from another retailer.

Individual promotions strategies will almost invariably surprise and delight. Giving a loyal customer the unexpected treat of a gift card is a great way to show appreciation. Increasing gift card sales is a frequent side effect of promotions as well. Any retailer can personalize gift cards to its brand image and strategy, and various control settings can be used to manage shopping behavior — such as defining the start and end dates, specifying the redemption location, quantifying the number of redemptions and checkouts per card, and setting the minimum qualifying spend amount.

Large retailers have distributed hundreds of thousands of these promotional gift cards, which can be tracked and used to determine not only whether customers are using them, but how they’re using them, and the effect this has had on their business.

Take the example of a retailer that sells a popular sportswear brand. It experienced several consecutive years of sales stagnation and wanted in particular to improve sales during two traditionally slow seasonal windows. The immediate goal was to increase traffic and spend for several weeks in the fall and post-winter holiday seasons. The retailer offered its customers a bounce-back promotion of a $30 gift card for $150 spent in the store or online. Redemption of these cards grew from 30% to 40% over a three-year period. The retailer’s e-card demand expanded in one year from 16% to 45%, and the lift in sales during the fall season doubled the value of the original card promotional amount.

If you have a dip in sales at a specific time or times every year, or if overall sales have been flat for a long period, these would be ideal times to run a gift card promotion — though many retailers find that using gift card promotions proactively will boost already strong and steady sales. They offer a way to improve your bottom line and enable the retailer to avoid overt discounting and the perception that comes with having to resort to lowering prices. Unlike coupons and mailer offers, gift cards offer the added benefit of trackability: Through them you can collect data on your business and also get to better understand your customers’ habits and preferences. Running promotions for several seasons or for a few consecutive years will allow a retailer to accrue the metrics of success.

Another example we can share: A well-known retailer of storage solutions, after determining its slowest periods, 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.

The most obvious benefits retailers can realize from gift card promotions campaigns are an increase in overall sales and a lift in spend during any given customer visit. But as they offer interoperability, gift card promotions can also allow retailers to connect with rewards plans for even more subscribership and more successful outcomes. Ultimately they have been shown to help retailers regain some real control over customers’ spending behavior — especially during slow periods — without having to rely on an ad campaign to pay off, or for social media “likes” or other patron recommendations to their circle of friends.

One last, very recent example: To support Mother’s Day sales this year, another national retailer ran a three-day promotion through its e-commerce platform. For this promotion, consumers got a $50 gift card for buying a $40 one — a $10 bounce-back. This produced explosive results — year-over-year e-gift sales increased by high double digits. In addition to this digital effort, this retailer dedicated space to merchandising Mother’s Day gift cards in-store — and now sees possible applications to expand this physical offering on a more permanent basis. On the level of information, it’s also ground-breaking for this retailer to have access to such accurate and deep real-time spending data.

Retailers who haven’t already experimented with gift card promotions program: Now is a great time, from a seasonal point of view, to start looking into it. Those who already have programs set up know what a great tool they can be, from changing shopper buying habits to better understanding what motivates them. Our experience through countless case studies shows that they will reliably benefit the retailer’s bottom line.

Mark Schatz is head of global marketing and product management at Louisville, Ky.-based Stored Value Solutions (SVS) and can be reached at mschatz@storedvalue.com. Jenny Parris is vice president of global marketing and product at SVS and can be reached at jparris@storedvalue.com. SVS works with top retail brands worldwide to optimize their stored value programs, both physical and digital.

Comments

Latest