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In an exclusive Webcast with industry experts, we took a look at the consumer phenomenon that is gift cards - new trends and technologies and why they’ve dethroned cash as king when it comes to motivating clients and employees. Here are the highlights.
Gift cards aren’t just hot in the consumer world. According to a 2005 study by the Incentive Federation, more than 50% of corporate users of incentives are using gift cards or gift certificates to reward customers, dealers and employees. When used the right way, gift cards can certainly add punch to your incentive programs. In a recent Webcast, Successful Promotions asked incentive experts to shed some light on the rising popularity of gift cards - and, most importantly, how marketers can leverage this powerful incentive tool. Read on to get the scoop.
Successful Promotions: Why go to all of the trouble of finding a gift card when you can just give a check to an employee and be done with it?
Rich Killian: I would push gift cards over cash because gift cards have a little bit more of a trophy value; the employee can take them home and share them with the family. Too many times cash is blown on things like cigarettes, beer and diapers.
SP: When you say trophy value you’re saying something that someone can pull out of their pocket and show off to colleagues?
Rich: Yes, they can pull the item out and tell other employees, “Listen, I won the safety award this year. I earned a $50 gift card to my favorite retailer.” That has more of a lasting impact on an employee than cash would.
Brian Thornsberry: When you consider using a stored-value card or a gift card as a reward solution, you’re making a clear choice to differentiate your program from a compensation related program to more of a rewards and recognition program. Additionally, when using stored-value products or reward cards, we find that we get a lot more engagement in the program, whether the participants are consumers, employees or salespeople. In addition, by using a gift card instead of cash, you have the opportunity to brand that reward experience, through tailoring the rewards that can be redeemed through the card or actually customizing the look of the card and the collateral associated with it.
KC Collins: Another great thing about gift cards and stored-value promotions is they give people the ability to buy something that they wouldn’t have gotten otherwise.
SP: We’ve heard a lot about how when companies give cash to employees, it becomes an entitlement. Is this another argument for gift cards in lieu of cash?
Dennis Borst: Cash is compensation, and it is not an incentive. So when you have a program where cash is involved it becomes an entitlement issue, because people automatically add that in to what their income is, and it becomes expected. So if you want to alter that incentive program in any way, it’s very difficult to do so.
SP: What types of programs are gift cards best suited for?
Brian: We see our stored-value products being used across the spectrum of applications. We service sales incentive programs and non-sales employee programs. But consumer promotions are a very big opportunity for us - in the near future, you’ll be seeing more consumer-related programs for things like rebates or programs that try to move consumers to exhibit specific purchasing or other behaviors.
Dennis: We have programs currently running of all varieties, including safety programs, wellness programs, length of service programs and business gifts.
Rich: Although we’re seeing gift cards used all over the board, we’ve seen an increase in their use as an incentive for test-driving or buying an automobile. They’re even being used in lieu of rebates. Think about it: Would you rather have $100 off your automobile or a $100 gift card?
SP: Are there any types of audiences or different sectors that gift cards seem to work particularly well for?
KC: We offered stored-value products, so you’re either given a card or you get an e-mail or something that has a PIN (personal identification number) with a redemption level where you go online and get your choice of music downloads, movie tickets, magazine subscriptions or whatever is offered. Although just under 70% of Americans now have Internet access, we’re finding out products seem to work best with the college markets, youth markets, businesswomen and those in the technology sector. Also, our products seems to work well within the male 18-35 demographic; they seem to ‘get’ our products right away.
Dennis: We find that all demographics find gift cards appealing. But not every gift card will appeal to all demographics. So one of the key things that marketers have to remember is the demographics of the group whose performance you’re looking to drive. What would be appealing to you isn’t necessarily appealing to the audience you’re trying to incentivize.
M.L. Helbig: Consumers plan to spend $48 billion this year on gift cards, and that number is going to double to more than $90 billion by 2007. Gift cards can cover the broadest or the most specific demographic. In our portfolio, for example, we have cards that can be used anywhere that American Express is accepted. In addition, we have theme cards that are tailored to focus spending into certain spending categories, like a home solutions card, a dining-out card and a gas card. And we can also enable our clients to custom-build the redemption to fit their program needs as well as the demographics of the recipients. That can be extremely powerful.
SP: Let’s talk about some dos and don’ts to keep in mind when structuring an incentive program that includes gift cards.
Rich: Here’s a don’t: We could all pick our three favorite retailers to purchase gift cards from, but wouldn’t you rather hear from your employees first on where they want to go and what they want to do? Obviously, you also want to keep locations in mind. If there’s not a Foot Locker within 30 miles of the employee home office, do you want to include a Foot Locker card in your program?
Brian: I agree that it’s very important to make sure that the offering you’re providing matches up with the demographics of your audience. You also want to assess whether or not they’ve experienced a gift card product before, and take a look at what their perceptions or inclinations are to perform for that gift card into the future. And, you need to look at how you intend to promote the card and the theme of the program. Lastly, you want to make sure your gift card distributor’s ability to fulfill those cards is commensurate with what your winners’ expectations are.
Dennis: Another thing to keep in mind: When you’re putting together a program, keep the rules simple and easy to understand. You should also make everyone in the program feel like they can effect the change that’s being looked for. In addition - and this is an important element that’s often overlooked - you need to look at how easy it is for the winners to redeem their reward. If the reward is difficult to redeem or people can’t figure out how to redeem the certificate, it can really throw a wrench into the whole system.
KC: I would definitely urge people to keep in mind that some gift cards have expiration dates on them. One thing we sometimes see is people who had purchased gift cards for a promotion and then wait for six or eight months before launching the promotion. If the cards have expiration dates, winners then don’t have as much time to redeem their rewards. You need to keep in mind such restrictions.
SP: Let’s look to the future a little bit. Gift cards have come a long way, even in the past year, with all different kinds of personalization options available and different ways to use the cards. What are you guys cooking up that we should know about?
M.L.: We very recently launched a couple of new products, including a home solutions card and an apparel card, which are in our theme cards set. The response to these cards has been great.
KC: One of the things I see on the horizon is cards that allow their users to create truly customized, unique, one-of-a-kind gifts for themselves. For instance, a winner might be able to create a T-shirt or something else online that’s totally their own. There’s a whole world of things you can go out and buy, but sometimes you want something you can make yourself. I also see an increase in stored-value cards that can offer not just choices of things but multiple combinations of things as well. For instance, a card might offer magazine subscriptions and music download cards, along with a customized T-shirt, all together as part of one delivery system.
Rich: One trend I see is that a lot of retailers are getting rid of expiration dates. That’s a positive I think for everybody in the group. Another trend I see is that some retailers are allowing people to customize cards by imprinting their photos on them. Gap and Wal-Mart are already doing that. Another major retailer is creating gift cards in packaging that includes 15-minute voice messages or music stored on computer chips. That’s pretty cool.
Reprinted with permission of Successful Promotions, copyright 2006
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