Gift Cards, Coupons, and Gift Certificates - The Forgotten Killer Resource
Posted on Tue, Sep 07, 2010
I look at gift cards, coupons, and gift certificates as the “Rodney Dangerfield of Promotions”. They just don’t get the respect they deserve unless you’re in the supermarket business and you live your life by manufacturers’ coupons. A few months ago, I did an article about the boom and the use of coupons and coupon services, and my recommendation was to jump on the bandwagon of coupons because it was a paid performance vehicle. Somehow these three promotional vehicles get clumped together (as I did) when in reality; they need to be separated so they can stand up on their own merit.
Having said that, these three tools are often interpreted differently. A gift card can be a coupon, a coupon can be a gift card, and a coupon can be a gift certificate. And if you were not confused before, I have probably made you more confused. Let me explain:
- In the beginning, there were just gift certificates and coupons. Never were they ever confused. A gift certificate was something you purchased in a store and used to give as a gift.
- A coupon on the other hand was a price reduction on a specific item for a very limited time period. Many of these coupons were sponsored by manufacturers who wanted to insure that the savings they were offering would be passed on to the consumer.
- The next incarnation of a coupon was the use of the store coupon for a specific or any item; example, a $10 coupon to stimulate the sale of coats. The coupon could only be redeemed if someone was purchasing a coat.
- The biggest mistake that stores make in using coupons is they sometimes forget that they only work well with a tight expiration date.
- The beginning of the combination of using a gift certificate like a coupon was for price incentives. This concept exploded with the birth of the gift card.
- The next big change was the shifting from the old fashioned gift certificate to the modern credit card looking gift card. It worked because it looked like a credit card, smelled like a credit card, and worked like a credit card. The best part was it didn’t get thrown away. They would stay in a woman’s wallet long after the expiration date (yes, I said woman’s wallet; that was not any type of slip). The use of gift cards and coupons between men and women are staggering. Women will use a gift card 18 times more than men. A simple test is to ask 5 men and 5 women “how many gift cards are you carrying in your wallet?” For every one a man has, a woman will have at least 5. Enough said!
Why should we use these tools?
The reason is simple. The numbers in the redemption rates due to the recession have skyrocketed. People are looking for every way possible to save money. USA Today reported that in 2009 the increase in redemption of coupons was up 211%. The interesting thing is that the use of gift cards, whose sales increases have been in the triple digit range, have been the number one selling item in retail for the past five years. A gift card only has a redemption rate of 88%, which means that 12 cents out of every dollar is never redeemed. That is the reason why every retailer should jump on this bandwagon. Where can you get a 12% return on your money?
How can these tools be used?
Here are some of the more interesting ways of utilizing these tools.
- A gift card promoted and sold in the traditional manner. You pay me $50 and you will receive a card to give as a gift. Many stores will gift wrap a gift card for an added touch.
- You promote gift cards by offering a gift card incentive for someone who is purchasing a gift card. The way this works is to buy a gift card for $50 and receive a $10 gift card for yourself. It is a true win/win.
- Your gift card can be sold by a third party whereby you will receive an incentive for purchasing that gift card from that third party. A friend of mine goes to a supermarket to buy a gift card for a restaurant she is going to that evening. When purchasing this card, she automatically gets 20 cents off per gallon at their gas station. So if the person were to purchase 5 gift cards to give as Christmas gifts, they would receive $1 off per gallon of gas. That’s what I call creating loyalty. So here is the lesson, when was the last time you checked with a supermarket to put your business on their program?
- Send out a gift card to your best customers. Many stores who sell high end items, will send out a $25 or $50 gift card because that is the sufficient incentive which will WOW the customer into coming in. The goal is to give the customer a reason to come in to spend. And do they ever!
- Using the same concept, send out a gift card for a customer’s birthday. I would send out a $5 or $10 coupon with no strings attached other than you cannot purchase a gift card with a gift card. It is one item per coupon and there is no cash back.
- A gift card used for fundraising activities – the charity sells your gift cards, or at least help to promote the sale of a specific gift card for that charity, the charity would receive an incentive of between 3% and 10% of the total amount redeemed. The part I love about this is that your store can be part of the minister’s sermon. I have actually heard one promote a specific business because of all the money the church was making from that business.
- Have a special promotion just for gift card days whereby you send out gift cards to all or part of your mailing list.
- The bounce back coupon, which is the most highly redeemed of all coupons – the way it works is someone makes a purchase of $100 and they receive 20% off their purchase (or $20) in the form of a gift card. These gift cards can be redeemed within 7 days of the purchase, but not on the day of the purchase.
There are countless ways the gift card/coupon can be used to build your business. The reason why it is so important is that it works and it is one of the most trackable and measurable advertising vehicles we have available today. Let me know what your experience is like and I will share your ideas.