Gift Card JV’s
December 11, 2009 by Admin · Leave a Comment
Have you ever noticed that almost ever single major Canadian grocery store or Drug store has 3-4 rotating stands of Gift Cards? It’s obvious these gift cards make money and improve bottoms lines.
Now your small business may not fit into the realm of a Shoppers Drug Mart, but there is no reason why you can’t partner with a few local businesses in your area and you all trade off on your gift cards.
This is commonly known as a JV (Joint Venture Partnership). How you want to structure your JV’s is up to you, but I would recommend giving away small Gift or Loyalty Cards that are loaded up with $5 or $10 so that your neighboring businesses can give away these cards to their customers when they make a purchase.
Why give these away…? Because you are taking their traffic and will redirect into your local business. People will come into your business when they have free money. Do they ever just spend $5 or $10 – never! The numbers are in your favor that they will spend more than they normally would. From seeing this first hand, this can be one of the best ROI’s on marketing a small business can do. Besides, think about what it can cost you to acquire a new customer via traditional marketing? Think about the life time value of your new customer and so on. For most SMB this is a no brainer.
It’s a win-win. You neighbor businesses get to seem like nice folks by giving away gift cards and you get to capture their customers. You neighbor’s might want to the same thing with their Gift Cards.
More small businesses need to be creative and start working together to survive in todays economic times. Start your own Gift Card Marketing Program today.
Marketing Gift Cards
April 20, 2009 by Admin · Leave a Comment
I found this video on YouTube today and they offer some good reasons why ‘gift cards’ are superior to using ‘gift certificates’. They just carry more perceived value. If you are not using Gift Cards as a marketing method in your business yet, then you are leaving money on the table. Read this free Gift Card Marketing Guide.
Why Your Company May Want to Give Away 100′s of Gift Cards For Free
February 27, 2009 by Admin · Leave a Comment
Why would Lord & Taylor give away 1000′s of dollars worth of gift cards with no conditions attached…?
Because they make a ton of money doing it!
Did you see how excited those people are in the video to receive a free $25 to buy stuff at this company?! What do people do when they receive a free gift card:
- They talk about it.
- They spend it. (Where only your place because it’s a gift card)
- They spend more than they normally would.
This is an amazing strategy to build rapport and create what Robert B Cialdini calls the “reciprocal agreement”. When you offer something ‘for free’ to people they then have a tendency to want to reciprocate and give something back. Like maybe… buying lots of your company’s stuff!
To learn more about the psychology of gift cards and why they can help your business make more sales read: ‘The Definitive Guide to Gift Card Marketing‘.
US Retailers Form New Retail Gift Card Association
December 3, 2008 by Admin · Leave a Comment
Several major US retailers led by founding members Applebee’s, Best Buy, Home Depot, Marriott International and Subway have announced they are joining together “to create an industry group whose goal is to ensure shoppers have only positive experiences with the gift cards they buy and use. The Retail Gift Card Association (RGCA) formed in October with a mission to create consumer-centered policies and procedures for members that will let consumers continue to confidently buy and use the cards that have become the #1 gift choice over last several years.”
Now my question is when will Canada form their own Gift Card Association to help protect consumers? We seem to always fall a little behind the times up here in Canada. Gift cards are a extremely powerful way to increase sales and profits for businesses, but there has also been some real issues with gift cards over the years. Even provincial guidelines have had to be created to protect consumers from expiry dates on gift cards. I think a Gift Card Association would be a great asset to the Canada Payment Processing landscape.
Any bold folks willing to step forward and form the Canadian division of RGCA…?
Click here for a: Gift & Loyalty Card Quote
The Definitive Guide to Gift Card Marketing – Part 4
October 4, 2008 by Admin · Leave a Comment
Return on Investment
Typical gift and loyalty card services can be quite affordable for even the small business owner. Once you understand how great your return on investment can be, odds are you’ll want to implement a gift card strategy ASAP!
Gift and loyalty card programs have four main costs:
- Initial set-up cost: $0-$400 fixed, one time cost
- Monthly maintenance/system access $19-$59-monthly on-going fee
- Gift & Loyalty cards: $0.80-$1.50 – card price depends on artwork requirements (Custom only)
- Loading & unloading card transactions $0.20-0.25 for loyalty cards (Custom Only)
These costs can vary depending on your individual business needs. Regardless of specific costs, a small business owner needs to understand that gift cards are profitable and increase sales for two main reasons:
Let’s look at how “Breakage” and “Uplift” increase profits:
Gift and loyalty cards have indirect benefits. This is where the “REAL PROFITS” lie in gift cards.
Not everyone will use all of the money on their card and many people will spend more than the value of the card in your store.
- In fact, studies have found that people will usually spend 10-30% more when using a gift card, which is known as “Uplift” in the industry.
- Add to that the fact that 5-15% of all cards are never fully redeemed – a phenomenon the industry refers to as “Breakage” – and you are left with even more profits from your gift card marketing programs.
Let’s use the worst-case scenario numbers in this example:
Let’s say you sold $7500 worth of gift cards. This is an example of what you might expect:
$7500 X 10% “UPLIFT” = $750 extra profits due to customers spending more because they see the amount on the card as “free money”.
$7500 X 5% “BREAKAGE”= $375 never redeemed due to a percentage of customers that never spend the full amount on the gift card.
Therefore, in this example you just made an extra $1125 in profits from your Gift Card Marketing Program.
Even if these were the only gift cards you sold all year and you never cycled them, you would still stand to profit.
Typical Example Case Study Expense on a Gift Card Program:
$199 in initial costs
$39.99 X 12 months = $480
$480 + $199 = $679 in costs
Potential Profits equaled $1125.
$1125 – $679 = $446 in extra profits on the same product that you would have sold without a gift card program.
In the example above you just increased your sales by 5.9% without changing a thing you other than selling the gift card instead of the product. You can obviously increase your sales much more, but we wanted to use a conservative example to keep it real!
HUGE BONUS: GIFT CARDS CAN ALSO REPRESENT PRE-PAID CASH FLOW
Assuming that you have paid around a dollar a card for a semi-custom-designed card, that is your total cost, no matter what the face value. If you sell a gift card with $500 loaded on it, it has only cost you a buck at the point of sale. You now have $500 in your register and your “Cost of Goods & Services” for that card was 1/5th of a one percent. Need short term capital? One the quickest and easiest ways to raise capital is with a gift card promotion.
I know a merchant who needed a short-term capital loan. Instead of trying to get financing from a bank or an alternative lender, he held a contest with his employees to see who could sell the most gift cards in one week. He offered whoever sold the most gift cards a bonus commission of 5% on the total amount dollars sold on the gift card promotion. He needed an extra $10,000 to play with within a week.
He had 12 employees. The winner sold $3,500 worth of gift cards and the others averaged just under $1000 each. He made just under $13,000 sold in one week on gift cards. He paid the winner a bonus commission of 5% on the dollar amount sold, which was $175. He just received a short-term loan of $13,000 for $175. We haven’t even factored in “breakage” and “uplift” into this equation. Oh, did I mention that loan of $13,000 he doesn’t have to pay back? GET THOSE GIFT CARDS ON THE STREET!!!
SIDENOTE: Know your legal obligations when it comes to Gift & Loyalty Cards.
There are good reasons why many of the big store chains have an aggressive Gift & Loyalty Card Program in place!
The Definitive Guide to Gift Card Marketing – Part 3
October 4, 2008 by Admin · Leave a Comment
Gift Card Marketing Strategies
Smaller businesses need to employ more creativity when marketing their gift card programs.
The trick to having great gift and loyalty card programs is to never let the card run out. This is called “cycling” in the industry. A savvy merchant will work aggressively to continuously cycle their gift cards, because as long as there is an amount on the card then customers feel the need to come back.
If you allow the card to reach a zero balance then there is no advantage for the customer in returning to your business. Repeated cycling creates an unconscious habit in your customers over time: habit of returning to shop at your location!
You should have two goals when planning your gift & loyalty campaigns:
- Increase your customer base.
- Maintain your existing and new customer base.
Let’s look at some real life strategies used in successful gift & loyalty Campaigns.
Lunch restaurant uses gift card strategy for opening day launch:
The owners of a lunch time restaurant, located near a university, were ready to open. They wanted to create a real buzz from the moment the store opened to ramp up their business.
We came up with a plan to make 100 gift cards with a value of $4.00 each. The owners knew their average ticket price was around $8, with a “cost of goods and services” of about $2.50. They could afford to give the cards away and still make a profit.
Two days before the opening we hired someone to hand out cards to students, explaining that they would only be good on opening day. When the restaurant opened its doors there was a line-up out the door. A lot of students brought their friends with them and many ended up spending $12 as an average ticket price.
And since the food and service were good, to this day the lunch time restaurant has one of the busiest lunches in that area.
Sidenote: An interesting read: Restaurant Gift Card Survey
Florist increases deliveries with gift card strategy:
A florist I worked with knew that most of the flowers they were delivering were to people who were receiving flowers from someone. The company wanted to try to increase their customer base to include the people receiving the flowers.
After working out their “cost of goods and services” they determined they could maintain profitability and still include a free $10 gift card with each delivery. They tastefully added a free card when they delivered flowers, and soon saw a dramatic increase in orders due to their gift card campaign.
Clothing retailer challenges larger chain stores with savvy strategy:
Clothing retailer challenges larger chain stores with savvy strategy.
A clothing retailer who was finding it challenging to compete against larger chain stores used a gift card strategy to turn things around.
The owner trained his staff to ask new patrons if they had shopped at the store before. If the answer was no, the sales person would offer a gift card in the amount of roughly $5. The free card was a big motivator. The store owner observed that patrons would begin to shop and would buy something because they’d been given a gift. (This is a sales technique called the “reciprocal agreement“).
But the store owner didn’t just want one-time customers, so he trained his staff to reload the person’s gift-card during the check-out. Customers, already in a positive frame of mind from the initial gift, received a cheery comment like “Thank you for your business, we added $X to your gift card for your next visit.” That simple strategy turned many casual shoppers into loyal, repeat customers.
Restaurant owner uses gift card strategy to create a lunch time rush:
The owner of this restaurant, located near a few office buildings, made it known to the buildings’ employees that a gift card with a $50 dollar value was hidden underneath one of the tables at lunch everyday. Eventually the word spread through the offices. As the card would, in most cases, be found by the first people to enter the restaurant at lunch, it created a line-up at the door before the restaurant opened. Because the restaurant was in an area where there was a lot of pedestrian traffic, people walking by thought, “Wow, the food must be great at that place. We will have to try it sometime.” So not only did this promote a faithful lunch crowd, it also created a ‘buzz‘ that brought in new customers for the evening meal, when the restaurant charges more for the same dishes. The Psychology of Line-ups
A Handbag Maker increases her sales and beats her competition at flea market with gift card strategy:
This entrepreneur made handbags out of recyclable material and would sell them at a flea market every weekend. Another lady was doing something similar a few booths down, and she wanted an edge on her competition. With every handbag sold she would thank customers for their business and put a $5 dollar gift card in the bag to be used for their next purchase-or to be passed along to a friend to purchase their own unique handbag. She reported her sales and referrals increase by 25%. It was a simple strategy but it worked!
Nail Salon uses gift card to boost sales with this Birthday gift card strategy:
The owner trained all her staff to say at check-out: “We appreciate your business and we are sending a $10 gift card to you and your best friend on your birthdays because everybody deserves to be pampered on their birthday.” Staff would then explain that all they had to do to receive this offer was provide a mailing address for themselves and their best friend so they could mail this gift card to them. Not only did this create an additional potential customer (i.e. the best friend), it also gave teh store a mailing address to which they could send personalized promotions to ensure repeat business.
A Retail Tire Dealer was looking for a way to create repeat business even though the average customer only bought new tires ever 2-3 years:
He gave out a $25 dollar gift card with every set of tires purchased. Since nothing in his store could be purchased for this amount, it was a strategy to take advantage of “uplift”. Most customers put the card away to be used for their next investment in new car tires, which is what the owner was hoping to accomplish.
An Automotive Repair Shop wins the sale today or tomorrow with this gift card strategy:
As mechanics serviced the problem the car was brought in for, they would also look for other potential near future break-downs. When the customer returned to pick up their vehicle the mechanics would say: “By the way, we noticed that “xyz” has been leaking, if the “xyz” runs dry, it will burn up and then it will cost you a new “abc”. As it stands now, we only need to replace “xyz”. Parts and labour will run you about $75. Would you like us to go ahead and schedule your car for that repair?“
If the customer looked like they were going to put off, the mechanic would say: “Look, I’d hate to see you come back in here to have “abc” replaced because you didn’t get “xyz” done today, which will then cost you $400. You know what we’ll do? We’ll give you a $10 gift card that you can use towards the replacement “xyz” or the “abc” if you wait too long. Just get it done soon, okay?“
The vast majority of the time the customer has the repair done on the spot-and if they don’t the customer usually comes back to have the repair done due to the generosity of the free gift card. This marketing campaign has increased this Mechanic’s sales by 45%.
A Wedding Invitation Business partners with a Formal Wear Shop with this gift card strategy:
The owners of a Wedding Invitation Business and the owners of a Formal Wear Shop shared each other’s mailing addresses. When a new wedding was announced, each other notified each other and they would each send a $20 gift card with a letter saying: “Congratulations on your engagement! We’ve got you covered.“
It brings them both business they might never receive. And with each of their “costs of goods and services” the gift cards really only cost them 1/4 of what the value is.
This gift card exchange strategy could be used for many different business types: an accountant could partner with a computer store; a specialty cigar store could partner with a specialty wine store; dance instructions studio could partner with a dance clothing retailer. You get the idea.
A Jewelry Store increases sales during the holiday season by giving a free $50 gift card to the “right” people:
Every year during the holiday season, this jewelry store gives the Human Resource department in a very large ad agency about a dozen free $50 gift cards to be handed out to the Head CEOs as a gift from the HR. It is a win-win for everybody. The HR Department gets to look very generous and CEO’s usually come in to purchase their significant others an expensive piece of jewelry for the holiday season.
Other strategies at play:
Gift and loyalty cards can be used in many unique ways. A few other creative strategies I have seen include:
- Small business owners using cards as rebates on products instead of holding a sale. A sale gets people in the store, but it doesn’t encourage them to return. Rebate gift cards do both.
- Gift cards can also be used as refunds and ensure sales stay in your store.
Gift and loyalty cards have been used successfully by: mechanics, massage therapists, beauty salons, restaurants, coffee houses, home improvement companies, accountants and companies in many other industries. This is no longer a business marketing method that is limited to larger companies, but a strategy that you can put to work in your business immediately.
Click on the following link to learn the ROI on Gift Card Marketing.
The Definitive Guide to Gift Card Marketing – Part 2
October 4, 2008 by Admin · Leave a Comment
The Psychology behind Gift Cards
Understanding the psychology behind gift cards will make any business owner get very excited!
One of the most fascinating elements of gift cards is that people see the value on the card as “free money” or “found money.” The psychological effect is similar to that of a credit card, only much, much stronger!
As a result, people spend more. Someone with a $50 restaurant card will usually indulge in a dinner for two, spending $120. Another shopper in a retail clothing store with $15 left on his or her card will splurge on an item that is $15 more than they would otherwise be willing to spend.
A person who has a $5 Starbucks gift card is more likely to visit Starbucks instead of another coffee store. What’s more, they will probably use the gift card to buy an extra coffee for a friend or colleague.
Other psychological benefits include:
- The cards create a “walking billboard” every time the carrier opens his or her wallet.
- Cards create a bond between the customer and the store.
- Cards make payments easy, with no searching for change for coffee, etc.
- Cards enhance a business’s image, giving the company an image of “modernity”.
Gift and loyalty card strategies can get quite sophisticated. However, you don’t want to rely on a display at the cash to promote your program, an approach that might work for a larger company that has huge marketing budgets to drive people to their locations.
You need to be creative and aggressive with your card marketing strategies. Click on the following link to see real Card Marketing Success Case Studies.
The Definitive Guide to Gift Card Marketing – Part 1
October 4, 2008 by Admin · Leave a Comment
This Guide was written to empower Canadian Small & Medium Sized Business Owners with the knowledge to increase their profits using gift & loyalty card marketing. So what’s in this guide…?
- What is a Loyalty Card Marketing Campaign?
- Benefits of Card Marketing
- The Psychology behind Gift Cards
- Real Life Examples of successful small-to-medium sized companies card marketing strategies
- Cost of implementing a Card Marketing Campaign
- Return on Investment
- How to get started
What is a Loyalty Card Marketing Campaign?
Loyalty Cards are what the name implies. They are used in marketing campaigns which are designed and utilized to maintain a loyal customer of your business.
The best way to explain Loyalty Card Marketing is to describe a few campaigns that you might already be familiar with.
1. The Discount Card Campaign
A good example of the “Discount Card Campaign” is the membership card that Costco uses. The customer pays an annual membership of around $50 dollars to be able to shop at the Costco Store and have access to their discount prices. Barnes and Noble has a similar program where the customer pays for a $25 dollar annual membership card that gives the customer a 10% discount on all purchases made in the store.
2. The Point Card Campaign
Second Cup Coffee Houses have had a “Point Card Campaign” for years, it is a variation on the old punch card system, where for every purchase of a coffee the customer receives a stamp or punch in the card and after a certain number of punches the customer receives a free coffee. Today’s version is simply swiped across the card terminal that records the number of visits or coffees purchased.
3. The Money Card Campaign
Shoppers Drug Mart has an excellent example of the “Money Card Campaign.” This is where every purchase receives points that then tally up to an amount of money that can be used to purchase goods and services. Canadian Tire has had a variation of this program for years, with their Canadian Tire Money, handed out to customers after a purchase is made.
When all is said and done, these concepts are interchangeable and are really just variations on gift cards. Instead of swiping a dollar amount across a card, loyalty cards are swiped with visits, oil changes, hair-cuts, massage sessions, items purchased, or whatever assigned amount you choose to encourage your customers to return to your business.
A huge benefit of Loyalty Card Campaigns: they act as walking billboards. A word of caution, though: owners must remember to keep loyalty marketing strategies simple (KISS).
WARNING: If your staff struggle to understand the benefits of your loyalty strategies then chances are greater that your program can easily fail. Make the rewards attainable for customers, where the benefits are easily identifiable. This will help increase sign-ups.
Although loyalty marketing campaigns can be extremely successful, We’ve learned -from personal experience in helping many owners implement card marketing campaigns,-that real profits in card marketing are in gift cards.
WHY HAVE A CARD MARKETING PROGRAM IN PLACE…?
- Help you increase your customer base
- Help you retain your existing customer base
- Can increase your average sale amount (ticket price)
- Can keep sales in the store as they can be used instead of refunds
- Offer “uplift” meaning dollars spent above the value of the card
- Are more secure than “certificates” – meaning less cases of counterfeit
- Are like mobile advertisements for your business – walking billboards
- Are re-chargeable
- Make purchases very easy for your customers
- Give a competitive edge over your competition
- Are one of the most popular gifts in North America
We believe the “REAL JUICE” in card marketing comes from Gift Cards. Loyalty cards are great, but Gift Cards are where the merchants make their $$$!
Click on the following link to understand “The Psychology behind Gift Cards“.
