Why and How to Offer Gift Cards

Gift cards were the most requested gift last holiday shopping season. Get on board with these four how-to tips.
(Assorted Gift Cards)
Experts says all small businesses should offer gift cards. (Photo: Joingate/Shutterstock)

Gift cards are ubiquitous at grocery stores and big retailers, but some small businesses have been hesitant to offer any kind of pre-paid certificate program because of fears they’ll be too costly or confusing.

But the numbers speak for themselves: Gift cards were the most requested gift of the 2015 holiday shopping season for the ninth straight year according to a National Retail Federation survey. Consumers spent an average of $47.87 per card according to the most recent NRF data available, and the NRF predicts gift card spending will continue to grow.

“Every business, including the smallest of small businesses, should offer gift cards,” said Jennifer Martin, a small business coach and consultant who owns Zest Business Consulting. “It gives your biggest fans an opportunity to buy a gift for someone they love, and you’re getting a guaranteed purchase of a certain amount from someone who hasn’t been a client before.”

They can also boost profits. Most gift card recipients — 65 percent according to research firm CEB Global — tend to spend more than the face value of their gift card.

Many consumers also shop differently with gift cards. “They’re using gift cards for splurge items. They’re spending on things they might not normally spend on,” said Martin.

Other advantages to offering gift cards include marketing and customer research. Asking customers to provide an email address to register their gift card is a good way to grow your email list. The customer wins because by registering the card they can get a replacement if it’s lost. “There’s a higher level of service by offering a gift card,” Martin said.

Your POS system may let you track how much money is being spent in gift cards, what people are buying with them, how much they are overspending gift cards by and other metrics that can be helpful in understanding your customers and what they want.

Choose plastic vs. paper

If you decide to venture forth, you’ll need to decide whether to offer gift certificates (usually printed on paper and filled out at the register) or gift cards (swiped at the register for a designated or pre-paid amount).

Paper certificates are the cheapest option, but Martin said in this day and age, cards are worth the extra cost. With tools like Photoshop, paper certificates can be reproduced.

People also tend to think gift certificates can be used only once, even if that’s not the case, because they’re not swipeable, according to Martin. Consumers under age 45 prefer cards.

Gift cards, when synced with your POS system, are also easier to use, and customers don’t feel pressure to spend the cards all at once if they don’t want to. The cards can be branded with your store’s logo so clients have a tiny billboard for your business in their wallets.

Research gift card providers

Shop around when choosing a gift card provider, Martin advised. Most business owners get their cards either through their credit card processor or a third-party gift card vendor. There are pros and cons to both.

For example, your credit card processor or merchant bank may not charge for the gift cards, but you might be very limited on customizing the design. Third-party merchants might have more design flexibility but not be able to integrate with your POS system.

“Do you homework because if you have a cash register connected to software, you want to make sure your software plays nicely with a card,” Martin said. “Don’t buy from the first company out there.”

Martin also advised that if your business will add any caveats around redeeming gift cards, you need to write them down. If you don’t want the cards to be redeemed for cash or used to buy more gift cards, list those policies on the back of the card or certificate. If gift cards need to be used all at once, make that clear as well.

Promote your cards

When you’re ready to launch a gift card program, the first thing to do is educate your staff. Teach employees how to process and redeem the cards, including registering customers by email address and gift card number in your POS. Explain whether they should throw away old cards or keep them for reuse.

Then get the word out to customers. At a minimum, Martin said, all of your cash registers should have small signs that advertise the cards. Or add small racks to hold cards for customers to grab.

“Display them where customers are paying for things” to inspire impulse buys, Martin said.

Promote your gift cards on social media and through email all year long. Tout them not only during the December shopping season but as options for graduations, Mother’s Day, Father’s days and other holidays.

Incentivize gift card purchases

If feasible, give customers who buy a certain number of gift cards their own $5 or $10 gift card for free as a buy one, get one. Or reach out to your big spenders about using your gift cards for corporate gifts in exchange for discounts.

For example, if you’re a restaurant that regularly caterers for a corporation, let them know you offer gift cards and would give them a discount on their orders if they bought gift cards for clients and employees.

Even if you’re a very small business, you can get creative to make gift cards a successful part of your business. “Don’t think you’re too small to have gift cards,” Martin said.

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