Gift Cards Increase Merchant Sales Volume and Net Profits

Gift Cards vs. Gift Certificates, Mailers and Coupons as Marketing Tools

Gift cards are used by merchants of all sizes

Gift cards, when used as a marketing tool, bring in new customers, increase profits and ramp up sales volume. They are more effective at these critical marketing jobs than any other physical marketing tool, for a number of reasons. Gift cards are also much easier to track, which should make any bookkeeper or accountant happier, in the bargain.  In the consumer’s mind gift cards represent hard dollar figures burning a hole in their wallet. Cards which have a cash value embedded on the face do not get tossed away, used in the fireplace or left pinned and forgotten on the fridge.

The primary key to a gift card’s effectiveness is that they are universally recognized as “same-as-cash” items by consumers of all ages. A gift card tells a potential customer not only where to obtain goods or services, but how much they get to spend once they are there. Yet that same gift card can have no more cash value than a coupon clipped out of the newspaper. Like all great marketing, the value is completely in the perception of the customer.

Gift certificates are not always practical for a potential customer to carry around with them, and the paper is susceptible to the elements. Certificates, like coupons or anything printed on paper, are also easily duplicated with today’s HD print technology. While that might not hurt a business offering a two-for-one style discount, a coupon printed with real dollar figure can suffer loss of value if counterfeits are being tendered. A real dollar amount on a gift card is a far more effective draw than a percentage discount, though each contributes to increased sales and profits for merchants.

Gift cards are usually put inside a customer’s wallet or purse, along with all their regular credit/debit cards, serving as a tangible reminder every time they access their plastic. When gift cards are distributed to potential clients and preferred customers in the same way a regular business card might be shared, the impact on the consumer who receives it is direct, and measurable. The gift card economy bloomed into a $100 billion industry by 2009, and has shown little sign of slowing down.

Gift cards also serve an excellent way to increase business and profits, even if they are never distributed like coupons. When purchased for a set amount in a retail location, consumers bringing the card back in tend to spend 20 to 50 percent more than the retailer’s average ticket.

The 40 percent of consumers who do not spend the whole amount leave an average of $2.30 on the card. Meaning, that money is taken in by the retailer, which is never used for their goods or services to the tune of $41 billion in unspent card value, between 2005 and 2011. In addition, gift cards are an excellent way for a merchant to reimburse or refund money to a customer, without losing the business already earned.

According to the Merchant Services industry, gift cards have an average purchase-to-use ratio of 30 percent. This is true across all industries and business types. Compare that ratio to the standard return offered with mailed coupons, newspaper coupons, traditional sales letters and email marketing, which is considered excellent if it reaches four percent. That figure alone makes gift cards a marketing tool which no business can afford to ignore.

Today’s business climate demands innovate marketing strategies and the ability to think “outside the box.” Increasing net profits by driving up sales volume is not a new idea, but integrating gift cards into a marketing package as a purchase motivator, most certainly is.

By Ben Gaul

LATimes

Wall Street Journal

Business Pundit

2 Responses to "Gift Cards Increase Merchant Sales Volume and Net Profits"

  1. Sales Promotions (@SalesPromoOrg)   August 11, 2014 at 3:32 pm

    Hi Ben, Great post. I was looking to see what else is out there. I have some more information on my website (we deal with information about running sales promotions, giveaways and sweepstakes) If you think your readers would find it useful. Feel free to reference or link. I am adding this post under our resources page. I don’t believe is leaving comment spam links. Thanks again!

    Reply
  2. Derrick Tulali   December 11, 2013 at 6:58 pm

    I think this is very useful information, I know of a company that I would recommend that does just that! Here is their website: http://www.appcardsolutions.com

    Reply

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