If you’re not making the most of your gift card program (or have yet to implement one), you’re missing out on some serious revenue potential. Gift cards are steadily increasing in popularity year over year, with the U.S. market expected to reach $510 billion in 2025.
No matter what type of business you operate, you can’t afford to miss out on the equity that comes with building an effective gift card program.
Here’s a look at how you can optimize this area of your business and make it successful.
What is a Gift Card Program?
A gift card program allows businesses to sell (issue) gift cards redeemable for goods or services. If a gift card is only redeemable at your business, it’s considered a closed-loop gift card program.
On the other end of the spectrum, open-loop gift card programs are redeemable anywhere. For example, gift cards with a card network logo like Visa or American Express are considered open-loop gift cards. Therefore, they are redeemable at any business that accepts those types of payment cards.
What are the Benefits of a Gift Card Program?
A gift card program is a cost-effective way to boost revenue, drive customer loyalty, and build brand awareness. They can also be a lifeline for your business during a time of crisis, such as the COVID-19 pandemic.
Let’s explore some of the game-changing benefits of these magical little vouchers.
Build Brand Awareness
When you’re looking for a new restaurant to try, a new vacation destination, or need some work done around the house, who are the first people you reach out to for suggestions?
If your answer is friends or family, you’re in good company. A Hubspot survey found that 90% of respondents trust suggestions from friends and family. We inherently trust our loved ones, so their recommendations, experiences, and implicit word-of-mouth marketing is meaningful.
A gift card program extends this type of marketing and is a great way to build brand awareness. For example, let’s say a first-time customer, Jane, walks into your restaurant. She has the trifecta of an overall great experience — the food is delicious, the service is on point, and your prices are reasonable. Not only did you start the customer journey off on the right foot, but you’re (most-likely) creating a repeat customer and laying the foundation of building brand awareness.
Now, let’s say a month goes by, and Jane needs a last-minute birthday gift for her friend John and wants to pick up something local on the way to the party. So she runs through a mental checklist of businesses she likes and cross-checks that with ones she thinks John will also enjoy. She recalls the great experience she had while dining at your restaurant, and decides to buy John a gift card.
Jane pops into your restaurant and buys a gift card for John — a $50 value. Upon receipt, John tells Jane he’s seen your restaurant driving around town but has never been there to dine. Now, armed with a gift card, he has an incentive to check it out.
Boost Your Bottom Line
Building brand awareness goes hand in hand with boosting your bottom line. The more people that know about your restaurant, the more potential you have to grow your customer base. Getting back to our Jane and John example, let’s see how the domino effect of a $50 gift card plays out.
After a long work week, John brings his family of four to your restaurant for dinner on Friday night. After they order drinks, an app, and their entrees, the check comes to $120 (not including gratuity, of course). Already, John is spending $70 more than the amount of his gift card.
In fact, 65% of gift card recipients spend 38% more than the gift card balance, so John’s spending habits are on par with most gift card recipients. If situations like this continue to play out over the course of the year, you’ll see a steady boost to your cash flow and your bottom line.
Drive Customer Loyalty
If customers have a good experience at your restaurant, there’s a high probability that they’ll return again and again.
Just like Jane, the restaurant made a good first impression on John and it’s highly likely that he’ll be back for another meal in the future. In this case, not only did a new customer spend more than double the amount of the gift card, but you also gained a new patron.
Another way to leverage a gift card program to drive customer loyalty is to use it in conjunction with your customer loyalty program. For instance, every time a customer spends $500 at your restaurant, they get a $15 gift card to use on their next visit.
How to Manage a Gift Card Program?
To have a successful gift card program, you’ll need to find the most effective way to manage it. There are a lot of moving pieces when it comes to gift card sales, and here are a few things you’ll need to know.
Issuing
From a business perspective, when customers purchase gift cards, it’s known as issuing. Your business is issuing a gift card with a predetermined balance that you’re collecting payment for at the time of purchase.
Redemption
On the other hand, when customers actually spend the gift card, it’s known as redemption. They’re redeeming goods or services in the amount of (and often exceeding) the card’s value.
Balances
Here’s where it gets tricky. Suppose the gift card is not redeemed for the total value during a transaction. In that case, it’s your responsibility as the business owner to keep track of the balance left on the card. Imagine doing that for every single card you issue.
Replenishment
Some physical gift cards are reloadable, so you can repeatedly add funds to an existing card.
A Point-of-Sale (POS) system is the absolute best way to manage a gift card program in these digital times. All of the details above are tracked automatically with a POS system.
Most POS solutions have a proprietary gift card program or integrate directly with a third-party provider. While you may pay a small transaction fee (as in pennies) to process gift cards, the automation of these card management processes is vital to being successful and worth every penny.
Physical and Digital Gift Cards
Since you’ll be managing the gift card program via your point-of-sale system, it’s important to ensure that your provider offers both physical and digital gift card options. Even though we’re primarily a digital-first society, we still have analog tendencies. So make sure you’re serving both types of customers, so you don’t miss out on any sales.
Marketing Campaigns
Speaking of sales, how will you ever sell any gift cards if nobody knows you offer them? Recurring marketing campaigns around your gift card program is a great way to get the word out.
Digital Marketing
Whether you send an email blast to your existing customers or use social media to spread the word, you’ll want to invest the time (and maybe a few dollars) in promoting the program. This is especially important around the many holidays throughout the year when gift-giving is a customary tradition.
Traditional Marketing
You can also explore more traditional methods like internal and external signage. When customers walk through the door, it doesn’t hurt to let them know gift cards are available for purchase. A small sticker on the door, a display, or digital signage are great ways to bring awareness to your gift card program.
Special Promotions
Expanding on leveraging gift cards with your customer loyalty program, you can take it a step further. You can run special promotional periods or gift card incentives on specific items. For instance, for every $50 gift card purchase between May 1st and July 1st, the purchaser gets a $10 bonus gift card.
Unlocking Revenue Potential
As one of the more popular gift ideas and a cost-effective way to open up a new revenue channel, optimizing your gift card program is a no-brainer. If you’re not marketing your gift card program to the fullest, now is the time to start.