Gift card revenue represents an extraordinary opportunity as we approach the holiday season, especially this year when traffic and overall holiday sales are predicted to be somewhat flat to last year's depressed levels. Today, the National Retail Federation unveiled, what I believe is a conservative, yet realistic, prediction for this year's holiday sales. The NRF is predicting a 1% decline from last year's levels to $437.6 billion for the November and December period.
Here are the top 5 reasons that an energized, focused and well executed gift card marketing campaign is essential to every retailer this year:
1) Drives lots of traffic to your retail locations, post-holidays. Most holiday gift cards are redeemed in January and February. On average, the holidays generates as much as 40% of a retailers total annual revenue, so you want to ensure you leverage this traffic to benefit your slower 1st quarter.
2) Improves cash flow immediately. You get the cash now and book the revenue later, when the cards are redeemed. A CFO's dream come true!
3) New customer acquisition. Many gift card redemptions are made by new customers. What a great opportunity to make these cardholders feel welcome. Remember, it costs three times as much to acquire a new customer than to service an existing one. Roll out the red carpet for these new guests!
4) Gift Cards are more profitable. According to a 2007 BigResearch survey, 50.9% of gift card recipients spent "much" more than the face value of the card. In my personal professional experience, it's about 50% more. They also tend to be less price-sensitive. According to a JC Williams Group survey, 40% of gift card recipients paid full price vs. 16% for customers using other forms of payment. Finally, it's estimated that between 10 to 15% of all gift cards are never redeemed, leaving between $10 to $15 billion on the table!
5) It's a terrific incremental sales opportunity, everyday, at a very low cost! Think about it. If you have 200 retail locations and you generate 2 million transactions per year and every associate presents a gift card at the close of each sale, your gift card sales will skyrocket. A simple reminder such as "Thanks for shopping at XXXX today. Would you like to add a XXXX gift card today?" will create extraordinary results and there's no marketing cost to do this.
Big opportunities exist to create new markets for your cards. You need to consider branching out of the traditional model of selling your cards exclusively in-store and on your website. You need new eyeballs to grow your business.
I'd recommend developing programs that reward other businesses and organizations to sell your cards to their members or customers. I'd develop several 3rd party programs to drive incremental gift card sales. There are thousands of shopping websites out there that are in business exclusively to drive traffic to your stores or website. These websites will track clicks-to-transactions and you pay a small percentage of your sales to these aggregators. You only pay for sales that are booked, so there's no upfront, expensive media campaigns to pay for.
Additionally, you need to develop a new 3rd-party retail program too. You can target your cards placement with other non-competing retailers, financial institutions and other organizations using demographics, brand continuity metrics and geography. It's another new market segment for your business. In this case, there are some upfront costs to produce specialized gift cards, but is primarily a pay-per-performance model as well.
Lastly, you need a comprehensive B-to-B (business to business) strategy to win. There are lots of proven methods to develop a successful business campaign. One of the best methods is to get your card in front of business / organization gift card purchasing decision makers. In addition, you should develop a strategy of targeting business reward programs, such as those offered by Capital One or Bank of America. They offer gift cards as reward options to millions of their customers.
Make gift card marketing a priority this season using non-traditional marketing techniques and watch your program sales grow. I'm confident you'll be happy you did.
Bryan Kipp is President of CMO Retail Solutions, LLC. He is focused on providing interim-CMO services and ROI-centric marketing programs to retail clients. Visit www.cmoretailsolutions.com
