How to Run a Gift Card Program
It’s hard to compete with other merchants in your area that offer similar products and services. In many cases, the only way you can attract customers is by having a loyalty program or an incentive system, such as a gift card program.
Gift cards can serve two purposes: to increase revenue and customer loyalty. Gift card programs are a creative way for businesses to stay competitive.
What Is a Gift Card Program?
Gift cards are a great way to promote your business and increase sales. Customers can buy gift cards that will carry an amount of money on them, usually at a later date when they want to use them.
The idea of a gift card is relatively new in the grand scheme of commerce. Gift certificates have been around for centuries, but cards themselves are only decades old. The original gift cards were thin pieces of plastic that could track purchases and redemptions.
In the 90s, stores began to replace gift certificates with loyalty cards that provided a more personalized experience for customers. They also enabled sales tracking and encouraged customers to shop at one store instead of many.
One of the more popular trends is loyalty card programs.
How Does a Gift Card Work?
When a customer wants to purchase a gift card, they can select the desired denomination. Typically,
- An employee collects the payment upfront.
- The employee selects the gift card program from the POS then swipes a new gift card thru the terminal.
- The employee enters the dollar amount on the POS to process the payment.
- A receipt is printed, then given to the customer together with the card.
When a customer decides to use a gift card:
- An employee will take the card.
- The gift card option is chosen on the POS interface.
- The gift card is run through a card reader.
- The merchant takes care of the approval and the purchase balance is deducted from the card.
- A receipt is printed, showing how much is left on the card.
- If a purchase fully depletes your gift card balance, a customer may need to provide an alternate payment method such as a credit card for any remaining transaction amount.
- The customer receives the card back. If the balance is used up, the employee can dispose of or recycle the card.
How to Start a Gift Card Program
Setting up a gift card program is easy and affordable. Most retailers have the technology to support this system, so they should not have any trouble creating one.
Launching a gift card program will require some work on your part, but it’s worth the effort.
Select a gift card system
To make sure that your gift card program is as good as it can be, you should look for a POS system with an integrated tracking option. Search for a program that comes with:
- Transaction reports
- Outstanding balance reports
- Redemption detail reports
Purchase gift cards
If you need to purchase your gift cards, be sure that the card design is customizable and buy enough for your guests.
For companies that operate primarily in the eCommerce space, it is possible to offer digital sales. You can issue numbers or barcodes and this will be most effective for these types of businesses.
Gift card programs are different, but they all have to follow federal and state laws. For example, the law in the US says that the expiration date for gift cards is five years from the date of purchase. Inactivity fees cannot be charged unless the card is unused for at least one year.
Before implementing any restrictions, be sure to look into the laws that your business may need to follow.
Employees need training about gift cards to avoid improper use or problems when dealing with customers. Ensure employees know how to run, sell, and load the cards.
It’s challenging to measure success when you don’t know who is buying your gift cards or how many. Rather than waiting for the reports and assuming everything will be fine, make sure that statistics like sales versus redemption are monitored closely.
Gift card programs for retailers
Choosing a gift card program is an important decision. It would help if you considered all the necessary functions before making your choice.
In general, gift cards come in two forms: closed and open loops. Closed loops are only usable at the store or brand it was issued from while open loops can be used anywhere that the card’s host is accepted.
Some small businesses with simple POS needs may find that a low-cost but less customizable merchant bank or credit card processor is the perfect solution. They have few fees and can provide you with basic reporting options to help your business grow.
The seamless integration with these types of systems allows users to order customized cards and gives them the ability to set up reporting capabilities and track liability.
Integrated cards make it easy to track all aspects of your gift card program by using POS reports, rather than an external tool. Information can be broken out based on employee ID, terminal number, and date of the transaction amount.
How to Run a Gift Card Program
Preparing for a gift card program is more than just picking the right one. There are many factors to consider, such as when and how they will be distributed.
Create a marketing campaign
The first step in a gift card program is to have the cards available. But, this isn’t enough because customers need to know about them too if you want your business’s name on their list of places they’ll visit for gifts.
You can market your gift card program in many ways, including social media and email campaigns. It would help if you also encouraged people to share the launch of your new program with their friends and family.
Establish employee policies
Employees need to know how you plan on advertising your gift cards and what promotions will be in place.
If you’re a restaurant owner, make sure your employees mention the rewards program when they greet tables or at least before bringing out dessert. Have your employees close sales by saying gift cards rather than just handing over the receipt if you own an online retail store.
Few businesses invest in a gift card program just to have one. To ensure optimal results, it’s essential to set goals that you can use to track performance and measure your success.
- What is your revenue goal?
- How many customers should purchase gift cards?
- What would you like the ratio of purchases to redemptions to be?
Provide online access
A great way to get customers excited about your gift card program is by allowing them to access the cards online. This will allow for a more interactive customer experience and open up new marketing opportunities as well.
Why Gift Card Programs?
It can be hard to find the right way of motivating your employees in a competitive market. Offering gift cards can help:
- Increase sales and generate cash flow
- Bring in new business
- Promote impulse buys
- Improve brand awareness
- Offer real-time tracking
- Offer speedy transactions
- Track sales trends
Gift cards are practical and affordable, with plenty of benefits. The question is not why you should use them; the better question is, “why not?”
Strategies for Increasing Gift Card Sales
Offering gift cards is a great way to bring customers back into your store, but they don’t always sell themselves. Some businesses with small budgets may be content limiting their promotions and advertising for gift card sales; however, if you want successful promotional efforts, consider using more creative thinking to advertise them.
If you want to make sure that your customers know about the availability of gift cards, advertise online. It will help a lot and it’s easy with a small investment for many opportunities.
One thing that will help your business a lot is to make gift card purchases available online. This way, when you’re running marketing campaigns and include the link for it in them, more people are likely to buy because they want something right then.
Marketing in-person can be a great way to get people motivated because it is harder for them to say no. This means that marketing done face-to-face will lead you more success than if they are faced with an email, text message, or phone call.
A simple way to get your customers’ attention is by handing out gift cards, which can be done in several ways. This includes putting up signs outside or at the checkout counter and asking employees to wear buttons that say “Ask me about our Gift Cards.”
Notify all customers
The best way to increase sales is by never letting a customer interact with your business without telling them about the gift card program. Please share on social media or put banners online; everyone must know about this great feature.
It may seem like overkill to be so explicit about your gift card presence, but you never know who will make a purchase. To succeed in this market, it’s crucial not to leave any stone unturned.
Establish employee competitions
The sales team might not always be willing to push the gift card program. It is essential that your employees are eager and excited about it, but some may find themselves resistant.
To encourage compliance, try to offer a small prize or bonus in high demand. You could also provide an incentive like giving the employee who sells the most gift cards their own personal benefit such as more vacation days and better shifts.
The more freebies that you give your customers, the better. They love getting something for nothing and when they buy a gift card from your store, add in some extra incentive with an additional prize or giveaway.
Instead of simply marketing gift cards, inform clients that they may get something more if they buy a card. You don’t have to give away anything valuable- even the most minor trinket will work well. This is also an opportunity for retailers with trouble moving inventory that may be on sale or clearance but hasn’t been picked up yet.
Price is a critical factor in customer loyalty. It ranks higher than quality or service among most consumers and can help you compete against the competition.
For example, you can provide all who buy your gift card during the introductory period with 20% off anything in-store or on the menu.
Gift cards are most commonly used as gifts, and advertisers know this. They advertise heavily around holidays like Christmas, Hanukkah, or Valentine’s Day to inspire the need for gift-giving.
To incentivize sales, consider giving a $5 promo card to anyone who buys a gift card during the holiday season.
Most people used to think that all we needed was a name on the card and people would buy it. It turns out that you need to use your skills in design or marketing because average-looking cards are less likely to sell.
The saying goes that you can’t judge a book by its cover, but when it comes to selling, the prettier your product is on the outside and packaging-wise, people will be more likely to buy.
How to Evaluate the Effectiveness of a Gift Card Program
Giving out gift cards can be a powerful motivator for your customers, but it only works if the program is set up correctly. Success depends on what you hope to see happen with this reward system – like increased revenue or profit growth.
Track all metrics
Don’t assume that a gift card program will be successful. Record all metrics related to usage, from redemptions to total sales, and maintain reliable records of all use aspects. Consider costs if you are paying for marketing or any other expenses to keep the balance sheet healthy.
Analyze performance vs. goals
When you start a gift card program, you must have specific goals in mind. For example, your plan might be that the average purchase per customer should be $50. If this was not done correctly from the beginning, there would never be any efficiency.
Instead of relying on gut instinct, keep organized data in tables and charts. Look for trends over time to see if performance is improving or not.
Run reports regularly
Along with other metrics in your business, like revenue and cost of sales, you should be looking at gift card performance. You can’t just check in periodically to see how they’re doing – incorporate them into all financial management practices.
If your business goals change, you will need to reevaluate the gift card program tied into those changes. If it was not meeting expectations at first but now does, this might mean expanding on what you are doing with the gift cards.
Frequently Asked Questions
Is it possible to use a gift card to buy another gift card?
If you are a merchant who sells closed-loop gift cards, keep in mind that the gift card is recorded as a liability to your company from an accounting perspective. In other words, using one of these cards to purchase another does not give credit for any revenue recognition.
Can you acquire a gift card with a credit card?
Once you set up gift card processing for your business, any tender approved by the processor can be used to purchase a gift card including cash, credit cards, or NFC payments like Apple Pay.
How can I design and generate gift cards?
Several companies allow you to upload or personalize designs if you want to customize your gift cards. You can find these options on their website or in their online store.
How do you activate a gift card?
After you set up your gift card program, it will be easy to sell them at the register. You can swipe them through a credit card reader and follow any prompts that pop up on the screen.
Final Thoughts on Gift Card Program
There are many benefits to having a gift card program for your small business.