image

Gift Card Secrets: Why Plastic Turns Into Profit

How would you feel if I told you that your business could transform a $50 sale into a $60 sale without even trying? How much would that be worth to you?

Or, what if I told you that there’s a good possibility that $50 could turn into $100 or more in profit? You’d probably laugh at me and my voodoo money magic! Well, because there’s nothing voodoo about it. In fact, it couldn’t be simpler. The secret is in front of you for every holiday and gift-giving occasion…

GIFT CARDS!

I don’t know who came up with the idea of the gift card and gift certificate, but it is pure business ingenuity. Sure, it’s a convenient gift, but it also urges consumers to commit money to your establishment and it makes money on itself. Consider gift cards another aspect of your store merchandise strategy!

How do gift cards make you, the seller or retailer, some extra money? Let’s think about it. The last time you received a gift card, did you use it for the EXACT amount of its value? Most likely not. Whether shoppers stay under the value of the card or go over, the business wins. If shoppers stay under, then the business essentially gets free money without having to give up any goods. That deal is unbeatable! However, if customers go over (which is the more likely option), then the business just made more of a profit. And that is the whole point anyway, right?

As a recipient of a gift card, it’s just so easy to spend more than the card’s worth. No one likes to waste money (especially if it’s a gift), so a shopper would probably be inclined to spend as much of the card’s balance as possible. These chances increase if the recipient is fond of the store the card is good for! Wouldn’t you use $50 toward a bigger purchase at your favorite store?

Think about how many gift cards a place like Target sells in a year. Even if they only make a few extra dollars on each one, that’s a ton of extra money a year with very little effort or cost to Target itself. And of course we can’t forget about all the interest they make off the money from gift card purchases before goods are even bought with them. See what I mean now? Genius!

So, if you own your own business, remember that there’s virtually no downside to offering gift cards. Just don’t go down the expiration date path. In theory, my money should be worth more a year from now, not less. Stooping to balance-zapping techniques is a quick way to discourage people from shopping with you anymore. Do it right, though, and your customers will love you for it because you’re adding convenience to their lives! Even if you sell a low number of gift certificates or gift cards, you’ll still make easy money on them. Give it a shot and see how it goes!

How do you use gift cards, either as a shopper or as a retailer? Is the balance wasted or is it spent in its entirety?



Jeff Porretto

Recently dethroned as the shortest member of the blogsquad, Jeff considers himself to be an artist in all facets of life. Be it playing or building guitars, writing blogs with scathing dry wit, or simply finding new ways to be productive, creativity is a central focus of his day. More than anything, Jeff likes to spend time at home with his wife and 2 dogs quietly enjoying their time together. As with many other members of the blog squad, Jeff is fascinated by the latest and greatest technologies. He is also a self-professed Air Jordan addict and is willing to talk about shoes at any time. You can connect with Jeff on Google+.

Comments

  1. cyberneticSAM

    I always thought about this, that’s why I prefer cash money. :P

    • JPorretto

      Well I know what to get you for your birthday now =)

  2. Kyle

    Wow I never really put much thought into gift cards, but since you put it that way they totally makes sense. Businesses win regardless of whether or not the consumer uses all of the money on the card. Sounds like a no-brainer to me. Thanks for enlightening me Jeff!

    And I totally agree with you on the whole expiration thing. As a customer, my money shouldn’t be worth less in the future. You brought up some great points here.

  3. Doc

    I love it, Jeff. I cannot remember where I read this, but there was an article showing the statistics of gift card credit going unused. It came out around Christmas time and the stats were overwhelming.

    As a consumer, I love gift cards because it’s a gift that I can pick out. It’s really a win-win for both the seller and the consumer. I love when clear out my wallet and find a Best Buy Gift Card from 8 months ago. It’s like finding money in the laundry!!! That feeling never gets old.

    • JPorretto

      Thanks Doc! I LOVE gift cards. Some people don’t like giving them because they’re impersonal. But that’s a million times better than getting a crappy gift and having to fake like it.

      • Amanda Sneed

        hahaha…… How about people just start giving out a wrapped box of cash, like in that Seinfeld episode. ;-) Jerry is too funny, and Elaine wasn’t too happy about that gift!

  4. Bret Bonnet

    I have a love hate relationship with gift cards.

    I love to receive them; I hate to use them. Cash please!

    You couldn’t be more right Jeff; most people NEVER spend EXACTLY what the gift card is worth, and whether they go over or under, the gift card issuer wins.

    Balancing zapping of gift cards should no longer be a problem though… I think the government (the one smart thing they did in all of 2010) made doing so illegal, or at least they put restrictions on this practice.

    SIDE NOTE: I hate gift cards that have BLACK OUT dates, like – can’t be used for new releases (movie theatres), not valid on Fridays & Saturdays (restaurants); SCREW YOU – I don’t have anyway of visiting these places to redeem these coupons NOT during these restricted times. Some people actually WORK you now. Make doing business with you EASY! :)

  5. Jana Tropper

    Great post. Although I dislike the impersonal aspect of giving a gift card, sometimes it’s just the right option for the situation. Plus, if you pick a very specific specialty-type store the persona really loves, it’s a little more personal than a Visa gift card and forces them to actually spend the money on something they WANT rather than something they NEED. That’s what I judge as the mark of a good gift, anyway. :)

    Just two little things:

    1) When shoppers don’t spend the last few dollars/cents on a gift card, it’s not always “free money” for the retailer. Buying a gift card is like opening a mini bank account. And like bank accounts, if abandoned, there must be a good faith effort to get the cash value to the purchaser. Unfortunately, there’s rarely a way to track down a purchaser from a normal gift card. The card’s value remains a liability on the retailer’s books. And, in some states, those liabilities are required to be turned over to the government if left unclaimed for whatever number of years the legislation specifies.

    2) According to Illinois law, retailers cannot put an expiration date on cards any earlier than five years from date of issuance. Other states have different laws; for example, Montana prohibits any kind of expiration date – ever! But then… you have to live in Montana. So there’s that.

    • That Guy At Work

      Another point about gift cards is that if the company issuing them goes out of business, the cards may become worthless.

      Cash FTW!!!

      • Jana Tropper

        Not always…

        According to the Better Business Bureau: “In cases of Chapter 11 bankruptcy, courts will decide if the business must honor gift cards or certificates. If the business has filed Chapter 7 bankruptcy, the gift card holder must file a claim. In some cases, consumers might actually get at least part of the value of the gift card back.”

        If it’s only a few bucks, it may be more trouble than it’s worth, but if it’s significant cash, a little paperwork might be worth it.

    • JPorretto

      We’d like to take this opportunity to apologize to our Montana readers….. **crickets**….

  6. Tony Promo

    Doc,

    When you wear the same sweatpants every day, yeah, you’re going to find a scrunched up dollar or two in the every once in a while. Bonus.

    On another note, I was handed a $50 gift card to Pappadeaux yesterday and couldn’t pawn it off on ANYONE. If you have a penchant for expensive seafood and a decent outfit to rock, let me know and we can make some sort of arrangement. “Arrangement” meaning like you buy me lunch today.

    If you don’t know me by my alias and still want the card, it’s gonna cost you two lunches. TWO!!!!

    • LK

      What’s Pappadeaux…. I like seafood…

      :)

  7. LK

    I LOVE Gift Cards… and since it was just my birthday I am completely stocked up on gift cards to all my favorite places :)

    I probably received over $75 in Starbucks gift cards, and it is definitely working to Starbucks advantage because I am now visiting more than I would have if I had to spend the money myself.

    My one bad gift card experience had to do with a gift card that had an expiration date. I received a gift card for Christmas to a spa place and by the time I came home for summer and wanted to use it, the gift card had expired! BOOOO! I still feel bad that I never got to use the gift card and the person who gave me the gift spent money on a gift I never used. I still have never went to that spa place and don’t really intend to since I was never able to use their gift card.
    So I agree with Jeff, as a business, if you decide to sell gift cards- don’t put expiration dates on them!!

    • JPorretto

      I bought my wife a spa package for her birthday one year and it had a year expiration date. I made damn sure she got in before that date!! =)

      • Amanda Sneed

        lol Jeff! I would make an appointment for that same week. Spa gift cards are the best!!!!!!!!!!!!!!!!! =)

  8. Tony Promo

    Pappadeaux is a semi-swanky seafood joint. $50 bucks will get you a steak or some lobster (but not full-blown surf and turf) and a glass of water.

  9. Joseph Giorgi

    I’ve never been a huge fan of receiving gift cards, simply because I don’t like the restriction of shopping only at the establishment listed on the card. I need options—I need cold hard cash.

    But, what you’re saying makes perfect sense. It really seems like a win-win for retailers to invest in gift cards. I never really thought of it that way before, but kudos to you for doing so.

    Now that I think about it, I’ve still got some “movie money” gift cards in my closet at home that are probably about to expire. I need to use those ASAP. Thanks for the reminder!

    :)

  10. Michelle

    I also love giftcards! I don’t think there has been a time when I didn’t spend more than what the gift card was worth. That may tie into my shopping problem…

    • JPorretto

      I refuse to believe you have a problem. It’s more of a…um…. passion. That, uh, costs a lot =/

    • Scooby DOO!

      Thank you for commenting, its duly noted. hahha!

  11. Scooby DOO!

    Doc,

    I am with you… comfortable RFB sweats are better than stinky, old Jordan sneakers, that use to be cool back when pinewood derbies were cool too. I am glad to see others turned down the piece of plastic Tony Promo tried to pawn off. You know the minute the waiter comes back and says, sorry sir, your gift card has a zero balance, that Tony Promo is somewhere laughing at you. You can’t fool us TP.

    Nicely written article Jeff. I don’t mind plastic BUT cash is king and you always know how much you have. With cards, it’s just too complicated and in general you can use them at only one store, that is, unless you get a visa/discover/amex card. But then you know, you are getting $10 less since the card cost the “gifter” an extra few bucks. So it’s a lose-lose.

    In closing, TP, I’ll get you a card for your next birthday for shoe dazzle; this way your shoes will be new, shiny, and better aligned with your personality.

    Wenger 1, TP 0.

    • Tony Promo

      As much as I appreciate one QLP’er looking out for another, I also understand the jealousy that comes with the guy in the office next to you rocking $400 sneakers on the reg. I’m also not married, so I don’t know what “shoe-dazzle” is, nor do I have the luxury of my wife picking out UGG’s and imitation Sperry Top-Siders for me. SEE YOU AT THE DOCKS, WENG-WENG!!!

  12. Scooby DOO!

    TP,

    I get it, I do, but nothing will bring back the value of all those beanie babies you collected along with your Jordan’s. So get over it. Yes, even those ones you got at the Burger King drive through. Worthless.

    That said, I must regress, yes, I do choose comfort over coolness, so my kicks, may not get me into the hottest night clubs but something tells me those Jordan’s aren’t helping your cause either.

    Lastly, I don’t envy your spot over there, I am not sure anyone does… but at least the smell rivals your bum a$$ shoes, yo.

    • JPorretto

      Oh, you two crazy kids. I settle this….

      My Jordans are BY FAR the comfiest shoes I’ve ever bestowed the honor of putting on my feet. AND many times they appreciate in value. So there… =P

      Slightly back on topic… If someone bought me Finish Line gift cards, I’d be eternally grateful.

  13. Peemo

    Hell yeah, voodoo money magic!

    As much as I love the idea of gift cards, I never get around to using them if they aren’t for places I frequent. I have a box full of gift cards from Christmas’ and birthdays and still some hanging around from my engagement/wedding five years ago.

    I prefer my Grandma’s way of gifting…

    CASH.

    Oh, and Tony Promo, I”ll gladly remove that Pappadeux from your hands. I love that place!

  14. Amanda Sneed

    I like getting gift cards personally, especially because the people who usually get me a gift cards, would pick something out for me that I’d have to return anyway. Although, sometimes it’s nice to be able to return it for cash and then you can totally do what you want with the gift. =)

    Expiration dates and fees on gift cards are bogus!!! But I do see Jana’s point about the companies’ books……never thought about that. Great point about the Want vs Need aspect of it Jana. I have done that too many times! Granted, it’s nice that a person’s gift can help you with a needed purchase, but it was meant for a gift, and it’s free, so I need to learn to buy fun stuff too! ;-)

Leave a Comment

Copyright 2003 - 2014 Quality Logo Products, Inc., Registration No. TX7-524-201. All Rights Reserved.