Gift card software: how to manage successful gift card campaigns

Gift card software has revolutionized the way enterprise retailers manage their promotions and campaigns.

What are gift cards?

A gift card is a form of payment that can be used to make purchases online and at retail stores, gas stations, restaurants, etc. Customers load money onto the card, and then the gift card’s owner can then spend at accepted locations, acting as any other payment form.

But here is an interesting fact:

There is estimated to be around $363,29 million of unspent gift cards in circulation each year. Think about all the people who have an unspent gift card, lost behind the fruit bowl in the kitchen.

Wouldn’t it be great for the retailer to know who they are?
Are they an existing customer, or a new one?
Are they part of your loyalty programme?
How can you entice them to dig out that gift card and make a purchase?
When they do redeem the card: how can you ensure you know who they are – in store and online?

Gift cards are expected to grow around $315.3 billion by 2027.

Let’s dive into the main reasons why gift cards can create a profitable opportunity for your retail business.

Types of gift cards

Open-loop gift cards

An open-loop gift card can be used anywhere that brand of card is accepted. For example, if you have a gift card that’s branded with the Visa logo, you could use it to make purchases anywhere Visa is accepted.

Closed-loop gift cards

A closed-loop card, on the other hand, can only be used at specific merchants.

For instance, if you purchase a gift card from Decathlon, Mango or Amazon, you or the gift card’s recipient would be able to use them to make purchases only at the retailer issuing the card.

One thing retailers should keep in mind is that from an accounting perspective, closed-loop gift cards are recorded as a liability to the merchant, not a sale.

Physical vs. digital gift cards

Gift cards can be physical—meaning a plastic card—or digital, where customers are assigned a unique code number that they can use to redeem at online retailers when making purchases.

Physical cards remain the most popular kind of gift cards, but that is expected to change in the near future. Companies such as Amazon, Walmart, and Target allow consumers to purchase physical cards as well as to load online or digital accounts.

Benefits of gift cards for retail companies

Cash Upfront

There is nothing better than being certain that a purchased product will not be returned to the store, and this is exactly what happens when a customer gets a gift card.

In addition to this, when a customer buys a gift card and, even when it is not used, it is considered as accrual accounting, and after a point, those gift cards never redeemed become breakage income to the company.

Omnichannel capabilities

Using gift cards as an omnichannel payment method is increasingly common in the retail industry. They can easily be redeemed in a variety of channels, including e-commerce, mobile app, in-store, or using a combination of all those options. It makes life easier for the customers which we all know is a great strategy for the retailer in the end.

Lower risk of fraud

Gift cards make customers feel safe and secure about their money spent, its balance can be checked automatically and the payment verified in-store once the purchase is done.

Additional sales around the holidays

Holiday seasons are great occasions to purchase gift cards. Those last-minute buyers and those who are insecure about their purchases, are relieved with this quick solution from retailers in both brick & mortar and online

Gift Cards provide valuable data to the retailer

Gift cards allow retailers to collect essential customer data, which helps retailers to understand buying patterns such as preferences in certain products or categories as well as the average purchase rate. In addition to this, all these customer insights can be leveraged to create marketing strategies focused on customer loyalty.

Gift card mechanics

Buying a physical gift card in-store

Step 1: An employee collects payment up front, as in any other transaction
Step 2: The employee then selects the gift card program from the POS and swipes a new gift card through the terminal
Step 3: The employee keys in the dollar amount on the POS system to processes the payment
Step 4: A receipt with the card value is printed, which can then be presented with the card to the customer

Redeeming a physical gift card in-store

Step 1: The gift card option is selected on the POS interface
Step 2: In similar fashion to chip-less credit cards, the gift card is run through the card reader with its magnetic stripe
Step 3: The retailer’s tech provider takes care of the approvals and the purchase balance is removed from the card
Step 4: A receipt prints to indicate the remaining balance and the customer receives their card back

If the purchase uses the full balance of the gift card, an alternate payment method such as a credit card or cash will be required for the remaining transaction balance

Purchasing and redeeming a digital gift card

Step 1: A shopper visits your online store and adds a gift card to their cart, either selecting a value or inputting a custom value
Step 2: They pay for their cart as usual
Step 3: If they bought a digital digital gift card, an email with the code will be sent immediately
Step 4: Using either the digital code or the numbers associated with the physical gift card (either on the card or on the accompany receipt), the shopper pays for their next purchase online by selecting gift card at checkout

Gift card software for enterprise retailers

Gift cards have become a popular choice for consumers and retailers alike, offering flexibility and convenience for both parties.

For enterprise retailers, the management of gift cards can be complex and time-consuming. With the innovation of gift card software, retailers can now improve the customer experience and boost revenue.

Types of Gift Card software

Loyalty and personalization platforms: A retail-specific customer activation platform such as Loyal Guru can handle a rich variety of loyalty and personalization initiatives, including not only gift cards but also cash back programs, personalized vouchers, discounts, rewards and more.
Standalone Gift Card systems: These are dedicated software platforms focused on gift card management. They provide various features like gift card creation, tracking, and reporting.
Integrated POS systems: Many modern POS systems come equipped with built-in gift card management capabilities. These solutions enable seamless integration between sales, inventory, and gift card transactions, simplifying the management process.
Pure play ecommerce platforms: For retailers with an online presence, e-commerce platforms often offer gift card modules or plugins. These tools allow customers to purchase and redeem gift cards directly from the online store, expanding the reach of the gift card program.
Mobile Apps: With the increasing popularity of mobile commerce, some gift card software solutions offer mobile app integration. This enables customers to purchase, send, and redeem gift cards conveniently through their smartphones.

What to consider when choosing gift card software

Integration: Look for software that seamlessly integrates with your existing CDP, martech stack and other systems, to avoid data discrepancies and streamline operations.
Scalability: Ensure the software can handle the scale of your enterprise retail business and accommodate future growth in the number of gift card transactions.
Security: Gift card software should adhere to industry-standard security protocols to protect sensitive customer and transaction data.
Reporting and analytics: Choose software that provides detailed reporting and analytics to gain insights into gift card performance and customer behavior.
Customer Experience: The software should offer a user-friendly interface for both retailers and customers, making it easy to create, purchase, and redeem gift cards.

Personalized offers for grocery and retail coupons

How to effectively use gift card software

Personalization: Customize gift cards with attractive designs and personalized messages, making them more appealing to customers.
Targeted promotions and campaigns: Leverage the software to run targeted gift card promotions, such as holiday discounts, special occasions, or referral rewards, to boost sales and customer engagement.
Gift Card balances: Regularly monitor gift card balances and expiration dates to ensure a smooth customer experience and reduce the risk of gift card fraud.
Omnichannel redemption: Encourage customers to redeem gift cards both in-store and online, fostering a seamless shopping experience across all channels.
Loyalty Programs: Integrate gift card software with your loyalty program to reward customers with gift cards based on their purchase history and loyalty level.

Best tips for maximizing gift card software potential

Omnichannel marketing: Use various marketing channels, such as social media, email campaigns, and in-store displays, to promote your gift card offerings and reach a wider audience.
Seasonal and event-based Gift Cards: Create themed gift cards for specific seasons, holidays, or events to entice customers and drive sales during peak periods.
Gift Card registries: Implement a gift card registry service to cater to special occasions like weddings, birthdays, or baby showers, encouraging gift card purchases from friends and family.
Redemption incentives: Offer additional discounts or rewards when customers redeem their gift cards, encouraging repeat business and brand loyalty.
Analyze and adapt: Regularly analyze gift card usage data and customer feedback to identify trends, preferences, and pain points. Use this information to improve your gift card program continually.

Gift card statistics

In it’s 2021 industry research, The Gift Card & Voucher Association published the following stats:

An average of 7.7% of UK consumers per month purchased a gift card for themselves over 2021 vs. 6.4% over 2020, with significantly higher purchase propensity among younger age consumers.
The proportion of UK consumers purchasing gift cards increased over Christmas 2021, with 27.1% of shoppers buying a gift card for someone else over December 2021, compared to 25.2% in December 2020
The proportion of UK gift card buyers purchasing leisure and experience gift cards also recovered strongly, with the average proportion of monthly gift card buyers purchasing for the latter increasing to 23.0%, up from 17.9% in 2020
Physical gift cards bounced back strongly in 2021, as stores reopened; across the year, a monthly average of 47.4% of gift card buyers purchased physical gift cards instore vs. 43.4% in 2020
Gift card purchasing was boosted by retailer stock issues in 2021, with an average of 35.8% of gift card purchasers over Q4 stating it was easier to buy a gift card than a physical gift
Consumer expectations around digital cards and cross-channel flexibility continue to increase; 40.8% of consumers expect all gift cards to be cross-channel in the future
Employee benefit, reward and B2B schemes continue to increase in significance; 39.5% of consumers received at least one gift card over the last 3 years through work rewards or incentives
Gift cards are increasingly seen as a tool to support local businesses; 28.8% of monthly gift card purchasers in 2021 said supporting local businesses was a motivation, compared to 24,5% in 2020.
Over half of all those receiving gift cards over the past three years have been introduced to a new brand or company via this format
Second, and most important, 65% of gift card users spend more than the face value of the card. Gift cards are a way to get shoppers in the door, at which point they’re likely to want more.
Over half of all those receiving gift cards over the past 3 years have been introduced to a new brand or company via this format

How do leading retailers increase gift card sales for their business?

Using a mobile wallet to store gift cards:

These are interesting benefits of using mobile wallets to store gift cards:

Shoppers don’t have to remember to pick it up from behind the fruit bowl before they shop. Or search for the code somewhere in the inbox.
They always know the balance on the card and expiry date as it’s on their phone.
It becomes a contactless payment method in store.
You identify the customer that redeems the gift card.

Communicate repeatedly about your gift cards online and in-person

Gift cards are a great way to drive revenue and bring customers back to your store, but they don’t always sell themselves. You need to tell shoppers about them. If you want to see sales rise, you should never allow a customer to have an interaction with your business without making your gift card program known (within reason, of course).

Advertise more around holidays

Gift cards are most commonly purchased as gifts. Promote gift cards heavily around Thanksgiving, Christmas, Hanukkah, Valentine’s Day and other events that center on gift-giving.

Incentivize the purchase of gift cards

Customers love getting things for free, so give them something to be excited about. When you advertise gift cards, add a little extra motivation with a free giveaway or gift.

Instead of just promoting gift cards, let customers know they can get a little something extra if they make a card purchase of a certain amount.

When selling gift cards, sweeten the deal with a promo code for a discount on anything in your store or on your menu. For example, you can provide a 20% promotional code to everyone who buys your gift cards during your pre-specified introductory period.

How to track and measure the success of your gift card strategy?

Here are some a few of the recommendations we give our retail clients:

Track all gift card metrics

Assumptions have no place in business. Track all metrics related to gift cards, such as:

Total sales: the number of gift cards sold.
Redemptions: the number of gift cards redeemed.
Supply costs: the cost of printing and designing your gift cards.
Marketing costs: the cost put into marketing your cards, be it through ads or printed materials.

Analyze gift card performance vs. goals

Before starting your gift card program, you likely had goals in mind regarding anticipated overall performance. As such, only proper comparative analysis will ensure you are hitting your targets efficiently.

Rather than eyeballing results, take time to keep data organized in tables, charts and graphs.

Monitor performance over time, and watch for month-to-month changes. Honing in on the specifics will allow you to identify weaknesses and come up with plans to correct them.

Run reports regularly

As with other metrics in your business, like revenue, cost of sales and overhead costs, gift card performance should be a part of your regular reporting—be that weekly, monthly or quarterly.

Periodic check-ins likely aren’t enough. Instead, incorporate gift card usage and results into all of your financial management practices.

Conclusion:

Gift cards are one of the best marketing tools any retailer can use to attract new customers and encourage existing ones back. In addition to that, digital gift cards provide you invaluable customer data. Retailers can use tech to identify their customers and transactions and be ahead in the digital world.

Gift card software has revolutionized the way enterprise retailers manage their promotions and campaigns. The ultimate goal is to offer a seamless and delightful experience for your customers, encouraging them to choose your brand for their gifting needs, ultimately contributing to your business’s success.

If you’re a retailer and you’d like to talk about any of the gift card strategies outlined in this article in more detail, please get in touch with our team – we’ll be happy to show you examples or talk through your brand’s unique challenges.