marketing | 4 mins read

Why Every Small Business Should Have a Gift Card Program

why every small business should have a gift card program
Chloe Henderson

By Chloe Henderson

Gift cards are great marketing tools that attract new customers and help to maintain cash flow at virtually no expense to the business.

Besides the manufacturing expenses, gift cards pull an immediate profit at the initial purchase, allowing retailers to collect the interest to fund other operations until the value is redeemed.

Plus, any leftover funds that aren't used can be claimed as pure profit. Therefore, every small business should establish a gift card program to increase brand exposure and profitability.

What is a Gift Card Program?

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A gift card program provides customers with a certificate containing a set monetary value that can be spent at one or more businesses. Most retailers offer gift cards on all sales channels, from in-store to online.

However, each business can establish its own stipulations when it comes to redeeming the card. For example, some companies only allow customers to redeem their gift card in-store, while others accept certificates throughout all platforms.

Advanced point-of-sale (POS) systems are programmed with a built-in gift card program that enables businesses to immediately accept these card payments. However, there are different types of programs to choose from-

  • Open Loop Gift Cards can be used anywhere and are typically created by major credit card networks, including Mastercard, Visa, American Express, and Discover.
  • Closed Loop Gift Cards are made especially for retail stores so customers are limited to purchasing merchandise from a specific business.

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Benefits of a Gift Card Program

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Gift cards are among the most popular gifts that people give each other, making it a $100 billion industry. This tool not only helps businesses increase sales but also creates a convenient way of shopping for customers.

Every small business should consider implementing a gift card program to-

Gain a Competitive Edge

Most, if not all, major retail chains offer closed loop gift cards that require recipients to spend the value on their goods. This creates a significant drive in sales after the holiday season especially, as many people are gifted cards to their favorite stores.

To compete with large corporations, small businesses need to establish their own convenient programs that make it easy for customers to procure and use their gift cards.

Outsell Traditional Gift Certificates

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Most small retailers start out by offering paper gift certificates that simply print the dollar value on the face of the slip.

Since these are easy to counterfeit and steal, many businesses store them in their cash registers, requiring shoppers to formally inquire about the certificates. Therefore, first-time visitors may remain unaware that gift certificates are available for purchase.

However, new gift cards require cashiers to program the amount onto the card before it can be used, allowing retailers to promote their program without the worry of theft. Modern gift cards are also plastic and typically designed with the store's logo, making it difficult to replicate, lose, and damage.

Studies show that businesses that switched from paper to plastic gift cards increased their gift card sales by up to 50%.

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Increase the Order Value

Studies show that 72% of customers using gift cards spend more than their card value, 25% of which purchased items they didn't intend on buying.

This means that gift card holders are often less price-sensitive when shopping because they feel like they are not spending their own money. Therefore, customers are more willing to pay full price for an item, even if it means going over their gift card amount.

Attract New Customers

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One gift card sale involves two consumers, - the purchaser and the recipient. If either party is a new visitor, the gift card can potentially result in a new, loyal customer. Provided that this cycle continues, businesses can consistently attract new customers solely from their gift card program.

In fact, studies show that 11% of gift card recipients never or rarely visited the store before receiving the card, and over 33% changed their buying behavior as a result.

Build Relationships

With reloadable gift cards, small businesses can establish long-lasting relationships with customers.

Recipients must not only interact with the retailer to make a purchase but also check their balance and reload their card. This presents several opportunities to promote targeted campaigns to encourage additional purchases.

How to Maximize a Gift Card Program

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Companies can maximize the income generated from their gift card program by-

Advertising Gift Cards

Retailers should promote their gift cards across all sales channels to increase brand exposure. Businesses should advertise their program in high-traffic areas, including-

  • Virtual checkout
  • Entrances
  • Self-service kiosks
  • Website banners
  • Social media
  • Newsletters

Selling eGift Cards

Electronic Gift cards are quickly becoming preferred by consumers, as recipients can upload them to their devices to complete mobile and contactless payments.

This also enables customers to order and send gift cards virtually to other people, reducing plastic and paper waste.

Rewarding Loyalty Members

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Some POS solutions integrate the gift card and loyalty programs, allowing businesses to reward frequent shoppers. Retailers can set a spending benchmark and send gift cards to customers that meet and exceed the target. By incentivizing purchases, companies can boost sales and retention.

Giving Gift Cards Instead of Cash

By offering gift cards instead of cash for customer returns, businesses can promote sales and minimize profit loss. This tactic also keeps cash flow within the store and deters thieves from attempting returning fraud.

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