Aug. 25, 2014
By Kristen Gramigna,
Chief Marketing Officer for BluePay
More than $118 billion was loaded to gift cards in 2013, and that volume is predicted to keep trending upward, particularly as consumers become more drawn to the conveniences associated with “e-gifting” and cashless payment methods. If your restaurant isn’t yet equipped to sell gift cards, you’re missing out on a significant opportunity to capture the “low-hanging fruit” that might otherwise go to your competitors. Here are five reasons restaurants of all shapes and sizes should offer gift cards.
1. They’re free marketing. Gift cards give your patrons a convenient gifting solution, but more importantly, they serve as branded marketing tools that help you acquire new customers. By the inherent nature of gift card exchange, the purchaser is essentially doing your marketing for you (and paying you to do it).
2. They can deepen loyalty. Whether you limit your gift card program to “physical currency” or supplement it with a digital gift card program that allows customers to purchase “virtual” cards online to send to the recipient via social media or email, gift card programs lend themselves to incentivizing customer loyalty. Learn from the best practices of other restaurants’ successful gift card programs: For example, in 2012, Starbucks reported that one in 10 American adults received one of its gift cards; it attributes nearly 3.5 percent of sales volume to its gift card program. Though having a quality product certainly doesn’t hurt, the success of its program is largely driven by the fact that it is designed to keep customers coming back. Not only does the brand make it easy to purchase a gift card in any increment, redemption requires nothing more than a swipe. Because the brand encourages cardholders to reload a value to the card once funds are depleted (and incentivizes those who register the gift card with special offers, like a free drink on their birthday), its gift card program turns what might otherwise be a small “one off” purchase into a marketing strategy aimed at building purchase frequency.
3. They’re expected. Despite the increased popularity of “open loop” gift cards (which typically bear a Visa or MasterCard logo), and can be used anywhere, research by First Data indicates that consumers still prefer branded “closed loop” gift cards that can be used at a specific retail or restaurant location. Further, the National Retail Federation’s 2013 Gift Spending Survey indicates that consumers spend an average of $165 on gift cards each year, and according to a survey by GiftCardRescue, consumers named restaurant gift cards (specifically those for locations like Darden Restaurants’ brands, Starbucks, Panera Bread, McDonald’s and Subway) among their preferred gift cards.
4. They can help you expand your offer to suit your customers. First Data’s research indicates that birthdays are among the top occasions that create gift card demand; holidays represent another peak gift card purchasing season. (In the same study, 83 percent of respondents said that they prefer giving gift cards to gifts because of the ease of finding and gifting them). Simply experimenting with customized imagery displayed on gift cards that’s suited to specific occasions (and measuring the top performers at various times of year) can provide marketing intelligence about your gift card buyers, and how you can tailor your promotions to speak to their needs. Additionally, gift cards that are geared toward an “experience” (like a pizza-making party, for adults or kids) can provide the opportunity to reach specific customer segments that might not otherwise visit your restaurant.
5. You can enhance your own profit margins. First Data indicates that the average gift card amount at a fine dining restaurant is more than $60; $34 at fast casual restaurants; $23 at coffee shops and $20 at fast food restaurants. Consumers are becoming more accustomed to cashless payment options — even for small purchases like a cup of coffee, or a $5 sandwich. (In fact, The Huffington Post reports that 81 percent of payments in restaurants were made by debit, credit or prepaid cards.) Particularly if you design your gift card program to contribute to customer convenience — either because of a faster checkout experience, or to provide the opportunity to earn rewards for using a reloadable prepaid gift card, you may shift more of your smaller transactions to gift cards to eliminate some of the small credit and debit card transactions that ultimately eat into your profit margins.
Gift cards are a low-cost marketing tool that can help any size restaurant boost sales, order values and profit margins, and can deepen customer relationships. Given that consumers are increasingly indicating a preference toward payment methods that are convenient, the gift card market will likely change and evolve, and this $100+ billion industry appears here to stay.
Kristen Gramigna is chief marketing officer for BluePay, providing restaurant payment processing solutions for merchants of all sizes. She brings more than 15 years of experience in the bankcard industry in direct sales, sales management, and marketing to the company and also serves on its Board of Directors.
Photo provided by Wikipedia.