Combining Gift and Loyalty Cards

Sep 07, 2004

By John Hennessy

In the September issue of Integrated Solutions for Retailers magazine, Matt Pillar covers the benefits of plastic gift cards beyond simply replacing paper gift certificates.
As Matt points out, gift cards have become a popular gift item, and are still not done showing what they can do to add to retailers’ bottom lines.

The article notes, for instance, that grocers like Pathmark and Safeway are selling third-party gift cards in their stores for as many as 30 other retailers, from Nordstrom to
Dick’s Sporting Goods. As Jake Jacobs, VP of sales for card provider Arthur Blank & Co. points out, “The beauty is that they don’t take up much space, and you can generate
hundreds of dollars a day from the same spot you sell 50-cent packs of gum.”

Bob Clarke, VP of marketing for card provider, CPI Card Group, sees another benefit, “My gut feeling is that the gift card and the loyalty card will merge.”

In the same light, Jacobs points to cards with an RFID chip for stored value and loyalty. “This card offers more attractive applications, like quick check-in and check-out for
the consumer, good information gathering for the retailer, and automated execution of benefits,” says Jacobs.

Moderator’s Comment: What role can gift cards play in a loyalty program?

Combining identification, reward earning and reward redemption in one card makes a lot of sense. It’s one-card convenience for shoppers and a powerful marketing
tool for retailers.

Even more powerful are rewards that, unlike savings or rebates, are redeemable in the store where they are earned. This is a terrific way for a retailer
to capture new sales. And as the article points out, gift cards are not used to buy paper towels. The challenge is doing it right.

Most programs reward shoppers based on dollars spent. Instead, shopper spending data should be used to make differentiated rewards. A reward for some shoppers
based on them spending in a category they don’t purchase. Or a reward for hitting a spending level they have not attained in the past. Using purchase data to determine reward
types is a more intelligent and efficient use of promotion dollars.

John Hennessy – Moderator

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