Mining Gift Cards for Customer Insights

Sep 27, 2004

By John Hennessy

Eric Dash reports in Inc. magazine on several small and mid-sized retailers who have transformed gift card programs into loyalty programs. These new “stored-value” programs
have several benefits:

  • They have lower administration costs than paper gift certificates,
  • Shoppers spend more than the amount of the gift card,
  • The full value of the gift card is prepaid, and
  • Retailiwers gain the ability to track and market to gift card users.

Golf Galaxy tracks the balance and frequency of use of each card. This helps them learn how much customers spend and other insights into their purchasing habits. “If it was a
paper-copy gift certificate, we wouldn’t have any of that,” says Mick McCormick, Golf Galaxy’s chief marketing officer.

These benefits come at a cost. Multi-store systems may require upfront investments of $20,000 to $100,000. These programs also have transaction fees and require resources to

Moderator’s Comment: What is the risk of adding an accumulated value feature to an existing loyalty card program?

This is a great example of an efficiency solution – replacing paper gift certificates with plastic gift cards – that evolved into a sales growth opportunity.

The integration of shopper tracking, reward accumulation and redemption on one card by small and mid-sized retailers is terrific. The best part is that
the rewards are not cents off that can be spent elsewhere. These accumulated rewards can only be spent in the stores of the card-issuing retailer.

Anyone operating a loyalty card program could borrow this idea and consider expanding their program to add accumulated value. Rewarding shoppers with store
value instead of discounts is a way to increase trips. Shoppers will need to return to your store to redeem what they’ve earned. This enhancement could also reinvigorate
a loyalty card program that’s grown stale.

John Hennessy – Moderator

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