Do You Use Gift Cards?

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Permalink Reply by Steve on March 17, 2008 at 7:34pm

We use gift cards for cash sales only because our point of sale system is not programed to know the difference between a cash sale or a promotion. The one exception is the sale of our gift cards in grocery stores. We track these manually as they are redeemed to account for the cost incured to sell them there.

All other promotions are done with gift certificates and since they do not have a cash value we don't have to turn the unredeemed certificates into the state every two years!

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Permalink Reply by Brook on March 19, 2008 at 7:03am

I understand how they would be different for you, Steve. I had more in mind their use by restaurants, as a way of increasing repeat business.

I'm curious about your last line. In my research I have yet to come across that aspect. And maybe we're talking about different things.

A gift card is used by the consumer. It is loaded with X dollars, to be spent at the restaurant (or other establishment). Some of them are reloadable, some not. Typically, they are purchased from the site by a third party, and given to the user as a gift.

Companies often use them as a way of rewarding employees, for instance, or as holiday gifts. Or a spouse might purchase one at a store (s)he knows their partner shops at.

There is nothing unredeemed to turn into the state, and I'm completely at a loss as to what you mean by that. I'd appreciate a clearer explanation.

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Permalink Reply by Brian Edwards on May 27, 2008 at 10:43am

My company focuses a lot on the use of gift cards, and this discussion has brought up some interesting points.

Research does show that 24-35% of gift cards are never spent, so lets look at how those numbers stack up:

$100 gift card - restaurant takes in $100
-25% that is not spent:
Restaurant sells $75 in food @ 35% cost

End result: Restaurant takes in $100 for $26 in food cost. Plus, they get the $100 to hang on to until that gift card is redeemed. Sounds good to me!

Depending on the system you use, gift cards are typically much easier to track than certificates.

Are gift cards reusable or not? Some are and some are not, it depends on how the program is set up.

Equipment? Some cards run through a POS system, some must use a stand alone machine, and some utilize the same machine your credit card do.

Fees? Most companies charge 1-1.5% to activate the card, and then $.05-$.25 per swipe after that.

I offer my clients zero fee gift card processing because I don't have a cost on it, and I highly encourage them to use the cards as a marketing tool.

A few examples:

In Memphis we leverage our relationships with local apartment complexes and Realtors so when someone moves near one of our clients, that person gets a $5 gift card to my client's restaurant in their welcome package with the roll of toilet paper, paper towel, and cooler(branded with the property management's info, of course).

Another idea: Purchase a $25 card and get an extra 10-20%.

You are protected because 24-35% of gift cards are not redeemed, and because of the math I listed above.
Then, if they buy a $50 or higher card, split it up. give them their extra 20% on another card and tell them to give to a friend who has never been to their restaurant before.

There are countless promo ideas we utilize, but the point is to think outside the box and to use these gift cards as a tool to grow your business and bring in new faces, rather than simply a product to sell when someone asks about it. Have your servers push it like they push appetizers, deserts, add ons, etc.

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