Gift Cards: Plastic Fantastic?

With popularity and customization options on the rise, gift cards are a go…

One way to determine where gift cards are going in the incentive marketplace is to look at what’s going on with gift cards in the retail marketplace. “What’s hot for consumers is hot for incentives,” says Nancy Serrato of Innovative Card Consulting. She points to the wide range of card brands that are available at retail, as well such innovations as cards that light up, record a voice message, can be personalized with a photo, or can be combined with a CD or DVD to provide interactive or exclusive content.

According to Teri Llach of the Blackhawk Network, “95% of U.S. households say they’ve bought or received a gift card in the last year, so they aren’t going away.” And that consumer popularity extends to incentive program participants as well. In surveys of program participants, Llach says, 60% to 70% say they would rather have a gift card than a specific piece of merchandise.

Another way to gauge the growth of gift cards in the incentive marketplace is to look at the rate of growth of the Incentive Gift Card Council (IGCC), which is part of the Incentive Marketing Association (IMA). “We started with six or seven members who were major gift card providers,” says Rich Killian of RK Incentives, current president of the IGCC. “Now we have over 100 members covering virtually every lifestyle segment – and we’re growing every year.”

In fact, there is growth in all types of incentive programs. “With the breadth of gift-card providers, Killian continues, “we’re seeing growth in programs involving everyone from Wall Street executives down to call centers and fast-food restaurant workers in terms of strong gift card usage.”

But perhaps the most important sign of the importance of gift cards to the incentive industry – and vice versa – is the willingness of many gift card providers to adapt and accommodate according to the needs of incentive users.

The Best of Both Worlds

American Express Incentive Services (AEIS), for instance, uses DirectSpend, a prepaid card acceptance process that allows clients to direct cardholder spending to a specific merchant or group of merchants. It’s an alternative approach to the more common Amex, Visa, or Discover universally accepted card or single merchant card that can be used only at a single retail chain. “Universally accepted prepaid cards are very much like cash,” says Bill Wehrman, director of marketing and corporate communications for AEIS, “and we all know that, even though everyone wants it, cash isn’t the best motivator. We’ve developed a number of cards that are designed to appeal to the specific demographics of an incentive audience while providing an incredible amount of choice.”

DirectSpend cards, built around specific themes like home improvement, electronics, entertainment, travel, etc., are essentially an Amex-branded prepaid card that can be redeemed at a specified group of retail outlets. The “spend” for the Home Solutions card, for example, is directed toward retailers, including Lowe’s, Best Buy and Linens ‘n Things and similar home merchants that participate in programs that welcome American Express. The spend for the Electronics Solutions card would be directed toward a select group of merchants who offer electronics. “Choosing a theme card allows clients to align their incentive program with their target demographic,” Wehrman explains. The face of the cards is also customizable, which means that clients “can pretty much consider that piece of plastic a blank palette,” he adds.

DirectSpend cards have been used successfully for a number of consumer incentives. One of AEIS’s clients, InterContinental Hotels Group (IHG), owns a portfolio of well recognized hotel brands (such as Holiday Inn Hotels and Resorts) and manages the world’s largest hotel loyalty program, Priority Club Rewards.

Priority Club members earn prepaid card rewards that can be redeemed for a stay at any hotel where the American Express card is welcome – even at IHG’s competitors. “Essentially, IHG knows that a large target segment is the ‘road warrior’ who might not look at earning another night at a Holiday Inn as an incentive,” Wehrman says. “But they’re willing to let their customers stay at competitors’ properties, trusting that they know the value of the IHG product and will be back.”

Scratch and Win

InComm, one of the leaders in the prepaid card industry, has also developed a customizable card that’s something of a unique hybrid. Its WIN! cards (short for “Win It Now!”) are similar to traditional prepaid, stored-value gift cards, but they also include a scratch-off area on the back that offers recipients the chance to win higher value rewards. It’s essentially a cross between a gift card and a sweepstakes.

“A client can use the WIN! card to stimulate results in whatever they need to do,” says Stan Bartelt, vice president of InComm’s Promotions Group, “whether it’s performance rewards, employee retention, dealer-distributor sales increases or whatever.”

In a recent program in the financial services industry, for instance, employees who were previously awarded $10 for the sale of a particular product were instead given a WIN! card with a low value of $5, but the scratch-off element gave each recipient the chance to win up to $250 of stored value that was immediately redeemable at a number of participating retail chains. “It’s a lottery mentality,” Bartelt says, “and the employee is much more responsive to this as opposed to a straight $10.” Bartelt adds that the client began using the card only eight weeks ago and has already seen an increase in sales of more than 800%.

Clients can customize the cards to meet their needs “with messaging, logos, a print ad, chronology, whatever you want to put on there,” Bartelt says. “There’s space on the card to put any kind of messaging you would want on the front, and we can create any kind of container you would want for it. If you’re selling refrigerators, for instance, we can design a little mini-refrigerator container and put the card in there.”

InComm is also putting together a “menu” of about 12 retail partners, and clients can choose up to three to work with their card, allowing them to tie rewards into a program theme. InComm will also work with clients to determine an appropriate overall budget for the cards and the range of values that might be offered as part of the program.

Flexibility Is a Factor

Even traditional catalog companies have begun to take advantage of the popularity of gift cards in the incentive initiatives. Ed Handel of Crutchfield Corporation says the firm is adding distribution partners to resell its traditional gift card – and an online “virtual” card – to the incentive market.

“It’s an easy incentive for somebody to do,” he says, “and we’ve probably seen a larger percentage growth than some other lineups or categories. Consumer electronics has always been one of the most popular categories, with rewards like big-screen TVs, iPods and other things like that.”

Crutchfield’s gift card also gives its traditional incentive catalog users a great deal more flexibility. “A lot of times we’ll set a program up by giving participants – in this case let’s say channel partners – an idea of what they can earn as a physical prize, but instead of giving them that prize, we give them the gift card,” says Handel. “That way they have the choice of getting the physical prize, if that’s what they really want, or the gift card if they want to go for something else.”

Handel notes that even in programs that are initially set up as merchandise reward programs, “the client will sometimes call and say, ‘The winner already has a flat-screen TV, can we do a gift card instead?’ And most times we can accommodate them.” How often does this happen? If 50% of Crutchfield’s programs start out as strictly merchandise programs, “I would say that about 75% [of those] end up using a gift card,” says Handel.

Despite the allure and adaptability of plastic, most providers feel it’s important for programs to tie cards to some sort of tangible reward. “It’s easier to motivate people with images of a specific reward than with an image of a gift card,” says Handel. “Being flexible and customer-oriented, we would rather see the end-user happy, but if we can keep the middle person happy too that’s even better, because that means they’ll come back.”

What’s Ahead for Gift Cards

Some of the innovations in store for gift cards will likely make them even more popular in the years to come. Teri Llach of the Blackhawk Network believes we’ll be seeing more high-end, “aspirational” brands getting into the incentive marketplace. “The idea of being able to shop on somebody else’s dime at some of the higher-end retailers can be a very powerful motivator in an incentive program,” she explains.

Llach also expects to see more cross-branding to create interesting rewards for the incentive market. “We have a product out now called ‘Dinner and a Movie’ – a combination product where you can rent a Blockbuster movie and get a Chili’s dinner all with one card,” she says, “and I think you’ll see more of that type of product enhancement.”

The travel segment will also become a bigger player in the gift card market, Llach says. “We’re seeing growth in the use of our hotel and airline cards on the retail side,” she notes, adding that she expects to see more travel packages put together for the incentive marketplace –“sending someone to Chicago for a shopping spree with one of our retail branded gift cards, for instance.”

Nancy Serrato of Innovative Card Consulting believes that we’ll be seeing more cross-branding and more cards that offer “an experience, rather than just having a dollar value on the card.” She points to Utix Group, which offers a “PGA Tour” card that has no specified face value but is good for a round of golf at any of 2,000 PGA-rated golf courses in the U.S. Another example of an experiential card is one that AEIS developed for the southern California grocery chain Ralph’s. For purchasing specific Ralph’s store products, points were earned toward a prepaid card good for movie theater admission for two adults at a wide range of theaters for the film promotion of Ice Age: The Meltdown.

This sort of “variable rate redemption” card will not only be popular with end-users, Serrato says, but it’s also likely to allow for higher margins than other types of gift cards and be more attractive to incentive industry resellers.

The type of award that Serrato sees becoming more popular, however, is one that ties merchandise and gift cards together. “You can truly marry the two,” she says. “Maybe it’s an iPod and an iTunes gift card or a box of Godiva chocolates with a Macy’s gift card attached – then you’ve got something that’s going to last physically, and you give people the choice to add more. To me, that’s the perfect scenario.”

Don’t Forget Communication and Presentation

Gift cards have become popular incentive program rewards in part because they’re easy to administer and easy to use. But that doesn’t mean you can just drop them on someone’s desk. Communication and presentation are just as important to a program using gift cards as they are to any other sort of incentive program – maybe more so.

“Communication is a big part of launching and promoting any incentive program, including those using gift cards,” says Rick Killian of the Incentive Gift Card Council (IGCC). “And after the program, you want to promote the winners to encourage them to talk about the reward. Employees aren’t likely to talk about how they spent a $100 bonus, but they can be encouraged to talk about how they spend a $100 gift card.” He also notes that personalizing the card and presenting it at a special awards ceremony will add to the perceived value.

“Even if it’s being used as a spot reward, it’s all about how the award is communicated and presented,” agrees Nancy Serrato of Innovative Card Consulting. “It doesn’t have to be confetti and balloons, but you can announce the award to the individual’s peers and superiors at a staff meeting or company luncheon. The idea of a spot award is to be able to reward someone right away, of course, but that doesn’t mean you can’t follow up the award with a notice in the company newsletter.”

Companies can also take advantage of the many custom packaging innovations that gift card providers offer to enhance the presentation of the award. “Use some sort of carrier to enhance the presentation,” says Serrato. “Cards can be presented in custom gift bags, tins or pop-up boxes, and a cardboard sleeve can be enhanced with a personalized ‘Thank You’ message.”

Some of InComm’s customers have created elaborate presentation packages. Example: Caterpillar wanted to put the card in a container that looked like one of their tractors. “We also customized a series of collectable cards that showed different types of Caterpillar tractors over its 100-year history,” says InComm’s Stan Bartelt. “You could also put a sales message, a congratulatory message or a motivational quotation on the packaging. It’s limited only by your imagination.”

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