The Life Cycle of an Incentive Gift Card
By Donna M. Airoldi
November 16, 2011
Gift cards make up an essential part of incentive and recognition programs. Nearly 75 percent of program managers who participated in Incentive’s
latest Gift Card IQ survey
said they use them. According to the October 2011 report “State of Gift Card Use in the U.S.” by the Incentive Research Foundation, gift cards are now included in more programs than cash, travel, and merchandise.
On the back end, usage analytics help companies determine which gift cards best motivate their audiences and adjust their future gift card programs
But what do you really know about a gift card’s life cycle? How do selection, design, production, and other elements factor into card programs?
Choosing the Right Cards
Not all gift cards are created equal. Retail cards work best in some programs, while prepaid cards are better motivators in others. It matters, too, whether their use is in a consumer promotion or in an employee reward program.
“The life of a gift card really begins with strategizing client needs and finding the best solutions,” says Betty Weinkle, president of the Incentive Gift Card Council and area vice president of Fenton, MO-based InteliSpend Prepaid Solutions. “We use incentive research to inform us when we build a card with a client. We want to guide the spend so that it supports everything incentive research tells us is important—awards that are free of guilt, possess trophy value, and garner lasting impact. We don’t want the reward used for lightbulbs and dog food.”
In general, low-value retail cards, such as a five-dollar Starbucks card, do well in consumer promotions and spot recognition programs. High-value prepaid cards are better suited to clients trying to transition from cash incentives or those where there has to be tangible currency value.
Patty Saari, vice president of client services for Aimia (formerly known as Carlson Marketing), starts by researching a client’s gift card history and profile layers, which allows her buyers to decide which cards will enhance the offering and entice engagement. For U.S.-based incentives, there are three areas of retail opportunities always covered, particularly for points programs.
“First, you need big-box names, like Target or Best Buy, with enough selection and representation across the country,” says Saari. “Second, include exceptional high-end retailers, like Tiffany & Co., for high visibility and desirability. Third, look for local representation if you have a concentration of participants in a certain metro area with specialty retailers that might not have national appeal.”
For sales programs, Saari adds, it’s also important to know whether the reward earners are the final gift card recipients or plan to cascade their awards to the next level, such as a car dealership owner using his reward to buy multiple smaller-denomination cards for his employees, in which case prepaid cards make up the better option.
In addition to being able to determine the look and value of cards, program managers can pick where prepaid cards will work. Technology at InteliSpend and other providers that represent multiple merchants allows clients to configure cards to work at all available retail partners, a select few outlets, or any number in between.
Home Depot surely wouldn’t want employees spending their recognition rewards at Lowe’s. Likewise, providers of wellness program rewards would prefer recipients purchase healthy goods and services.
“MasterCard is our go-to network for wellness,” says Weinkle. “They did a tremendous amount of research in wellness performance and found that if you offer a card that works only at gyms or health food stores, that doesn’t move the needle on performance. Cards with more choices work better. But for clients that feel strongly that their employees can’t buy cigarettes or go to fast-food restaurants with their wellness cards, those outlets are filtered out appropriately, based on their needs and desires.”
One InteliSpend client, InterContinental Hotels Group, used a filter in an unusual way: it created the Any Hotel, Anywhere lodging reward card that’s usable not only at its properties but at competitors’ as well. Loyalty program members can redeem their points for the card, with values from $100 to $250, and use it like a prepaid card.
“InterContinental’s marketing team had learned that its frequent travelers belonged to four or five hotel programs and stayed wherever they got the best location and price,” says Weinkle. “Adding the ability to use loyalty points for stays at other brands, especially when there wasn’t an IHG property in a destination, skewed customers to want to stay at more IHG priority club hotels because the value of those stays was greater than anywhere else.”
Physical Card Designs and Costs
Gift cards can be super simple or simply stunning, depending on just how much a client is willing to invest. Costs can run from as little as five cents per card for basic four-color cards to up to $10 for ones that incorporate special shapes, lettering, foils, glitter, textures, or other visually enhancing features. Packaging needs to be considered, as well.
“When you get over 30 cents, you’re doing pretty fancy stuff; over one dollar, you’re creating a reusable toy of some sort,” says Martha Weaver, product manager of card products for Travel Tags, a printer based in Inver Grove Heights, MN. “Cards for incentive and promotional programs tend to be the basic ‘down-and-dirty’ four-color cards, since it’s the brand that’s the draw, and they’re seen on a web site [or in a catalog] and don’t have to attract attention on a store shelf.”
Incentive companies purchasing bulk retail cards are reliant on whatever card architecture and packaging that the retailer and printer have already determined. Clients creating new cards typically bring in design ideas, and printers work with them on finalizing the look and structure of the new cards.
Three factors determine card costs. The first is the choice of the aforementioned design elements. Second is the selection of card stock, thickness, and finish. In recent years, companies increasingly have desired greener, sustainable materials for cards, but some of those can drive up costs, while recycled PVC can be less expensive. The third variable is quantity. Because it takes the same amount of setup for a 1,000-card run as for a 500,000-card run, orders with lower quantities have higher per-card costs.
For purchase costs, retailers often offer discounts on business-to-business (B2B) or large-volume card orders. Incentive houses save on costs by going through companies that offer a single card product that can be used at more than 200 retailers, such as
GiftCertificates.com and InteliSpend.
Regardless of whether retail or prepaid cards are used in a program, “you never want the cardholder to experience costs,” says Weinkle. “From the channel partner perspective, you want it to be beneficial to them. For corporate clients, too, cost should be neutral or better.”
Once a design is determined, the printer sets timelines. Some cards take longer to proof and produce than others, depending on the elaborateness of the order and where they need to be shipped. Time of year matters, too.
“Every card manufacturer is busy from June through September, when we get holiday orders, because merchants sell 50 percent of their cards in November and December,” says Weaver. “It can take up to 12 weeks to print and ship orders during this time. Other times, six to eight weeks is normal. Runs smaller than 500,000 can be done more quickly.”
Most printing companies today have the ability to do even shorter runs, where they get images from merchants and use equipment similar to digital printing that isn’t UV color printing, says Weaver. “The quality is not necessarily as nice, but they can save some money there.”
InteliSpend has a system where, when an order comes in, “we emboss the card number, put on an individual’s name and a message—“Congratulations,” “Happy Shopping,” whatever—and it gets printed and shipped within 48 hours,” says Weinkle.
Printers work closely with merchants’ gift card project managers to get correct data for orders, especially as “99 percent of the time, retailers will have two batches of coding for their business-to-consumer and business-to-business channels in order to analyze the businesses separately,” says Weaver.
Quality control is a major issue in gift card printing. A quality-assurance procedure conducted at each of the following steps ensures quality and reliability of data and construction:
• Design and art review
• Proofing and color matching
• UV printing
• Magnetic stripe application
• Encoding (adding data to the magnetic stripe)
• Imaging (adding the human-readable card number and pin)
• Scratch-off coating (pin cover)
• Affixing (if a carrier is required)
“Every time you run 500,000 pieces, production gets bunched up or you have some quality issue where you have to reprint a card,” says Weaver. “You have to be careful that you know what cards you had to toss and make sure there aren’t duplicate ones.”
Fulfillment and Redemption
Gift card printers often fulfill orders directly to clients or their card recipients. Incentive houses usually buy and warehouse the cards, which can be costly, and then handle fulfillment and shipping upon redemption.
Digital and mobile gift cards are changing this part of the industry. A gift is now an email with links for accessing a certificate that can be printed at home, codes for immediate online shopping, or barcodes for in-store scanning on smartphones.
Paul Hubert, GiftCertificates.com’s vice president of customer and merchant services, has seen the majority of his incentive business go digital. “On the B2B side, 80 percent is digital. It’s exactly the opposite on the consumer side,” he says.
Low-value plastic cards are ripe for displacement by digital, says Saari. “It takes the costly fulfillment element out of the equation,” she notes. “And while it may be a negative for plastic manufacturers from a volume perspective, retailers will see an uptick in use.”
Whether they are plastic or digital, incentive gift cards are redeemed quickly. “Something like 90 percent of cards are redeemed in the first 60 days,” says Weinkle, adding that branding makes a difference in how quickly cards are used, as does the reason for receiving them. “Someone who receives a card from an employee reward program savors it more than one received from a consumer promotion. They might put them in their wallets and carry them around, which is shown to have some beneficial brain activity that helps contribute to the goodwill they feel in earning [the rewards].”
The life of a card doesn’t end when the recipient spends it. Tracking analytics give insight into return on investment, how incentives work, and how participants interact with rewards throughout the life of a program.
Software can track the popularity of different cards in programs, the pace of redemptions, where people are choosing to redeem, what they’re purchasing, and so on.
Aimia’s data has shown that fewer people are saving for big-ticket items, continuing the trend of redeeming sooner for usable items that started with the recession in 2008. Points are being used for cards of retailers that “tend to be more utilitarian,” says Saari.
Data analyses also can lead to shifts in the types of cards used in future programs or can spotlight partner opportunities. “We can tell a client with a reward card usable at 200 places that the top 20 percent spent it on travel-related items, and maybe there’s an opportunity to do a promotion that focuses on travel reward cards going forward,” says Weinkle. “That’s what moves the needle. Business intelligence on the back end helps create laser-focused rewards or incentives as the cardholder relationship continues.”
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