by Alex Palmer | November 08, 2012
Closed loop cards make up a larger portion of incentive budgets than open loop cards, new research finds. According to the Prepaid Business Incentive Report from payment solution company first data, about one third of incentive budgets went to some type of gift card, while many other incentive categories made up budget shares in the single digits.

The study, conducted by Burke, Inc. on behalf of First Data, drew on approximately 300 interviews with decision makers at companies employing 100 or more individuals. These respondents — from industries as disparate as manufacturing, government, retail, and telecommunications — reported that 20 percent of their incentive budgets went to single-merchant gift cards, with an additional 14 percent going to multi-merchant network branded cards. 

According to the report, six percent of incentive budgets went to merchandise, with three percent going to travel. 

Overall the study found a 28 percent decline in incentive spending compared to its last study in 2010, with average expenditures dropping from $317,300 in 2009 to $228,520 last year. 

The preference for closed loop cards over open loop ones were attributed to a variety of factors, including employee preference (at 38 percent), followed by physical proximity, past ordering history, and volume discounts. Half of respondents said that they purchased single-merchant gift cards in person, while 28 percent purchased online and 12 percent ordered by phone. 

The most common occasion for giving a gift card to an employee was “employee recognition,” with 48 percent of respondents saying they almost always gave for this reason. This was followed by an employee’s service anniversary (with 36 percent), year-end holidays (32 percent), sales and marketing incentives (32 percent), and employee health and wellness goals (12 percent). 

The top categories of single-merchant cards were discount stores (making up 25 percent of incentive card spending), followed by full-service restaurants (13 percent), specialty restaurants (11 percent), specialty stores (10 percent), fuel stores (8 percent), movie theaters (6 percent), and supermarkets (6 percent). 

The full report can be downloaded here