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TOP GIFT CARDS: Stalwarts of the Market
September 18, 2009
These cards prove to be perennial favorites, even in recessionary times.
By William Ng
If you’re designing a gift card program for deserving employees, clients, and partners, which cards are redemption sure-shots that will get participants motivated? We asked some of the incentive industry’s biggest gift card providers for their lists of top redeemers, and if department stores, big-box retailers, casual eateries, and electronics are under your consideration, then you’re on the right path.
The gift card suppliers we queried note that their top merchants have remained consistent, for the most part, year after year. In our unscientific poll, the data provided by Maritz Motivation, Globoforce, Carlson Marketing, National Gift Card, SVM, Marketing Innovators, and Patriot Marketing Group showed this general consensus. Brand recognition, buying selection, and convenience are what drive the staying power of retailers that appear on list after list. For home improvement redemptions, they are the Home Depot and Lowe’s. For dining cards, they are Darden Restaurants (which owns Red Lobster and Olive Garden, among others), Brinker International (whose brands include Chili’s Grill & Bar), OSI Restaurant Partners (Outback Steakhouse and others), and Applebee’s. Target and Walmart were mentioned repeatedly for mass merchandise gift cards. Macy’s, JCPenney, Sears, and Kohl’s are most popular for department store cards. With Circuit City’s bankruptcy, Best Buy dominates for electronics and home and mobile entertainment incentives. Amazon.com, iTunes, and Marriott garnered mentions on several lists.
But the recession certainly has impacted incentive card choices. Gift cards for gas (notably Shell) were mentioned by more than half of the card suppliers, plus plastic for grocers (Kroger and Safeway were mentioned) and quick-service dining outlets (Starbucks Coffee, Subway, and Burger King) also surfaced. With employees’ household budgets being strained in a non-bonus year, employers are helping them with “everyday-spend” gift cards.
Responsible Spending
Pam Gerhardt, senior director of marketing at SVM, says in this economy people focus on life’s necessities and that its gift card campaigns this year are “back to basics” ones that emphasize pharmacies, groceries, and gas. At Carlson Marketing, Joyce Engberg, director of fulfillment, remarks, “Gas and grocery among our top merchant categories are new for us. We’re also seeing movie gift card volume doubling this year. We’re looking to add phone cards.”
On the other hand, Adam Van Witzenburg, president of National Gift Card, says employers are watching their money, too. “Lots of businesses are saying, ‘I don’t have the budget I had last year. What can you give me that’s lower denomination?’ ” he explains. “You can go into a Subway, Burger King, or Starbucks and get something for five bucks. We’re getting a lot more requests for $5 cards.” Movie gift cards, which suppliers say fall just outside the top tier of redemptions, are proving popular as they fulfill the entertainment needs of families, which are traveling less. National Gift Card just added
Fandango to its lineup.
T.J. Maxx and Marshall’s, discounters of brand-name apparel, grabbed share on the lists of Globoforce and Maritz Motivation. “People still want the big clothing brands but are looking for deals and bargains to stretch their buying power, especially when they have gift cards,” explains Kurt Hosna, Maritz Motivation’s solutions manager.
As employers strive to make their incentive and recognition programs more efficient and, at the same time, focus on giving program participants the power of choice, open-loop prepaid incentive cards are gaining in popularity. These cards are good for redemptions at any merchant that accepts debit cards. At SVM, Gerhardt says Visa open-loop cards are big sellers because they offer cardholders universal options and they “make it very easy for program managers.” That was echoed by Van Witzenburg at National Gift Card, where, in fact, Visa prepaid cards have been a mainstay on its most-wanted list. “It’s easy to offer one card that recipients can use for whatever they want,” he says, adding, “pricing for open-loop cards has come down.”
Still, merchant cards are entrenched in suppliers’ lists, and the recurring big-box and department-store brands are tough to displace because they give recipients a variety of redemption options and have wide demographic appeal. “I can go into that store, and there will be lots of different things to buy,” Hosna says. “You can see people from all walks of life shopping at Target,” notes Dennis Borst, president and COO of Patriot Marketing Group. The top gift cards have “everything to do with demographics and ease of redemption,” he says.
Breaking down the lists by merchant category, employers are covering their bases with a steady mix of home improvement and home furnishings, general merchandise and department stores, casual dining, apparel, and electronics and entertainment.
Cindy Mielke, manager of national accounts and head of merchant relations for Marketing Innovators, and 2008 president of the Incentive Gift Card Council, confirms, saying most clients choose a wide assortment of gift cards “because they are trying to appeal to a diverse workforce and all the generations employed today.”
And this assortment is generally recession-proof. In home improvement, for example, during good times, gift card recipients use their plastic for major remodeling projects, but in down times, those cards are deployed for practical items for upkeep and minor upgrades around the house, says Hosna. Casual dining, meanwhile, allows card recipients to share their rewards with loved ones, so it’s always popular. A night out with the family at a restaurant “is always a nice thing to give,” says Gerhardt.
Recession or not, a recognition or incentive reward that allows the recipient to share with family will have evergreen value, notes Derek Irvine, chief marketing officer and head of strategy consulting for Globoforce. “Whether it’s shopping for the kids or dining, consumers are doing family things, and those gift cards have trophy value,” he says, as opposed to grocery and gas cards.
Engberg at Carlson Marketing expects that gas and grocery cards will cede to experiential and aspirational reward cards once the economy recovers, when consumer focus turns away from pressing needs. This is already occurring with gas cards; National Gift Card reports a 40 percent drop in demand—its biggest year-over-year decliner versus 2008, when gas prices soared past $4 per gallon.
But for now, Engberg points out that everday-spend gift cards can be awarded with more formal presentation packaging to mitigate their lower perceived motivational appeal. But Gerhardt argues that everyday-spend gift cards are no less motivational. “I know if I’m going to walk into a grocery store and if my company is footing the bill, that’s still going to excite me,” she says. Borst adds, “I know many people get excited when they get Starbucks cards.”
Borst cautions that these top lists are not the last word when it comes to choosing gift cards for your program. “If your workforce is male chemical and electrical engineers, you won’t be offering Bath & Body Works gift cards,” he quips, illustrating the point of following your employee demographics. In the end, “it’s what your people need. That’s what it’s all about.”
Here are some major suppliers' top gift cards
Patriot Marketing Group
Best Buy
Foot Locker
Home Depot
Kroger
Lowe’s
Red Lobster
Safeway
Shell
Target
Globoforce
Amazon.com
Bed, Bath & Beyond
Best Buy
Chili’s Grill & Bar
Darden Restaurants
Kohl’s
Lowe’s
Macy’s
T.J. Maxx
Williams-Sonoma
Maritz
Applebee’s
Best Buy
Brinker International (Restaurants)
Darden Restaurants
Gap
Home Depot
JCPenney
Kohl’s
Lowe’s
Macy’s
Marriott
Sears
Starbucks Coffee
TJX (T.J. Maxx, Marshall’s)
National Gift Card
Amazon.com
Brinker International (Restaurants)
Burger King
California Pizza Kitchen
Cheesecake Factory
Darden Restaurants
Gamestop
Gas cards (Shell, Exxon Mobil, BP)
iTunes
Lowe’s
Sears
Starbucks Coffee
Subway
Walmart
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