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Gift Card Grief?
December 10, 2007
Consumer Reports raises concerns about one of the incentive industry's top rewards
By Alex Palmer
This holiday season, Consumer Reports is challenging what has become a consumer and incentive program mainstay: gift cards. Specifically, unused gift cards, gift card fees and expiration dates. The report discussed a number of "gotchas" that may catch the gift cardholder by surprise, pointing to a survey last spring of 1,500 consumers that indicated fees and expiration dates as top sources of aggravation in dealing with gift cards. Also of concern is a high rate of disuse, with cards forgotten in the bottom of drawers, forfeited to fees and expirations or never spent because of lack of interest.
About $8 billion in gift card value was left unused in 2006, according to TowerGroup, a research firm in Needham, Mass. Citing a survey by the Consumer Reports National Research Center, Consumer Reports also states that more than one in four of those who received gift cards during the 2006 holiday season had not used at least one of them nearly a year later.
It was a thorough critique of the industry, but representatives from both bank- and retailer-issued gift card groups felt the report simplified some of the issues and overlooked positive experiences consumers have with the cards.
"The report is very much out of step from what consumers are actually telling us," says Marilyn Bochicchio, president and executive director for the Network Branded Prepaid Card Association, a trade association for parties promoting bank-issued cards. Bochicchio pointed to a contrasting study reported at the beginning of November. Conducted by Dan Horne, professor of marketing at Providence College, the survey found an over 93% satisfaction rate toward branded prepaid gift cards, from a sampling of 1,788 consumers.
"Clearly consumers find that this product fills an unmet need better than their other options, which would include cash, checks or a variety of merchandise items," says Bochicchio. She also disputed the article's claims that the expiration dates and fees on bank-issued cards are somehow obscured or could come as a surprise to the average consumer.
Frustrated or not, consumers and incentive planners continue to purchase gift cards at ever-higher rates. Predictions from the National Retail Federation expect consumers to spend $26.3 billion on gift cards this holiday season, up from $24.8 billion last year.
Speaking about the retailer-issued cards, Incentive Gift Card Council President Cindy Mielke agreed that too many cards are left unused, but saw it as a problem with choosing the wrong retailer or type of gift card, rather than a problem with gift cards in general. "We talk about the importance of understanding who you're motivating and what you're using to motivate them. Whether it's a gift card or product, it has to fit the audience, otherwise the incentive to perform isn't there," says Mielke. "It's all about fit."
Mielke also pointed out that incentive winners are often given a choice among several retailer-issued gift cards, as opposed to most consumer recipients, who get what is given them. This increases the likelihood that incentive gift card winners will receive a desired card reward that will be redeemed.
Also pointed out was the fact that the disuse of gift cards hurts vendors and retailers as well as the consumer, since these groups rely on the cards to bring in new customers or to strengthen the loyalty of current customers. "Retailers want these cards to be redeemed. They want the customers coming into their stores," says Rich Killian, president of gift certificate-focused incentive house RK Incentives, "It's a win-win for the retailers, for the economy and mostly for the recipients themselves."
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