Gift card usage increasing again, at last

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By: Wise Marketer Staff |

Posted on November 13, 2009

When gift-giving on a fixed budget, 23% of Canadians opt to buy gift cards instead of personal gifts or cash, accoring to the sixth annual gift card market study by Givex and Harris/Decima.

This tendency to buy gift cards instead of specific gifts translates into additional, incremental sales opportunities for retailers because it not only increases customer traffic during the holiday season each year, but it also smooths out the January sales when most people redeem their cards.

During redemption, the study found that 50% of consumers usually spend more than the value of the card, creating additional revenue that the merchant may not have had otherwise. This is a significant increase from the 39% observed in 2008, and suggests that gift card spending behaviour is at last returning to levels last seen in 2006 and 2007.

The slower economy may have driven consumers to fixate on prices in the short term, but deep discounting is never a sustainable strategy. Those who are loyal only to the price tag have no problem switching to a cheaper competitor at any moment. A better retail survival strategy is to create strong brand affinity by forging a strong connection with customers, which leads to more enduring loyalty and even overcomes price concerns.

As a result, Givex says that many businesses are using their gift card programmes to gather customer data and consequently to better target their best customers, building on those relationships without resorting to deep discounts that would soon erode the bottom line.

Some 62% of Canadian consumers said they are likely to provide their personal information in exchange for an incentive, while 21% said they are likely to register online with merchants to protect their gift cards from theft or loss.

But apart from security, incentives such as bonus gift card funds (17%) or free products (15%) also have wide appeal. Mobile technology is also such an integral part of modern life that 24% of consumers aged 18-34 said they are likely to provide their mobile phone number to register their gift card at the store for loyalty programme points (compared to the national average of 16%).

This year has also seen a surge in demand for environmentally conscious products, including gift cards made from recycled plastic or other eco-friendly materials. In fact, over half (55%) said they would be willing to pay more for a gift card made from environmentally friendly or recycled materials instead of plastic.

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