Gift cards climb the corporate incentive ladder

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By: Wise Marketer Staff |

Posted on July 15, 2004

Following their increasing popularity and acceptance by American consumers, gift cards are now beginning to climb in popularity as corporate incentives for employees, according to a recent study commissioned by ValueLink (the gift and spending card arm of First Data Corporation).

According to ValueLink, gift cards are fast becoming a preferred choice for companies that want to motivate, retain and reward both employees and customers with cash-value incentives.

The firm's study polled the opinions of incentive programme decision makers from 460 American business organisations, revealing that 40% have used gift cards and/or gift certificates as incentives within the past year, and that 14% say that gift cards are the most used incentive items within their company. "Only cash (58%) was used more frequently as an incentive item in what is estimated to be a US$30 billion a year incentive industry," said Karen Larsen, ValueLink's vice president of marketing and product evolution.

Market growth
In addition to the use of gift card incentives over the past year, 41% of the survey's respondents said they "would definitely" or "are very likely to" use gift cards as incentives during the coming 12 months, with another 18% saying they are "somewhat likely" to do so. For example, John Manzer, senior manager of national sales for Lands' End, explained: "We understand the tremendous opportunities that exist as a result of the continued growth and expanded use of gift cards as incentives. An objective evaluation and understanding of the business-to-business opportunities provides us with in-depth intelligence which helps us create a strategic growth plan for the coming year."

More than one-third (35%) of current gift card incentive purchasers anticipate expanding the number of cards they distribute in the next year. Of those, 17% said they will increase purchases by up to 9%, and 18% of respondents said they will increase gift card incentive purchases by more than 10%.

"The projections and the expectations for future opportunities in gift and spending cards should be very encouraging to merchants and restaurateurs with established gift card programmes," noted Kevin Harte, senior vice president and general manager for ValueLink.

Multi-sector usage
The firm's research found that incentives are used extensively across industries, by companies of all sizes, for both employees and customers. However, the most prevalent incentive programmes are those designed to motivate, retain and reward employees, with 70% of the respondents' companies offering incentives for employee performance, 56% for length of employee service, and 54% as a sales incentive. Conversely, customer incentives were highest in the service industries, especially finance, insurance and real estate.

Survey findings
The study's findings also included:

  • 60% of businesses that use incentives are in the service and manufacturing sectors. More than 75% of those companies have less than 500 employees.
  • 55% of gift cards given out as incentives are for less than US$50 (approximately one-third carry values of US$25-US$49, while 20% are for US$100 or more).
  • Incentive programme decision makers who have used gift cards personally (74%) are more likely to use gift cards as business incentives in their company.
  • Incentive decision makers reported the following reasons for using gift cards the most as incentives:
    ·  The recipient highly values a gift card (84%);
    ·  Reasonable costs associated with gift cards (83%);
    ·  Gift cards offer good value relative to cost (81%);
    ·  Gift cards are easy to order (80%) and distribute (81%).

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