Cooley Group, Inc.

Gift Cards: Our Retail Application of the Month

For: Retailers of all types

Description: Example: A sporting goods retailer uses a 4-color plastic gift card featuring the retailer's logo, Internet address and a photograph showing a sport utility vehicle hauling recreation equipment. The cards were inserted into slits in an outer envelope; a gift card and smaller envelope were included.

Benefits: Plastic gift cards are increasing in popularity because they are harder to duplicate than paper gift certificates and offer a professional image. In addition, the mag stripe on the gift card keeps track of purchases accurately and means that retailers never need to offer a cash refund as they often do when a paper gift certificate is only partially used.

Advantages of Plastic Cards
Plastic products are more durable than paper ones, and that's why image-conscious companies prefer them. They come in a variety of shapes and sizes. Does your firm have a laser printer? You can use that printer to personalize thin plastic cards. Thicker, credit card-style cards are ideal if you seek durability and a more distinguished look. Either way, plastic cards are a great way for you to separate yourself from competitors.

One main advantage of plastic cards is they can be encoded with magnetic stripes, enabling you to capture and analyze information such as purchasing behavior and buying history. Cards with magnetic stripes pull this data together when it matters most—during the transaction.

Gift cards with magnetic stripes are some of the hottest cards on the market because they can be used repeatedly until entire card amounts are spent. You don't have to refund cash, as you often do with paper certificates. Plus, the cards are durable and more easily carried by shoppers.

Why Gift Card Programs Are Popular
Compared with paper gift certificates, gift cards are considered more efficient, convenient and flexible tools for increasing revenue. Stores don't have to refund cash, and the cards are durable and easily carried by shoppers. Coral Gables, Fla.-based ValueLink, a gift-card processor, says retailers that implemented gift-card programs for the 1999 holiday shopping season experienced 15 percent to 46 percent growth in sales volume, compared with their paper gift certificate programs in 1998.

That growth is fueled by two major benefits of plastic gift cards: While most paper certificate programs yield cash as change, plastic cards keep the money on the card-in other words, with the store. Also, plastic cards are more secure. A high-tech color printer can make a passable copy of a paper certificate, and blank certificates are ideal targets for dishonest employees.

Membership Cards
A library recently was opposed to buying 4-color plastic cards until it realized it could include an image of a lighthouse on the front. (The library is close to one.) The buyer ordered plastic cards that included the library's logo, contact information, the lighthouse image, instructions for mailing lost cards back to the library, and a matte finish on the back so cardholders can sign them easily. The library got dozens of compliments from members, and when other libraries in the area saw the new cards, they rushed to improve their own. Plastic cards can help you lead the way.

You're already using plastic cards?
Consider getting new ones for your best customers/members, who deserve special recognition. Those cardholders could be entitled to increased discounts and other perks. Plus, your regular customers/members who see the cards will ask how they can get the new card, too.

The Skinny on Smart Cards
Smart cards, arguably the most technologically advanced plastic cards on the market, store huge amounts of data and can be updated regularly. Embedded with microchips, smart cards often retain cash amounts or more complex information, such as an individual's medical history or driving record. According research firm Frost & Sullivan, U.S. smart card makers shipped 14.4 million units in 1999. That number is projected to rise to 114.7 million by 2006.

A Good Line to Use:
"Your company wants repeat customers. Customers want discounts and rewards. Plastic frequent-shopper cards help both sides."

Stats:
41 percent of buyers said loyalty benefits influenced where they shopped, a 5 percent increase over 1999. (Standard Register's 2000 National Consumer Survey of Plastic Card Usage)

43 percent of buyers who had loyalty cards said they shopped more often at retailers whose loyalty cards they owned. (Standard Register's 2000 National Consumer Survey of Plastic Card Usage)

The number of participating households in frequent-shopper programs has doubled over the last four years (AC Nielsen)

7.9 billion plastic cards were manufactured in 1999. (ICMA Card Manufacturing Global Market Survey 2000)

The plastic card market value worldwide reached $4.5 billion last year. (ICMA Card Manufacturing Global Market Survey 2000)

Gift cards and certificate sales have been growing 11% to 15% annually since 1993. The National Retail Federation reports the trend is clearly moving toward plastic. For retailers, profit margins go up. For consumers, perceived value multiplies.

Why plastic? With company logos and stunning design motifs, plastic gift cards are an exciting form of branding, a constant reminder of the merchant and its products. They boost the perceived value of the gift. Credit card sized, they're easier to manage and more durable than paper. They also mean fewer returns (shoppers pick exactly what they want), and perhaps additional purchases, as shoppers apply remaining balances to more expensive items. They can also be reloaded after the initial pre-paid amount has been spent. Parents can add dollars for children's clothing allowances. Businesses can use them as debit cards in ongoing incentive programs, adding buying power as employees accumulate points.

Think of them this way: A plastic gift card is a license to shop, a ticket to browse, a promise that "gaudy ties" are history. It's a perfect gift in a society that finds reasons to give all year round.

Industry analysts project that 80% of retailers expect to convert from paper gift certificates to plastic gift cards by 2006.

Loyalty cards are catching on fast. More than 50% of Americans use them regularly. Food retailers are fueling their growth: 35% already have loyalty programs.

Associations, shopping clubs, auto clubs - it seems that everyone wants to belong to something, which is one reason why membership cards are the third most popular plastic wallet card in the US today, right behind credit and ATM cards. According to an ACNielsen survey, 64% of US households said loyalty programs were important in their shopping decisions.


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