How to Offer Gift Cards in Your Small Business

Camino Financial27 Feb 2024
How to Offer Gift Cards in Your Small Business
Increasing your sales, attracting new customers and competing with big companies: these are some of the benefits that offering gift cards can bring to your business. Gift cards sales were estimated at 160 billion dollars in 2018, and their popularity is predicted to continue increasing over the next years. The reasons? They are practical, especially for those who don’t know what to buy as a gift or leave their shopping for the last minute; the recipients can decide what to spend them on; they are available in many physical stores, and can even be purchased online. Nowadays, it is possible for any business, regardless of its size, to offer gift cards as part of its marketing strategy. The best part? Selling gift cards is not as expensive or difficult as you might think. In this article, we’ll explain you everything you know about how gift cards work, from the benefits they could bring to your business, to the best techniques to make the best of them at your establishment or online store.

Why should you offer gift cards in your business?

A gift card is a means of payment loaded with a specific amount of money that people can buy in your business or virtual store. They can be redeemed at any time after purchased. These cards have become one of the most popular forms of a gift, especially during festivities such as Christmas or Mother’s Day. A report by the National Retail Federation highlights that 62 percent of consumers prefer to receive gift cards above any other type of present. Similarly, according to a study by, 65 percent of those who receive gift cards spend almost 40 percent more than their value when exchanging them, which translates into additional profits. In addition to boosting your sales, gift cards can attract people who had never visited your business or heard about it. They could potentially become loyal customers. Also, the format of a gift card is a marketing tool itself and can help you promote your brand, since you can, for example, customize it with the logo and colors of your company. These are other advantages of offering gift cards in your business:
  • They can generate income during the low season. Many of these cards are not redeemed until several weeks after purchased. These dates match the slowest period for businesses, (like the months following Christmas).
  • They make customers come back. If customers have the opportunity to use the gift cards several times, they will return to your store or they will buy again online. This is especially true when the cards can be reloaded, or if their amounts are very high and it’s not likely to spend the whole amount at once.
  • They allow you to compete with big brands. These cards are very popular among the most important retailers, who offer them as part of their sales strategy. To be able to compete with them and with larger brands, you must offer this shopping experience and its benefits to your customers.
  • They are a safe means of payment. Their top-notch security measures reduce the possibilities of fraud, when unscrupulous people try to exchange expired cards for money, or when they try to duplicate them. They also avoid reimbursements in cash, because when they are partially redeemed, the rest of the balance is stored on the card.
  • You can track them. It is possible to monitor gift cards in real time, which allows you to identify market trends, depending on the activity of the clients.
Other benefits of gift cards:
  • Clients can redeem them in person or online.
  • It is very easy for employees to become familiar with how they work.
  • They can be issued with any amount of money.
  • They offer quick transactions, with immediate benefits for customers and for your business.

What do I need to know to offer gift cards in my business?

Starting a gift card program is relatively simple and affordable. The first thing you need to know is that any business can offer these cards, regardless of their size or industry. Retail stores, restaurants, beauty salons, spas, flower shops, auto repair shops, independent contractors, and many other businesses can take advantage of these cards. If you want to start selling them, you should follow these steps:

1. Choose a gift card program

The first step is to choose a provider that will advise you on the gift card program that better suits your business and that guarantees minimum enrolling costs. The most important thing is that the company you choose offers a gift card program whose software is seamlessly integrated into your Point of Sales System. This integration will simplify the charging process and the transactions made with the cards. These are very similar to those in debit cards and credit cards since they also must be passed through a reader. Also, you must take into account the design of the cards. Ideally, the provider will allow you to customize the gift card of your choice with the logo and colors of your business. You can also choose to offer digital gift cards, that are much more convenient for you since you don’t need to print or send them, reducing your costs significantly. They are also easier to use for clients. A digital card is sold like any other product in your online store. Customers buy these cards with a certain value and send them as a gift by email to their beloved ones. They can be integrated directly into your e-commerce platform, and customers can redeem them by paying for their purchases in your online store. An additional benefit is that they can also be used directly in your establishment.

2. Familiarize yourself with the laws on gift cards

There are rules that you must follow if you want to sell gift cards. They are detailed in the Credit Card Accountability and Responsibility and Disclosure Act of 2009. Under this rule, a gift card must have an expiration date greater than five years from the date it was issued, or since the last time it was loaded with funds. In some states, you can claim the cash value of the cards that were not used after they have expired. In other states, you must report cards that have not been used as "unclaimed property." Title IV of this law explains in depth how the sale of gift cards is regulated in the United States. Make sure to study it well before establishing conditions and restrictions, such as limits on purchases, or charging fees when redeeming them.

3. Train your employees

It is essential that your employees learn how the gift card program works because their implementation also depends on them. In addition, they should advise clients on how to use the cards properly, promote them, and convince them to buy and use them.

4. Monitor the use of cards

Most Point of Sale Systems allow you to track transactions with gift cards. Thus, you can know how much money has been exchanged in your store, or know the sales history of a card. A complete card program should generate reports of transactions, and detailed reports of redemptions and outstanding balances. With these data and other statistics, you will better understand the market tendencies, which will allow you to create strategies to offer a better service to your customers. Also, you can compare all these results with your initial goals.

How to choose the best gift card program for your business?

Basically, there are two types of gift card programs: open cycle programs and closed cycle programs. Each one is divided into several categories. Closed cycle cards only work in a store or in the different brands of a corporation. They do not have the logo of any payment processing company, such as Visa® or MasterCard®. Only the processing program of your business will accept this type of cards. On the other hand, open cycle cards are similar to a credit card; they are not to be used exclusively in one business and are accepted in almost any establishment. These cards are processed by credit card systems such as Visa® or MasterCard®. To help you make the best decision, we have compiled a list of the programs that could work for your business, including their pros and cons:

Closed cycle programs

  • Merchant banks gift card programs. Some merchant banks offer closed cycle gift cards, which can only be used in your business. Generally, these cards are easy to configure in your system. However, their designs are limited, as are the program features and processing options.
  • Card provider program. By partnering with one of these companies you can create your own gift card. The provider must guarantee that the card processing plan and its software easily adapt to your system. This is the most flexible option in terms of design variety and program features.

Open cycle programs

  • Restricted card program. All of the processes of an open-cycle restricted card program work in credit card networks, such as Visa® or MasterCard®, but its operations are limited to specific business locations, such as a shopping center that offers valid cards only in its stores. These cards have some drawbacks because they can only be used to buy certain products.
  • Card program without restrictions. It is similar to the restricted card program, but there are no restrictions on where the card can be used or what can be purchased with it. In essence, it is a gift card with the name of your business, which can be used anywhere credit cards are accepted.
  • Branded prepaid gift cards. This type of cards display the name of your business, but they can be used anywhere. You must pay the card in advance, unlike others in which the money is charged at the time of purchase. As they can be used anywhere, they are considered as a gift from your company to the customers.

How to use gift cards in your business

Now you know how to implement a gift card program in your business. Making it successful is another question. These are some ideas that you can put into practice to make the best of this marketing strategy: Promote your gift cards. There are multiple strategies to promote gift cards in your business:
  • Advertise them on your social media channels or create a marketing campaign via email to promote their launch.
  • Make sure your store properly advertises your gift cards, and spread the word among family members, friends, and acquaintances, encouraging them to tell others about their benefits.
  • Your employees are a very important part of your marketing strategy, as they will be responsible for telling customers about the benefits of the gift cards. They can inform customers of their benefits when they visit your store and when they are at the cash register.
  • Finally, place them in a prominent location, preferably next to the cash registers, where people can easily see them.
Prepare for the festivities. Gift cards should never be missed, especially before and during festivities. Order them from your supplier in advance so you are prepared for dates such as Christmas or Mother's Day. Start promoting them on your social networks or through emails about four weeks before the celebration. Offer cards instead of refunds. To cancel a transaction when customers return or exchange a product can get complicated. By offering customers gift cards instead of cash as reimbursement, you avoid these inconvenience, and in the process, you give them the opportunity to return to your business. Reward your loyal customers. Give your best customers some courtesy cards. This is a way to reward them for their loyalty, turning them into a marketing tool as ambassadors for your brand. There are other ways in which gift cards help your business. They can improve your image in your community by donating them; you can give them to your employees as an incentive, or they can be used to collect information that allows you to be in contact with your customers.

Last words

Gift cards are an effective method to increase sales in business, and their popularity and sales continue to grow. Selling them is not expensive, and they are easy to use. In addition, they have the potential to attract new customers and get them to return to your store. After choosing the right provider and learn all about how gift cards work, you must develop a marketing campaign to promote them and use all the necessary strategies to get the most out of them and grow your business. To learn more marketing strategies for your small business, subscribe to the Camino Financial newsletter. You will receive useful tips and tools as well as the latest trends in business management, finances or technology, which can be essential to growing your business.

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