How Client/Consultant Partnerships Build Stored Value Revenue
Working side by side, Applebee's and SVS position gift cards as an integral sales and marketing driver.
There’s a lot of talk in the corporate airwaves about partnering, versus a simple client/vendor relationship. Much of this comes from the idea of working with outside consultants that are able to go beyond simply providing a commodity service. In making that choice, the client should be asking these questions, “Can this partner offer thought leadership, innovation, and shared vision? Will this partner be viewed as an extension of our team-sharing ownership in our strategic objectives?” A true partner, not just a vendor, is an outside entity that offers a complementary area of expertise outside your core competency, for mutual benefit. In this context, we’d venture to say that an ideal “partnership” is one where the two parties are able to create, innovate and achieve by expanding one another’s comfort zone, and come up with results that neither could have achieved alone.
One such partnership built on that foundation is the relationship between Applebee’s and Stored Value Solutions (SVS). Over this 13-year relationship, Applebee’s has been able to create new ways to generate revenue using a mechanism that, at the beginning, was fairly new to the restaurant industry. Together, the two companies have employed, refined, and expanded strategies that have consistently grown the Applebee’s gift card program.
How It Started
In 2002, most restaurants didn’t have gift cards; the gift card world was just starting to gain traction in other areas of retail. At the time, while a few big retailers like Kmart, GAP, and JC Penney had gift card programs, most businesses were still selling paper gift certificates. In the restaurant sector, Applebee’s looked at their competition and at the building trends around gift cards, and decided they should spearhead a gift card program. Gift cards were becoming a popular gift choice among consumers, and at that time, SVS was able to help Applebee’s make data-driven decisions, having successfully executed retail campaigns and gift card programs that enjoyed measurable gains. For example, SVS was able to demonstrate that if a brand switched from paper certificates to gift cards, they saw gift card/certificate sales triple.
SVS, hungry to make a mark in the dining world, discussed with Applebee’s the potential benefits this capability might bring to its franchise owners. Applebee’s responded not only by hiring SVS (or in today’s language, “taking them on as a partner”), but by fully embracing gift card programs as a way to build revenue. The two companies worked side by side, with Applebee’s willing to help define requirements and SVS able to offer a complete and highly flexible solution.
With Applebee’s guidance and involvement, SVS developed innovations in gift cards that no one else had at that time. Today, gift cards are not a minor program in a back corner of Applebee’s business—they have become an integral part of the Applebee’s marketing plan. With the partnership of SVS, Applebee’s has been aggressive and innovative in creating ways to leverage gift cards as a highly efficient tool for driving traffic and an equally effective tool for increasing check averages.
Two Innovations That Arose From the Partnership
By innovating processes with SVS in a way that best served its franchised model, Applebee’s was able to leverage gift cards to increase customer visits and the amount spent per visit, and to establish a customer acquisition and retention tool.
One of the first things the partnership brought to life was the development of an inventory management system for the stores. With the increasing volume of gift cards they were selling, Applebee’s needed a reliable method for keeping cards in stock. They had been reliant on restaurant managers to perform that task. They approached SVS with the challenge of warehousing and defining a solution to either auto-ship based on established inventory triggers at the restaurant level, and/or to offer the option for restaurants to order cards on demand. In response, SVS built a unique card inventory management and supply system that starts with warehousing inventory and incorporates easy access for franchisees to set up their own order, delivery, and payment solution.
In the end, SVS made it easier for individual Applebee’s restaurants to manage their gift card inventory. With this system, restaurant managers don’t have to use personnel hours tracking gift card inventory. As shipments arrive, the standard operating procedure for merchandising takes over ensuring that the proper amount of cards and the appropriate designs for seasonal or promotional sales are available.
A second innovation that Applebee’s and SVS jointly pioneered was a system of funds settlement between franchised locations. This allows cards purchased in one restaurant and redeemed in another to reconcile funds. SVS, with Applebee’s guidance, developed the system which at that time was unique to Applebee’s. This innovation, new to the industry at that time, has resulted in what is today a core competency for SVS.
The mechanism that makes this system work can be compared to how banks relate to the Fed—they have to exchange money every day, for money they accepted from each other. It’s roughly the same in franchisee funds settlement—it’s an exchange to allow franchise owners to true up their funds on a monthly basis. Corporate holds the money; SVS determines where it goes, and who gets how much, acting as the technology or the money engine behind the “Fed”—Applebee’s, in this case.
How Gift Card Based Promotions Campaigns Drove Traffic and Spend
A few years after the gift card program rolled out, Applebee’s started working with SVS beyond inventory management and settlements, creating gift card-based marketing programs. Applebee’s had already been trying out some of these initiatives with paper certificates, but Applebee’s posed the question: could we create a promotion that could increase gift card sales and drive incremental visits to the restaurants? The bonus card program was born and has grown in popularity across retail and restaurants in recent years.
More recently, SVS and Applebee’s have used their promotional platform to address other challenges: leveraging gift cards and bonus cards to drive traffic to a particular time of day, day of the week, or even to a specific menu item.
Through the in-depth reporting tool built by SVS, Applebee’s is able to measure success directly resulting from these programs, with the ability to track activations, redemptions, and through cross-referencing with its own data warehouse, Applebee’s can track the total spend when a gift card is the form of payment and compare that to other forms of payment to determine incrementality of the program. Perhaps the best illustration of the program’s success is in the continued growth in gift card sales, and in the increase in proportion of sales that include a gift card. For Applebee’s, gift cards have truly gone from a passive payment option to an active marketing tool that drives customer behavior.
Where the Partners Are Now
Applebee’s became such a proponent of SVS that when DineEquity, formerly known as IHOP, acquired Applebee’s in 2007, they also moved that business over onto SVS. SVS started processing gift cards for IHOP in 2013.
The gift card industry has certainly evolved since the beginning of the Applebee’s/SVS partnership. More competitors exist for both parties, and new technologies and consumer uses pop up seemingly daily. But it has been this partnership driving much of the change, perhaps leading an industry with their innovation.
Both groups continue the commitment to lead the industry with new products and solutions, continuing what has been a creative, profitable, and enduring partnership.
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