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Best Practices for Gift Cards

April 06, 2015 Industry News
Industry News

With Mother's Day, Father's Day, and scores of students graduating in May and June, the coming two months make up the second-highest period for gift card sales, following the holidays. 

Experts says restaurants should not eschew or ignore the value of a strong gift card program, especially as data suggest consumers typically overspend $23 beyond the gift card value.

Between Nov. 28 and Jan. 9, First Data, a provider of merchant service gift card programs, hired an outside agency to send send mystery shoppers into 658 stores, including casual-dining restaurants. They found that not every casual eatery has a strong gift card program in place, whether due to lack of visibility, a void of information about the program, or poor signage.  

FSR spoke with Euphemia Erikson, director of product marketing, and Mark Putman, senior vice president of prepaid solutions, at First Data to learn the best practices for gift card programs, common mistakes casual-dining restaurants are making, and the impact a strong gift card program can have on revenues.

FSR: In a nutshell, what are some of the best practices for casual-dining restaurants when it comes to gift card strategy?

Erikson: It comes down to having a great assortment, telling your customers that you have a gift card program, and integration if you've got cards that are online or in store—leveraging that omni-channel approach. 

FSR: What are some common mistakes restaurants make with gift card programs?

Erikson: You need to have the gift cards in the store. Sometimes restaurants don't have displays with the gift cards, or the displays aren't full. We suggest you have a couple of different designs, so that you're reaching different clients and different spending occasions.

Promoting the gift card program to customers while they're in the restaurant can be key. Also, if you have a website, make sure you're promoting it on the website or with the right signage.

Putman: You also have a customer satisfaction angle. Say you have customers giving you a bad service review; with gift cards, you very much have an opportunity to reach out to the customer with a $5 gift card. It's a different way of engagement and one we're seeing take off right now.

Erikson: Similarly, if you're on social media or Yelp and you get a customer who writes a lovely review, you can extend a gift card to reward that customer. He or she clearly loves your business, and will probably promote you more.

FSR: Within a casual-dining restaurant, where should operators place gift cards or signage?

Erikson: Even if you're on a busy street, you have an opportunity to work with the landlord on monument signage or signage outside. If you have great foot traffic, something on the sidewalk, especially during the holidays, is nice.

Indoors, you can use front door stickers and promote the cards on your menu. And use your employees, give them pins—they are your best sales people. You can incentivize them to sell gift cards, and you can incentivize customers with free food items or discounts if they buy gift cards.

Finally, the check is another opportunity. Mention the program at the bottom of the check or receipt.

If you have a website, make ensure you have a clean, easy user experience so consumers can come online and buy your card easily.

FSR: How important is inventory level in a gift card display?

Erikson: It's very important. Make sure you have choices for a broad range of consumers. You want cards that fit their needs or who they're buying for, as it may be for a birthday, a holiday, or a thank you. If they don't find what they want, they may walk away, and with every gift card, we've found there's about $23 in additional income the retailer will get over and above that card value.

Most gift card consumers also come back about three times. Nothing else in a restaurant is going to be as valuable.

FSR: For a small business that's never had a gift card program, how do you recommend it start one?

Erikson: It'd be great to start with one card that has a design and logo for your business. Ultimately, we commend four or five cards: one for the holiday season, a thank you, a birthday, one with your logo, and one that speaks to your market, such as a favorite sports team or university. 

It might not be a plastic card you start with; it might be virtual if your clientele is a certain demographic.

Putnam: We look at virtual as the next generation of gift cards, especially for the small merchant. Distribution is easier; you can import the card into an app, and you can even have a piece of cardboard you sell as a gift card, and let people import the card and its value into an app using a QR code. 

With the ability to manage the card electronically, it solves the biggest problem in the industry. Most people leave the gift cards at home; the average American has eight gift cards at home.

FSR: What sort of attributes should gift cards have? What about a gift card's design makes it stand out?

Erikson: We did a gift card attribute study with consumers earlier this year. An attribute can be a cut-out design or sparkles—any sort of tweak in the design. A great example that somebody gave me is that least year, a casual-dining restaurant did a gift card that was a reindeer. It came in pieces, and kids could assemble the reindeer while in the restaurant. It became an interactive experience. I'm seeing some gift cards this year that are coming out as ornaments.

FSR: How can gift cards encourage foot traffic?

Erikson: If I'm in casual dining and I know Tuesday is a slow day, I can use gift cards for incentives. Maybe they've uploaded and registered that gift card in your app, and you send them a message saying they can come in this afternoon with their gift card and have 10 percent off. It's such a great tool that you can use to grow your sales on every ticket.

FSR: What's one final thought on gift cards you want to leave restaurant owners with?

Erikson: The most important thing to know is that people who buy gift cards are your best clients. Someone knows it's a loved one's favorite store. So, when a consumer comes in to buy a gift card or to redeem one, just alert everyone who's working in that restaurant. 

By selling a gift card, you are getting that lift of approximately $23 over and above the original value of that gift card. It's like getting a second sale.

By Sonya Chudgar

News and information presented in this release has not been corroborated by FSR, Food News Media, or Journalistic, Inc.