Gift cards, traditionally a simple transaction tool, have seen a significant evolution over the years into a versatile instrument for consumer engagement and brand-building. With the integration of digital solutions, they have become more than just items of convenience; they represent a strategic avenue for merchants to enhance consumer interaction. The past decade-and-a-half has transformed gift cards from their basic, physical form into an omnichannel asset, vital to modern retail strategies.
Nearly two decades ago, the gift card market was limited to physical cards available only in physical stores. Unlike today, consumers had few purchasing options. Over time, the industry adapted, incorporating digital transformation and expanding purchase avenues across various platforms. This digital shift increased the accessibility of gift cards, moving beyond brick-and-mortar establishments and identifying them as a crucial tool for retailers.
Why are Merchants Investing in Gift Cards?
Gift cards offer merchants a cost-effective method to drive traffic both online and offline, making them a critical part of customer acquisition strategies. They allow consumers the flexibility to choose their preferred gifts, reducing the risk associated with selecting specific items. Besides acting as a financial transaction tool, they are increasingly pivotal in enhancing brand loyalty and personalization.
Do Gift Cards Enhance Consumer Engagement?
Yes, consumers now find higher convenience in using gift cards due to their integration into digital wallets such as Apple (NASDAQ:AAPL) Wallet and Google (NASDAQ:GOOGL) Wallet. This digital storage reduces the likeliness of unredeemed cards, addressing issues of unused cards forgotten in drawers. Merchants are also leveraging technology such as push notifications, encouraging higher redemption rates.
Mary Bailey, senior product manager for Bank of America’s gift card program, noted, “Our surveys say that 64% of our consumers would prefer a gift card as their reward.”
This preference indicates a clear synergy between gift cards and loyalty programs, offering a mutually beneficial situation for both consumers and merchants.
Moreover, internal surveys from Bank of America revealed that a substantial 96% of consumers tend to spend at least the value of the gift card when they receive one from a merchant.
“Merchants can set parameters on their own funded gift cards, setting activation and expiration dates, for instance,” Bailey added.
This strategy not only aids in customer satisfaction but also ensures steady foot traffic during less busy periods.
Gift cards are poised for international popularity, allowing for purchases in one country and redemption in another, thus expanding the merchant’s market beyond domestic boundaries. In essence, they create valuable touchpoints that strengthen customer and merchant relationships.
Gift cards continue to adapt to technological advancements, positioning themselves as a practical tool for enhancing consumer engagement. Through digital integration and strategic merchant practices, they create a win-win situation which fosters loyalty and encourages spending. This ongoing evolution is key to their sustained relevance in a rapidly changing market.
