Leveraging Gift Cards

Neiman Marcus introduced the first gift card using a payments infrastructure in late 1994,[8] though Blockbuster Entertainment was the first company to do so on a wide scale,[9] test-marketing them in 1995 and launching them around the country the next year. In the beginning, the Blockbuster gift card replaced gift certificates that were being counterfeited with recently introduced color copiers and color printers.

Neiman Marcus and Blockbuster were later followed by the Mobil gas card, which initially offered prepaid phone value provided by MCI. Kmart was next with the introduction of the Kmart Cash Card, which in the early generations provided prepaid phone time with AT&T. (Wikipedia)

The rest is history.

Gift cards can be a great way to provide a lot of value for very little work on your Shopify store. Here are some of the benefits of gift cards:

Boosting Revenue with New Customers:

Gift cards, obviously, can be a great ‘gift’. Adding gift cards to your Shopify store is a great option to encourage current customers to refer family and friends. As a customer, if they believe someone else would like your brand but don’t know what specific product they may like, a gift card is a great option. But gift card offers are more powerful than you would think…

72% of customers who use a gift card, will spend more than the gift card value. (cardsource.com). 

The reason? Most consumers with gift cards will view a more expensive item as “cheaper” given that the true cost to them (Price - Gift Card Value) is substantially less. This leads to a lot of gift card customers spending more than they would have spent without the gift card, increasing AOV of these customers. 

Breakage Revenue:

Gift cards can also be a great way to increase profit - pure profit. More than 51% of Americans leave value on gift cards. (bankrate.com). No matter how small your Shopify store is, this provides the opportunity for you to gain a significant amount of breakage revenue.

For example, Starbucks had over $130,000,000 in breakage revenue in 2020. Not bad. 

 

There are redemption laws that vary by state for gift cards, so be sure to do your research. Some information can be found here.

Smarter Promotions:

When running promotions, is it better to give away discounts or gift cards? How about with referrals? Would you rather provide $10 off your next order? Or send a $10 gift card? 

Well, the benefit of running promotions via gift cards is that you have multiple factors working in your favor:

1. Secured Customer - Users have to use the gift card on your Shopify store
2. Low redemption rate - As mentioned above, most will not fully redeem
3. Higher perceived value - The customer will view the gift card as more valuable as it seems like a gift rather than another discount
4. Higher AOV, as mentioned above, 72% of customers will spend more than the gift card amount
5. Sharing - You are reducing the possibility of a coupon code being shared

Promotions via gift cards becomes even more powerful when you combine a gift card with events, such as birthdays or customer anniversaries. Gift cards can help increase brand loyalty while also increased CLV and AOV, helping to grow your Shopify.  

Now go and grow.

J