Paytronix Provides Insight into Gift Card Application

Whether it’s for a promotion, a last-second holiday gift, or just a desire to consume more from one brand, people have often seen value in buying gift cards from a variety of different businesses. But what is a consumer looking for in a gift card? And how can businesses better target these consumers?
 
Paytronix, a loyalty program provider that specializes in gift card loyalty, may have the long-awaited answers to these vital questions. Recently, it published its annual Gift Card Report, which offers insight into customer behavior regarding gift card utilization. One notable fact that the report found was that same-store gift card sales were relatively flat between 2016 and 2017.
 
In addition, the report identified an uptick in fraudulent attempts to discover gift card balances, challenges with encryption at the point of sale due to new EMV standards, and brands moving to more robust platforms for payment processing. The report also says that consumers are demanding that gift funds be usable within online ordering and delivery flows, via mobile wallets, and through branded apps.
 
How should brands counter flat sales, attempts at fraud, and new consumer demands? One thing Paytronix recommends is offering promotions for buying an increased number of a gift cards or for spending more on individual gift cards. In addition, restaurants have tried to counter flat sales by offering third-party retail sales, virtual gift cards, and other channels. The biggest sales increases Paytronix has seen, however, are with brands that focus on promotions, channel sales, and operational improvements.
 
“Generally, a coffee place might do this if they are trying to sell packs of cards,” says Andrew Robbins, President of Paytronix. “But, usually we see it more with casual dining. And what they end up getting is an increase in the average gift. Someone that was buying two $25 gift cards might now buy four. We definitely have seen year over year when people do this that the average amount of gift cards goes up and the total amount sold goes up.”
 
Paytronix also recommends that brands focus on gift card holiday sales, or sales that occur between November 1st and December 24th. Holiday gift card sales typically account for nearly 50 percent of all gift card sales for restaurants. By planning for holiday gift card sales in advance and securing materials before September, merchants can avoid higher product costs, rush fees, and concern about missing prime selling days.
 
But what happens when customers are dissatisfied with the restaurant experience? For this, Robbins recommends switching to a comp card system. “If [a customer] had a bad meal, most restaurants would comp the menu item as if you were never there,” he says. “They strike it from the check, and it won’t show up for revenue or sales tax. The ideal thing would be what if you could give that entrée to them into the future to get them to come back and make that experience better? We can do that, and give restaurants an extra visit from the customer, extra revenue, and a chance to change that customer’s experience.”
 
Michelle Tempstra, Paytronix’s Head of Marketing, adds, “Comp cards are great because you can have a usage timeframe and an expiration date. You cannot do that on a gift card.”
 
Robbins and Tempstra also recommend that restaurants look closely at taxes when building a gift or comp card program for customers. “Taxes can hurt,” Robbins says. “We were doing a gift card promotion for a steakhouse that charged around $50 for an entrée and wanted to give out $50 gift cards. But, with taxes that goes down to about $43 and they felt kind of tacky giving out a $43 card. But when we changed that to a free meal, that didn’t sound tacky, it sounded grateful. It was perceived to be better than a gift card by the public, and it saved seven bucks. There was a higher redemption rate with this, there was lower cost, and a higher perceived value. The whole thing was brilliant, and it made them about $400,000.”
 
Through its various studies on customer loyalty through gift card and comp card applications, Paytronix has provided valuable insight for companies looking to either fully maximize their program or to create one. No one knows what the future holds for gift card applications, but with these insights, companies can be better prepared for whatever lies ahead. 
 

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