Closed Loop Predictions 2012  

    Gift Cards Still the Sweet Spot

    At last count, there were 16 categories of closed loop prepaid cards, including transit, health care and government. Of all the important functions that these cards provide, it is gifting that is most popular.? The in-store gift card continues to be the darling of this market, and the e-gift card is gaining in acceptance.  Designed for a specific store chain or location, the closed loop gift card serves as currency and a mini-billboard for the brand; in effect, the gift card is a multi-functional promotions and sales tool. ?

    ?Consumer protection reform, embodied in Dodd-Frank, has buoyed the gift card market further. New regulations eliminated dormancy fees and extended expiration dates, among other changes. Essentially, the climate for gift cards has never been cleaner.?

    ?Growth has also been driven by the recession, because in a tight economy consumers have a more practical mindset. The National Retail Federation (NFR) recently reported that practicality wins as the most likely reason shoppers will buy gift cards. NRF’s 2011 Holiday Consumer Intentions and Actions survey, conducted by BIGresearch, found that eight in 10 shoppers will give gift cards this year. ?

    According to First Data’s 2011 Prepaid Consumer Insights Study, the average value of closed loop cards grew significantly in 2011, increasing by more than 70 percent compared to 2010, with the total average amount spent on closed loop gift cards increasing to $291, from $161 last year.  ?

    ?Michael Hursta, vice president and category manager, Prepaid Solutions, First Data Corporation, said, “We expect this upward trend to continue in 2012 and beyond.”? We asked a number of prepaid experts for their prognosis about gift cards, and closed loop prepaid in general, and here’s what they forecast:?

    Lori Breitzke, president, E&S Consulting LLC, said that closed loop will continue to satisfy consumers with gifts that go directly to the recipient via email or social media. E-gifting will become more popular. Retailers see that e-gift cards make good business sense, as it expands their reach and allows for additional ways to build their brand. ?

    Breitzke advises prepaid providers to think about and emphasize brand building through e-gifting. To enhance e-gifting even further, consumers will be able to personalize the gift with a card or photo, making for a richer experience. Platform developers should keep the process simple. Complicated gifting processes or too many steps before check out will dampen the experience and stifle growth.?

    Payroll cards are already in use for the top retailers and restaurants in the country. Further growth is likely to take place among Tier 2 and Tier 3 merchants where they need a one-stop shop provider and easy-to-implement solutions for less than optimal returns. Providers, however, should not pass up these opportunities. They can make it up in volume. Or said another way, a turnkey solution can reap benefits and rewards for savvy providers. ?

    Mark Johnson, president and CEO of Loyalty 360, provided insights on how loyalty is changing the way people spend: Companies that have effective loyalty and engagement strategies are able to create an engagement with their customers that is long lasting, impactful and will weather the temporal setbacks of challenging short term customer interactions. We know that the customer experience is one of the “stools” of loyalty. Engagement and customer satisfaction (other short term metrics) are important tactics needed to get to long term loyalty…

     

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