A Growing Market
by Ray Clopton
What's Driving the Growth?
The vast majority of the national retailers are now using gift cards. To an ISO who has just
entered the gift card market, this might seem like bad news. On the contrary, the rapid adoption of gift cards by
large merchants has dramatically increased the size of the overall gift card market by driving gift card sales in
the small to medium-sized merchant market. Business owners in this segment of the market are now regularly exposed
to gift cards when buying or receiving gifts from family and friends. This has generated a great deal of interest
from small to medium-sized business owners who already seem to understand the basics of how gift cards can reduce
costs, increase gift sales and enhance corporate identity.
What Motivates the Merchants?
Most merchants see the value in automating their gift program: it eliminates paper processes
and makes it easier for customers to make gift purchases. However, much of the motivation for converting to gift
cards stems from a desire to use gift cards as a marketing tool. This is one of the main reasons selling gift cards
can be a very different if not refreshing experience for a salesperson who is accustomed to selling bankcard
processing. Even single-location merchants place a high value on being able to have their own gift card programs
and see it as way to help enhance their companys' image in customers' minds. The merchant's marketing person or
department often becomes the motivating force behind a decision to convert to gift cards.
Many new products and services in the bankcard industry have fallen by the wayside because the product was too complicated to sell. The rapid adoption of gift cards by major retailers is also helping clear the way for ISOs because most salespeople can easily articulate how gift cards are used and how they will benefit merchants who make the change.
A Pain in the POS
Assuming the rates are reasonable, it would seem that converting to gift cards would always be
an easy decision for any merchant. Unfortunately, the question of how best to add gift card support to the
merchant's point-of-sale system can complicate things. Merchants tend to insist on having a gift card solution
that integrates with bankcard processing equipment. Restaurants in particular can be a challenge because a large
percentage of restaurants - even small ones - have installed fully integrated touch-screen POS systems that are
used for credit card transactions.
After the Deal is Closed
There is one important rule to remember after a merchant has signed up for your gift card program: The amount of help the merchant will need to create a gift card design is inversely related to the size of the merchant's company. In other words, the deal isn't really closed until the merchant has submitted card graphics to you or your gift card processor and the little guys face some serious challenges in this area. This may be the 21st century, but some of the smaller merchants don't have their logo in electronic format yet, so the chances of the merchant creating a card design without outside help are, well, slim to none. The best response is to be prepared with a service-oriented solution that provides the merchant with clear guidelines for designing a card and the option of additional design assistance from you or your gift card processor.
Tying Gift and Loyalty Services Together
Customer loyalty and frequency programs are a natural extension of gift card services and these
types of programs can also provide your merchant with a valuable service. In fact, a significant number of merchants
choose to implement a loyalty program without gift cards. However, merchants should always be reminded that the
customer-tracking technology that you are offering is far less important than the merchant's commitment to ensuring
the success of the loyalty program with ongoing promotions and creative incentives that keep customers interested.
A failed loyalty program doesn't help the merchant or ISO.
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