With gift card spend projected to reach $267.3 billion by 2028, it’s clear that gift cards  are an influential force in the market. And the rise of digital gift cards, a trend that continues to gain momentum, is opening up new avenues to engage younger generations. During a recent PaymentsJournal podcast, Blackhawk Network’s (BHN) Sarah Kositzke, Director of Research and Hilary Spidaliere, Director of Product Marketing, as well as Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, explored, analyzed, and amplified the insights from this year’s Benchmark Report: 2024 Digital Gift Card Leaders, conducted by NAPCO research in partnership with BHN.

This market-leading report on the gift card industry, which evaluated the digital gift card programs of 100 U.S. merchants, identifies best practices and opportunities for how retailers can optimize their own gift card programs.   Gift Card Industry Trends During the 2023 holiday season, the average individual received around three gift cards, totaling roughly $160 in value.

However, when recipients made their purchases, they spent an average of $78 more than the card’s value1. Leveraging a gift card to purchase a bigger-ticket item is commonplace and one of the reasons why gift cards are so valuable to retailers – driving that additional overspend and store visits. “About a third of people said their favorite gift was a gift card,” Kositzke said. “Most people are still getting single-branded cards, like Starbucks or Amazon, which account for 75% of gift card buys.

The Visa and Mastercard options and multi-branded cards are picking up steam though1.” According to BHN, 77% of purchases were physical cards, even when the transactions occurred online. Physical cards are considered more personal, especially when there’s an option to customize the card. Despite the increasing popularity of online shopping, most gift card transactions still happen in-store, making up 85% of purchases1.

But that is likely to change. “Looking a little further out to 2030, digital cards are going to continue to gain ground,” Hirschfield said. “By the end of the decade, it’s likely to be a 50/50 split. That’s driven by Gen Z and Millennials, who are also significantly more likely to extend their purchases beyond the gifted amount.

Digital options are going to be a great way to reach those generations.” 2024 Gift Card Benchmark Report Criteria NAPCO Research, in partnership with BHN, examined the gift card programs of 100 U.S. merchants with a specific emphasis on the e-commerce gift card experience. NAPCO developed 130 criteria, across to four major categories. “First and foremost is discoverability,” Spidaliere said.

“How easy is it to find that brand’s gift card program? Next, they’re looking at personalization. Can I pick my own gift card design, or add a personal message? Third, they’re evaluating the checkout experience for efficiency and payment flexibility. Finally, they’re evaluating the recipient experience.

Does the card feel like a gift? Is it easy to redeem?” The end goal was to fully evaluate the purchase and recipient experience for each of the merchants across all platforms. Speaking to the assessors who reviewed each gift card program, “They’re like a secret shopper,” Spidaliere said. “During the process, they capture hundreds of screenshots and use them to score each of the merchants across the established criteria. Then they crunch the numbers and not only come up with the rankings list, they also identify industry trends and best practices.” Areas of Opportunity One of the main takeaways from the study is there’s plenty of room for improvement—even for the companies that ranked in the top ten. “Everybody across the board has something that can be fine-tuned,” Kositkze said.

“These are opportunities to drive additional revenue. It could be the placement of cards  or making the most of the fact that 9 out of 10 people are buying other gifts are the same time they’re buying gift cards. That’s a perfect chance to build loyalty1.” The report found several common denominators among the bottom 20 companies.

For one, they were less likely to sell cards across all their devices and channels. Lower-ranked companies were also less likely to support gift card purchases in their app, which is a missed opportunity with younger users especially. But that wasn’t the only issue. “The most concerning thing with the bottom 20, in some cases the assessors just were not able to fulfill the purchase,” Kositzke said.

“They tried several times, probably more times than a customer would, and it doesn’t go through. ” Issues in the gift card experience can be costly because it can be a customers’ first impression of a company. “A gift card often kicks off a customer’s relationship with your brand,” Hirschfield said. “It’s a challenging, but also an amazing opportunity, because many times the gift card leads to additional purchases of both your material items and more gift cards.” Best Practices of Top Performers One of the key differentiators for the top performers in the benchmark report was a dedicated gifting section on their website and app. “All the top-performing brands had a clear path to gift cards,” Spidaliere said.

“It was clear what customers needed to do, how to personalize, all the ways they could buy the card. The best-performing brands promoted their cards on multiple places on their site, and marketed their program outside of the website and app.” Top-tier gift programs used social media and emails to attract new customers. Those merchants  also found innovative ways to offer personalization, like giving buyers the ability to upload a photo or video to accompany the card.

Top-ranked programs also connected their gift card programs to their loyalty programs to incentivize gift card purchases. “The recommendation here is to get creative,” Spidaliere said. “Align your promotions to what’s most important to your brand. The top performers had recipient experiences that were really thoughtful and considered both the recipient and the buyer.

What’s meaningful to your customers? For instance, you could consider a partnership with other brands that are important to your customers and produce a co-branded promotion that leverages both audiences.” Key Takeaways The 2024 evaluation offers clear takeaways merchants can use to identify untapped opportunities for their gift card program – Companies should continuously strive to raise awareness of their program, prioritize creating an optimal customer experience with a mobile-first approach, and consider offering options for gift card personalization. Integrating loyalty programs with gift card programs is another best practice. Companies should explore opportunities to sell and redeem gift cards across all customer touchpoints.  A great gift card program also requires the ability to detect and prevent fraud `, often requiring a partnership with a third-party expert. Finally, functionality should be the top priority.

Companies should regularly evaluate their gift card programs through the eyes of the customer to ensure seamless processes. This approach not only ensures efficiency but also helps identify opportunities for improvement and ways to differentiate the program. Company websites should include site search keywords that make it easier for customers to find gift cards. “Gift cards pay off,” Hirschfield said. “It’s an easy and low-cost way to turn someone from a stranger to your business into not only a loyal consumer, but an advocate for your brand.” Source: 1.

BHN EQ Global Spring Gifting Study, n=2,019 US consumers 18+, Feb 2024 Learn more about  this year’s Benchmark Report: 2024 Digital Gift Card Leaders, conducted by NAPCO Research in partnership with BHN. Let’s Start a Conversation! Fill out this form to talk to BHN: Your form has been submitted! A BHN team member will be in contact with you to learn more about your audience, objectives and needs. 0 SHARES 0 VIEWS Share on FacebookShare on TwitterShare on LinkedIn

By paymentsjournal
May 29, 2024 00:00
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