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PRODUCTS AND IDEAS THAT INSPIRE PERFORMANCE

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Inside the IGCC
Gift Card Trends & The Incentive Gift Card Council

New developments in how businesses are employing gift cards as key elements in their consumer and employee incentive and reward programs have made the information provided by the Incentive Gift Card Council an indispensable resource for many organizations around the world.

The IGCC offers three major benefits, explained council President Jim Atten, who is also vice president of sales, North America, Shell Gift Card/IPG Card Services. "Education," he began. "We bring together experts who share information on the incentive gift card industry that is relevant to members' businesses. In fact, it's really relevant to everybody's business. It's great to have a lot of smart minds come together to say, 'How do I use this information to move my business forward?'"

Second is networking. Atten said the biggest business benefit of the networking events IGCC hosts is that you get to talk to your peers in an unstructured format. You can share success stories, pain points and resources.

Promotion is another benefit, Atten said. "The IGCC invests in great research in collaboration with the Incentive Research Foundation (IRF) and we share the research with our members to help them in their businesses. We're also in the development phase of a corporate outreach plan, in alignment with the IMA's strategic plan. We want to take our industry knowledge about the business benefits of incentive programs and the role of gift cards out to the customers who use our products and services. We want to help grow the incentive industry pie from $90 billion into something larger."

The IGCC, added Todd Tomlin, global head gift cards, Hotels.com., is the only trade organization in the United States that focuses solely on promoting gift cards as a viable mechanism for use in employee, loyalty and customer engagement incentive programs, along with the technology platforms, distributors and consulting agencies that support this B2B distribution channel for gift cards.

"The IGCC has been an important resource to me in my gift card sales role," explained Len Sadek, CPIM (Certified Professional of Incentive Management), director, gift card sales and marketing, Landry's Inc. "My membership provides a community of peers to share ideas with, discuss current trends in the industry, and advise on issues and opportunities I am seeing."

The IGCC member meetings, Sadek said, are a great opportunity to network with current and potential clients. "It has helped us secure incremental sales from reward-recognition providers, incentive houses and fulfillment companies. If we are looking for a new service provider for a specific area of our business, I can find those companies there as well."

The industry research updates are invaluable to the gift card business, Sadek continued. "They help us spot trends, provide information I can share with our management team, and it helps in our business planning. The IGCC is also a great resource for new people entering the business. I will be bringing one of our new team members to the next IGCC meeting."

Continuing Growth

The gift card industry has come a long way since those early days in the 1990s, when Blockbuster and Nieman Marcus began offering the first gift cards as incentives. The most recent survey, in 2017, by the Incentive Research Foundation resulted in these findings about the business, and help explain the surge in gift card growth:

  • A majority of U.S. businesses now choose gift cards as a reward tool for a number of key groups, such as sales, channel, employees and customers: 61 percent of large companies buy gift cards for an average of 2.4 different reward/recognition audiences; 69 percent of mid-size companies buy gift cards for an average of 2.8 different reward and recognition audiences.
  • Business investment in gift card rewards is growing: On average, the mid-size firms in the study spent $450,000 per year on gift cards across all programs, the largest firms are spending more than $1 million; 71 percent of mid-size and 52 percent of large companies say their B2B gift card spend is increasing.

When gift cards are included in incentive program catalogs, said Ira Ozer, CEO, president of Engagement Partners, Chappaqua, N.Y., "the majority of participants redeem for them, often 75 percent or more depending on the type of program, audience demographic, gift card brands and denominations offered."

They do so for several reasons, Ozer said, including:

  • Value: They understand the dollar value of them and what they can buy.
  • Choice: They know that they have thousands if not millions of choices.
  • Simplicity: They can redeem it now and then use it later whenever they want, and they don't have to browse through a catalog of merchandise and research the items available.

For program sponsors, the primary downside is that incentive industry research indicates that performance improvement best occurs when participants focus on tangible award they aspire to achieve, vs. cash or cash-denominated gift cards, Ozer said. "For incentive companies, the downside is that there is very little profit on gift cards and no value-added service provided by curating a special catalog for the participant audience. And neither benefits by the breakage of unspent gift cards.

Trends in E-Cards

Atten cites the growth in e-gifting as a major trend in the business, and Dennis Borst, a 27-year veteran in the gift card business, president of Patriot Marketing Group, and a charter member of the IGCC, concurs.

"E-cards changed the entire landscape, and anybody who cannot deliver a virtual card in a matter of hours directly into an e-mail box or a phone is behind the times," Borst said. "Because that is where the trend is."

When Borst started working with gift cards, delivery would be in seven to 10 days. Now, Borst said, "we are dropping them into e-mail boxes in a couple of hours. In this day and age, the way the world is, where everybody wants instant gratification, delivery time of a reward is important. That is the single biggest change in the gift card and reward business over the past five years."

Retailers and restaurants have figured out redemption from mobile wallets, and there is great adoption in that regard, Atten said. "As the workforce changes, the mobile payments technology continues to expand, and as incentive gift card providers we have to be able to provide that or we're going to lose share."

This is not to say that plastic is dead, Atten said. "It's still important and even more important in the incentive world because it is the brand ambassador and represents the reward for customer or employee behavior that your company is striving for."

Some major brands, particularly entertainment venues such as casinos, are finding creative ways to merge loyalty programs and gift cards. They host special events where members can earn a gift card to their favorite retail merchant by attending the casino event and swiping their loyalty card.

"As incentive and loyalty programs grow in size and sophistication," Atten said, "it becomes even more important to work with incentive and gift card providers who have the expertise and the best industry connections to all of the resources you'll need. This helps to optimize results and save money on program design and implementation."

"Security has become paramount," Atten noted. "The security required for handling millions of dollars of gift cards is important. IGCC members and their suppliers have great security controls and practices in place that you don't get when you buy your gift cards at the grocery store."

Instant is a major movement "we are experiencing in the gift card industry," said John Hornbogen, CPIM, IMA president, and vice president business development, RPG Card Services. "Consumers love to engage in loyalty programs. What consumers don't love to do is wait for their rewards. Digital e-gift cards provide a solution that allows you to deliver rewards in real time.

From a gift card supplier perspective, Sadek added, "we have seen a great deal of consolidation in the industry. Many of our clients are consolidating fulfillment of their physical and digital gift cards through companies that offer more specialized and automated solutions. I believe this provides our clients with increased efficiencies and the ability to focus on what they do best in the incentive and reward marketplace. In turn, it makes us become better suppliers, with a focus on our brands."

In a more competitive marketplace for employees, Sadek said, incentives are needed to help recruit and retain employees. Employers and employees are looking for instant gratification and the new digital delivery capabilities for gift cards fit this trend. "This includes user-friendly mobile gift cards that can be easily redeemed at our restaurants."

Gift card mainstay brands such as Amazon, Starbucks and fast-casual dining remain a trend, Tomlin said. However, a continued focus on wellness and experiences show travel, spa and fitness categories growing quickly. To meet the demand of this trend, incentive program buyers need both the everyday consumer gift card brands alongside the likes of Spafinder, Hotels.com and travel-related brands.

Demographics a Consideration

You can appeal to all generations in the workforce with careful selection of the gift card brands you choose to offer, Atten said. You might focus on more of the experiential with travel or dining for those who are highly mobile or have more time for leisure, while home improvement stores may be more appropriate for those who are the life stage where they are buying homes and starting families.

The beauty of a gift card program, he said, is that you can also find brands that transcend all generations. People of all ages like coffee and enjoy dining out or going to a movie.

Hornbogen agreed with Atten. "For sure, adapting is the key," he said. "Historically, consumers were always looking for bigger, better and faster. Today it is now bigger, better, faster and easier. People will always gravitate to do what is easiest."

An illustration of that, said Borst, "is that years ago, people would say, 'yeah, I was given a gift card and I was walking through a mall and saw something I wanted to buy, but the gift card was at home.' Well, if you drop the gift cards into their e-mail or smart phone it doesn't prohibit them from being used for an impulse buy. They have the gift card with them all the time because everybody travels with their phone."

This is true across all generations, Borst said. "The world has turned into 'I have to have it now' in every facet of life so why would it be any different in a reward situation?

"Here is where I've noticed a really big change," Borst continued. "Most of the credit card companies have loyalty and rewards programs. You charge something to the card, you earn points, the points accrue, you redeem points for rewards. In many cases, those rewards are gift cards. Those cards used to be plastic. But the evolution has taken place to where those credit card loyalty programs are buying virtual cards now. Because even their reward earners are demanding a quicker delivery of their reward. Sometimes these reward earners want to redeem while they are in a store."

"We have to be more technology-focused, Sadek insisted. "This current workforce is following the 'go mobile' trend of the general population. Landry's and our third-party gift card clients need to cater to the growth of these consumers. That means providing seamless and user-friendly mobile delivery and redemption. They want to be able to send their gift card from one mobile device to the other, check gift card balances on their device, and create fun delivery for their recipient."

Absolutely, Tomlin agreed. "Specific to travel, according to the '2018 Generations on the Move' study conducted by Expedia and The Center for Generational Kinetics, 65 percent of millennials are saving toward travel compared to 57 percent of other generations combined."

In total, Tomlin said, 74 percent of Americans prioritize experiences over products for things. Program managers need to ensure they have gift cards that meet the experience need, such as travel or dining out, as much as product-based, such as apparel and electronics.

Where Do We Go From Here?

Amazon, Target and Wal-Mart control the world, Borst said. If we are talking gift cards, family dining is a huge category. "What I am finding out is most of our customers, the big suppliers for the loyalty programs are getting more and more questions about our gift card uses outside of the United States. It is scary in some sense because if you are a specialty retailer—such as Foot Locker, Gap, Bass Pro shops, T.J. Maxx the specialty retailers—you wonder how you are going to be able to continue to grow when you are fighting against the Amazons of the world."

Choice, immediacy and convenience is what people want now, Borst said, which leads us back to e-gift cards.

Any discussion has to start with mobile, Hornbogen said. Mobile gift card platforms are great. They enable consumers the ability to buy, send and manage gift cards. Retailers like Starbucks, for example, give you the ability to safely store and manage your gift cards within their mobile applications. Companies like ApplePay and SamsungPay stores virtual versions of all your gift cards so you can easily access them at any time.

"Mobile and social media have to be key elements of getting the message out on our gift card program," Sadek added. "To effectively communicate our gift card offering and our brands, we have to think about the messaging to our Landry's Select Club members, as well as how we can bring it to life through social networking sites that our guests use."

Both mobile and social media have their place in incentive programs, but Tomlin does not believe they have overtaken physical gift cards or reached a point where the social media makes a meaningful difference. However, he said, while your program participants might not post about receiving a gift card, they may have posted an experience or product they purchased using a gift card that was received as part of an incentive.

Meanwhile, Ozer said, a new trend has emerged in which incentive companies and brands are developing their own proprietary gift card solutions. "For example," Ozer said, "CarltonOne Engagement has created new 'G-Codes' that are digital gift codes redeemable from a vast selection of award choices in hundreds of countries globally, Paramax has created codes that can be redeemed for merchandise from various pricing plateau selections, and Tumi and Maui Jim have created non-dollar-denominated gift cards that allow participants to pick their choice of brand-name gifts from a selection of specially selected items."



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