The Gift of Choice

There's an old adage that states, "You can't please all of the people all of the time, only some of the people some of the time." While these words are clever and in many ways true, it's safe to assume the original source was unaware of the eventual advent of gift certificates or gift cards--which essentially do allow you to please anyone at any time.

Gift cards and gift certificates differ from prepaid cards or debit cards in that they can only be redeemed for merchandise, travel or services. They have no cash value. The corner deli won't recognize them as cash and wouldn't be able to process them even if the proprietor was willing. Debit cards, however, can be used almost anywhere credit cards are accepted, and in some cases, can be used to obtain cash.

It's an important distinction, and one that gift card and gift certificate providers, whether they're retailers or resellers, have worked hard to promote. Incentive managers have to take that difference into consideration when planning a program. "That's been one of the hurdles that we've tried to overcome," says Susan Gray, director of merchant operations for the Gift Certificate Center (a Hallmark Company). "People are initially quick to say that it's like cash. It is, and it isn't. You can't take a gift card and strictly cash it in for cash. It is a means for giving merchandise from a specific retailer."

Pete Mitchell at Online-GiftCertificates (O-GC) echoes that thought. "The argument that's being made is that the gift certificates and gift cards are essentially cash. My view is it's value, not cash. Money is money--it goes into your wallet next to the stuff you've taken out at the ATM, and there comes a moment when you've forgotten which one was given to you by the ATM and which one was given to you by your company. But that Best Buy gift card goes into your wallet and occupies a place of honor. That difference is very distinctive and that's what end-users are telling us by their willingness and their enthusiasm for buying gift cards. They're saying it's not cash, it's a ticket that gets you into an amusement park to look what's inside, and you get to decide as a recipient what rides to ride."

It's a long-standing truism in the incentive industry that cash gifts make poor awards since recipients tend to look at the reward as part of their overall compensation package, rather than as a one-time, earned incentive item. When the cash doesn't arrive at the same time the following year, the result is an unhappy employee.

The Gift Certificate FACTS report (Gift Certificate FACTS report) showed that 45 percent of those polled felt gift certificates were more effective than cash, while only 11 percent thought of cash as more effective. "In addition to the perceived value and acceptance from the recipients," notes Jill Ambrose, vice president of marketing at GiftCertificates.com, "from a cash perspective, if you were to survey a population base and ask that population to recall what they used their rewards for, the ones who purchased with cash cannot recall at the same level what they purchased as the ones who used a gift card. So if you're trying to connect a behavior with a specific result and reward them for that--and they can't even remember what the reward was--I don't think you're actually associating that behavior back to the result that you're looking for. One of the challenges that many corporations have is ensuring that the program participants are conducting themselves in a way that the organization wants them to and yet feeling really good about it. How can they do that if they can't remember how they were rewarded in the end?"

Personalized, Not Inpersonal
In years past, gift cards battled the stigma of being impersonal, and employers giving them risked being considered expeditious rather than thoughtful. But that sentiment is largely in the past as award winners see the benefits of being able to pick their own awards from a larger, often brand-named selection of goods. Incentive managers also save time with gift cards and certificates since they take the guesswork out of finding great motivational products for their best employees. "Consumers are more receptive not only to receiving gift cards but to purchasing them as well," says Babette Halder, Sears' marketing program consultant, gift cards. "The impersonal gift stigma is gone and they are the gift of choice. Employees welcome gift cards now. Instead of hats, T-shirts, etc., they are able to choose their own reward to suit their needs and givers enjoy the convenience and time savings," she adds.

As an award, the gift card has revolutionized incentive plans by taking them to a new level of customization. Members of a large group can each be given a card to a retail store with a large and varied inventory, such as Sears or Target. Smaller groups can get cards for specialized stores including Best Buy, Home Depot, Blockbuster or Barnes & Noble. For individuals, the sky's the limit. There's no end to the number of cards available to incentive managers looking to customize a gift to an individual. "Gift cards continue to increase in popularity and are being used for all kinds of incentive programs," Gray says. "The key thing is the flexibility and the choice that gift cards provide. Gift cards and gift certificates really give the program coordinator, and most importantly, the end recipient, that ultimate choice in selecting what merchandise or product they really want."

The Recepient POV
Since few people look a gift horse in the mouth, it's not surprising that, from the recipient's point of view, gift cards are a great motivator. But it seems there's more to it than just thankfulness for any award, be it cash or card. "One of the most important trends in gift cards and gift certificates is probably that it is the fastest-growing category in non-cash compensation vehicles," says Ambrose. "In addition to it being the fastest-growing category, it's growing mostly in terms of its popularity with the recipient because of the fact that once you receive a gift certificate, you have a choice of what product you actually redeem it for. That freedom of choice is what separates gift cards from pure merchandise or travel."

Merchandise and travel are, of course, the most frequently used incentive awards. According to an Incentive Federation study released in May, merchandise makes up 52 percent of non-cash incentives, followed by travel (25 percent) and recognition awards (23 percent). As for cash, the study showed that four out of five respondents agreed that travel and merchandise are remembered longer than cash. Given this knowledge, the personal choice factor can't be understated. Giving people the freedom to choose what they want to buy or where they'd like to go extends the benefit of the reward by personalizing it. In fact, GCC's Gray points out an added benefit: "With merchandise gift cards you not only can pair them with large national retail stores and brands, you also get the benefit of all the various brands that they may carry in their stores. So you really kind of get a double reinforcement and reward from that employer."

Gray also notes that the employer or incentive manager benefits from the recipient's excitement because it extends to the water cooler. "People are much more willing to talk about what they got in terms of a gift card versus cash. Cash is a little more difficult to talk about, but you can say, 'I got a gift card to Best Buy, and I got a big screen TV with it.' People are more willing to talk about it when it's given in the format of a gift card versus cash," she says. "The point is that you're able to hype that, and you get more of a bang and more results out of your program because people want to talk about it, and then others get excited about it and they want to hype it too."

Trends for 2006
A TowerGroup study predicts that by 2006 the gift card and gift certificate market will grow to $78 billion, 18 percent higher than in 2005. With this growth will come change as more incentive companies try to get a piece of the pie. "More and more, the various incentive providers are looking for ways to build their market share and build their presence in the market by working with strategic partnerships," says Gray. "That may be, if you're a retailer, working with a reseller; if you're a reseller like us, you're working with point-tracking programs. More and more clients want a full-service program. They want you to help them plan their program, help them administer it, help them track it and then help them fulfill it. The demands of the corporations who are using incentives are becoming much greater than they've been in the past."

Gray also notes that gift cards have started to allow planners to customize the cards to their client's programs. For instance, they allow them to select retailers that reflect their themes. "You can be really creative on packaging and such," she says. "If you've got a specific theme that you're doing with your program, it's pretty easy to incorporate that into the packaging or the presentation of a gift card or a gift certificate. You can pick a brand card that's consistent with your theme. One of the programs one of our clients is doing is geared towards 'tuning in' and 'getting in tune' so they chose to put a variety of music and DVD merchants together."

Ambrose sees better days ahead for end recipients, too. "One of the things that we see in the marketplace is that many of these cards over time have dormancy fees associated with them," she says. "If the cards are not active for a period of time, certain fees are either allocated or a percentage of the value is decreased. And that is a trend that we believe is important to reverse. If you're trying to motivate some type of behavior, the last thing you want to see is a card that you issue for $100 get deducted to the point that by the time [the recipient] is really ready to make a purchase, there's no available value left on that card. Legislation is starting to impact that, and although there's not anything global at this point, I do see that there will be a movement over time to protect the participants of these programs and consumers in general with the elimination of expiration."

Cards in Play
Gift cards are clearly being embraced by the industry, and more importantly, the end recipients. With a great combination of flexibility, speed of delivery and choice, it's clear they're here to stay and their effect on the incentive industry, while still unmeasured, is no longer in doubt. Bill Cosby once said, "I don't know the key to success, but the key to failure is trying to please everybody." Obviously, he's another person who failed to see the oncoming cards.


Certified to Please
Two resellers are making a name for themselves in the gift certificate market.

The Gift Certificate Center and Giftcertificates.com provide incentive managers with access to an extensive array of retailers through the use of one certificate.

The Gift Certificate Center,a Hallmark Company, takes the choice and flexibility of retail cards to the next level by increasing the number of places a single reward can be used. Not to be confused with debit cards, certificates issued by the Gift Certificate Center cannot be redeemed for cash but can be redeemed at more than 400 national and regional retailers' stores.

Giftcertificates.com (www.giftcertificatecenter.com), a Hallmark Company, takes the choice and flexibility of retail cards to the next level by increasing the number of places a single reward can be used. Not to be confused with debit cards, certificates issued by the Gift Certificate Center cannot be redeemed for cash but can be redeemed at more than 400 national and regional retailers' stores.

Giftcertificates.com also represents hundreds of retailers, and the company's Super Certificates allow recipients to break up the certificate and use portions at different retailers. For instance, a $100 certificate can be used to buy dinner at one retailer and a movie at another.

Both companies offer a full spectrum of incentive solutions for corporations, from the initial planning of the program, to administration and communication and finally fulfillment through the reward component, which is when the employee is presented with the certificate.

In addition to the increased choice of reward, employees and incentive managers will be surprised at the speed with which these certificates can be issued. Using the Web, an incentive manager can fulfill a reward and send it to the winner in a matter of minutes.