September isn’t too early to start planning your gift card strategy. Gift card sales generally start picking up in September and October and peak around the December holidays, so it’s critical to have your tools and strategies in place before the fourth quarter starts.
“Almost half of gift card sales from Square merchants happen between October and December since these months hold major holidays like Hanukkah, Kwanzaa, Christmas, New Year’s Eve, and others,” says Saumil Mehta, GM of Square’s Point of Sale Solutions. “Restaurants can expect gift card sales to start increasing at the beginning of October with a big spike right before or even on Christmas for late shoppers.” Also, don’t discount other opportunities for gift card sales, such as birthdays, graduations, Valentine’s Day, Father’s Day, and Mother’s Day.
Here’s how to rock your pizzeria’s gift card program this holiday season, and all year long.
Yes, You Need a Gift Card Program
Gift cards are a low-cost, high-return marketing tool. According to a National Restaurant Association survey, 24 percent of card recipients would use them as soon as possible; 38 percent would use them within a few weeks; and 38 percent said they would save them for a special occasion. As long as the card lingers in your customer’s wallet, they see your name and logo regularly and your pizzeria stays top of mind. This is free, recurring, targeted advertising.
“Customer relationships are vital to any business and having a gift card program can enable businesses to improve the customer experience,” adds Mehta. “You can use gift cards alongside a loyalty program, so you reward your top customers or offer gift cards to remedy an unhappy customer.”
In terms of promoting customer loyalty, gift cards are designed to guarantee a visit by a new or returning customer. They’re usually purchased by committed fans who plan to come again, or who want to share their passion for your pizza with friends and family. In both cases this is a huge compliment from your customer and indicates some serious loyalty.
You can reward this loyalty by offering a little extra to buyers. For example, sell a $50 card for $40, or throw in an extra $5 card with purchase. These small-denomination gift cards are very likely to plant the seed of a bigger purchase, whether they are used by your loyal customer or passed on. Either way, you are engaging your customer by demonstrating your appreciation.
Gift cards can boost sales. “One of the top benefits of implementing a gift card program is maximized sales,” says Mehta. “Historically, Square has found that 17 percent of transactions where a gift card is used result in overspend, creating an opportunity to drive incremental revenue and sales.” When the customer doesn’t spend over the value of the card, they might well spend under the value, encouraging them to return to use the remaining balance. At that time, you might see them overspend.
How to Prepare for Gift Card Season
If you are launching a new gift card program, Seshu Madabushi, founder and CEO of M-Konnect, proposes a series of questions to ask yourself. “What kind of gift cards do you want to have? Do you want a physical gift card or an electronic gift card? Can they be redeemed online or only in-store? Can your point-of-sale (POS) system accept physical gift cards? Can your online ordering system accept your digital cards?” He advocates starting early so you can make informed choices.
Mehta suggests that “the best way to prepare for gift card season is to make sure you’re offering both physical and e-gift cards so your customers have a choice. When stocking up on gift cards, restaurants should make sure they have different designs, such as a customized gift card with your business logo, birthday, or holiday, among other things.”
Familiarize yourself with the types of gift cards available: electronic vs. physical; bar code vs. magnetic strip; reloadable vs. not reloadable. Compatibility with your POS system should be your first priority. Consult with your provider to ensure a frictionless experience. It’s important that transactions go smoothly to maximize convenience for the customer.
“Every business should have a 360 view of their operations, and gift cards are included in this,” observes Mehta. “It’s important for restaurants to use integrated solutions that seamlessly work together. This removes the need to piece together hardware and software that don’t work together, and ultimately cause more work. By running your restaurant all through one centralized platform, businesses can better understand how they’re performing, areas of improvement and necessary changes to make.”
Promoting Your Gift Cards
Train your staff to engage in active but low-pressure promotion. Make it crystal clear in every available channel that you offer gift cards, including your menu, website, table tents, e-mail communications, social media campaigns, and at the register and hostess stand.
Incentivize your staff by rewarding top sellers or reward the whole staff when you hit a certain target of gift card sales. Present a gift card as a prize.
Madabushi at M-Konnect suggests partnering with local entities such as schools, PTAs, scout troops, youth organizations, sports teams, realtors, churches and apartment managers. Offer them bulk gift cards at a discount to provide as prizes, incentives and rewards to their members and customers.
New Opportunities with Gift Cards
“Surveys on gift-giving found that a large portion of Americans preferred to receive cash over other presents,” according to Mehta at Square. “Last year, gift cards continued to grow in popularity and there’s no sign of this trend slowing down.”
Digital cards are particularly attractive to the last-minute shopper, who can make a purchase in minutes on their phone and deliver it cross-country at lightning speed.
Madabushi predicts that this holiday season, customers will be eager to return to the experience of dining out with friends, “so that’s how I’m looking at gift card positioning for this year specifically.” However, public health circumstances might compel a spike in takeout this winter, so make sure your cards are versatile for both in-person and online use.
Square has noted increased self-use of gift cards. According to Mehta, “last year, around a third of gift cards purchased from Square merchants were for self-use as consumers now use gift cards as a budgeting tool to keep track of finances.”
Financial Implications of a Gift Card Program
Gift cards can boost cash flow for restaurants. Many establishments promoted gift cards heavily during the peak of the pandemic as a tool to cover immediate operating costs so they could endure the hardships of the shutdown.
It’s also worth noting that a certain number of gift cards are never redeemed. According to USBank.com, three to five percent of total gift card value goes unspent.
Madabushi from M-Konnect reminds operators that they need to make sure their accounting systems are prepared for the interval between sale and redemption. “From an accounting standpoint, if you are a publicly-traded company, it’s a kind of a debt which needs to show on your financial statements. But for most mom-and-pop restaurants, it doesn’t matter.” You may sell a thousand dollars in gift cards in December, and there’s no cost of goods sold until they’re redeemed, “so you need to be prepared from a financial standpoint as well.”
Annelise Kelly is a Portland, Oregon-based freelance writer.