Gift Cards

Do I have this right?

• You buy me a $50 gift card from "Big Box Brand".
• I buy you a $50 gift card from "Big Box Brand".
• On Christmas Day, the tree is littered with mini-plastic-ads for "Big Box Brand".
  
• On the day after Christmas, gift cards are redeemed for merchandise sold at 70% off of full price ... whereas the customer, sans gift card, would have paid 40% off of full price just two weeks ago, 25% off of full price on Black Friday, and 15% off of full price on November 1.
• "Big Box Brand" gets a much-needed cash infusion, but takes huge inventory risk by not selling merchandise prior to Christmas, then not knowing how much merchandise will move in the days after Christmas --- and cannot record the sale until the customer redeems the gift card.
  

If we, as business leaders, were to invent commerce from scratch, would we draw it up this way?

Gift Cards

Gift Cards are the wild card of Christmas retailing.

Consumers love these little plastic wonders, and for good reason. No longer do you have to receive a scarf from Aunt Priscilla for Christmas.

But for multichannel catalogers, gift cards represent significant challenges.

Many multichannel businesses record transactions from customers who redeemed gift cards. Not many multichannel businesses record transactions from the customer purchasing gift cards.

These are the transactions that are fun to pay attention to.

If you can segment gift card customers, watch their behavior during the rest of the year. In fact, purchaser and redeemer behavior can be put in the context of a robust Multichannel Forensics analysis ... you could have three channels, say online buyers, gift card buyers, and gift card redeemers.

One would analyze the repurchase habits of each group. Furthermore, one would pay close attention to the product these customers purchase. This is a topic of increasing importance for inventory managers, given that some businesses do 10% or more of their "volume" in gift cards during the final few weeks before Christmas.

Gift Card Customers

Please click on the image to enlarge it (it may be a challenge to see the small numbers in the chart, FYI).

Our industry loves to tell us that we need to have a viable Gift Card program for the Christmas shopping season.

Our industry seldom tells us how customers who purchase Gift Cards for others behave, long-term.

The Multichannel Forensics framework is well-suited to understand if customers who purchase Gift Cards for others behave, long-term.

The attached simulations illustrate what you want to see happen.

• Customer purchases a Gift Card for another individual.
• Other individual (not illustrated above) redeems Gift Card for merchandise.
• Customer who purchases a gift card becomes more loyal, and spends more, long-term, than customers who don't purchase Gift Cards for others.

You have an opportunity to analyze how customers who actually purchase Gift Cards behave, long-term, vs. other customers. Hopefully, you'll find that your Gift Card program provides a double-whammy ... increased sales from the Gift Card, and increased long-term loyalty from the customer purchasing the Gift Card.

In many order-entry systems, the customer who purchased the Gift Card has a notation placed in their customer record. Use this information to your advantage!!

Holiday Shoppers, Who Are You?

Several trends have accelerated changes in customer behavior over the past five years.

Catalogers always knew that Christmas shoppers were different than all other customers. Back in the day, the catalog shopper purchased Christmas merchandise between October and late-November. Catalogers knew these customers were different than customers who shopped during other times of the year, and changed the catalog contact strategy to target these individuals less during other times of the year.

Multichannel and Online Retailing changed the rules, making our lives more challenging.

• The Holiday Shopping Window. Customers now shop for Christmas during the first three weeks of December. Database Marketers need to follow these customers, to see if they behave like all other customers during the remainder of the year.

• Expedited Shipping. Is the customer willing to spend $27 to have an item delivered next-day to a gift recipient worth more than other customers? In the past, we would say "YES"! These days, the answer isn't certain. The customer may not care about your brand, the customer may simply care that you can deliver an item quickly. You have to run Multichannel Forensics on this customer segment, to understand their future value and behavior.
  

• Gift Cards. Has anything mucked-up customer analysis more than gift cards? Is the customer who purchased a gift card worth more than other customers? Does the gift card recipient have any long-term value?

• Sale Merchandise. We retailers really messed up this one. We declare the day after Christmas as a day for customers to get great bargains. Customers respond by not purchasing full-price merchandise prior to Christmas, delaying purchases for sale and clearance product after Christmas. Retailers see decreased demand prior to Christmas, and accelerate markdowns after Christmas. Brilliant! What does the marketer do with the customer who buys sale merchandise on December 26? What does the marketer do with the customer who buys sale merchandise with a gift card on December 26? Do you define these shoppers as true "customers"?

• Multichannel Mess. We compromise the potential of the online channel by forcing pricing parity across channels. We provide the customer with a wonderful multichannel online shopping experience on December 26, one that is less profitable for the enterprise.

Today's savvy Database Marketer has no choice but to develop customer profiles that take the Holiday Shopping Window, Expedited Shipping, Gift Card Buyer/Redeemer, and Sale Merchandise Buyer into account.

Once the profiles have been developed, the marketer can determine whether the sale buyer using a gift card on December 26 deserves to receive a full-price e-mail campaign in February, or a 148 page catalog in May.

Just as important, the Database Marketer needs to run Multichannel Forensics on the customer profiles, to understand if there is any potential to get these buyers to purchase full-price merchandise at other times of the year.