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GiftCards.com Gets Grilled! Why Gift Cards are Better than Coupons

By Shelley Hunter | Published July 24, 2013 | Google+

Who’s on the grill today? Steve Dimmit, Chief Revenue Officer at GiftCards.com.

As the Chief Revenue Officer, Steve Dimmit oversees and is ultimately responsible for the sale of all products and services at GiftCards.com. But today, Gift Card Girlfriend dives deeper into the product called “GiftLocal.” Steve says that GiftLocal, a filtered open-loop gift card for small businesses, is the best customer acquisition tool around.

GCG: How did GiftLocal come to be?

SD: The real genesis of the product is that Jason Wolfe, CEO of GiftCards.com, wanted to buy a gift card for a car wash. He went to the grocery store and, not surprisingly, found that only national brand gift cards are sold on the gift card racks. Frustrated, he started pondering ways to make local-area gift cards more accessible.

GCG: The introduction of the grocery store gift card rack has certainly changed the way we buy gift cards. Prior to the kiosk, we had to drive to the store or restaurant of choice to buy a gift card. Some retailers sold gift cards online at that time, but not all. The rack makes national gift cards easily accessible … but still leaves mom and pop stores off the radar.

SD: That’s right. For local gift cards, consumers must trek to the nearest location or check the company’s website to see if they sell gift cards online. In this case, Jason looked at the car wash’s website and saw that, while the company said they sold gift certificates, they had to physically be purchased in their store. So he drove to the car wash, only to discover that the cashier had no idea how to issue a gift certificate. His simple desire to support a small business and give a car wash gift card turned into a very frustrating experience.

GCG: I’m really not surprised. When I sold gift card solutions to small businesses, the reason most store owners gave for not wanting a gift card is that their “paper gift certificates work just fine.” Yet, they had no idea how many potential customers, like Jason, had taken their business elsewhere after unsuccessfully trying to buy a gift card.

Store owners also avoided issuing gift cards because they didn’t want to mess with the card reader on their counter. (Typically credit card processing machines are set up to only accept credit cards. To accept gift or loyalty cards as well, the machines have to be reprogrammed or upgraded.)

SD: GiftLocal solves both of those problems. When merchants sign up for GiftLocal, their gift card gets listed in our online gift card rack at GiftCards.com. Local-area gift cards can go from obscurity to nationwide availability in a matter of days. Secondly, our gift card program runs on the Discover network. If the merchant already accepts Discover card, then GiftLocal gift cards work automatically. No equipment changes are necessary.

GCG: You definitely solved the technical objections. But do merchants see the value in the program? In other words, I also spoke with many store owners who thought of gift cards simply as a convenience to customers, not something worth paying for, or a product to drive business. After all, paper gift certificates cost very little and don’t require subscription or maintenance fees to keep the program running.

SD: A gift card is one of the best customer acquisition tools around. Think about the ways merchants advertise their business.

  1. Traditional Advertising. Store owners pay for advertising hoping people will hear or read the message and do something about it. That’s not very effective.
  2. Coupons and Discounts. Store owners offer coupons in hopes people who redeem the coupons once will return at least one more time to pay full price. In this scenario, merchants pay to produce or advertise a discount plus get discounted revenue for the goods and services sold. If coupon customers don’t come back again, owners may never see a return on this investment.
  3. Gift Cards. With gift cards, store owners are making it possible for Person A to give Person B money to spend at their store. All the business has to do is make sure the transaction can happen.

GCG: And those customers who come in to redeem the gift card typically pay full price. Shopping with a gift card feels like “free money” to me. Gift card customers are more likely to shop regular-priced merchandise than the clearance aisle, and will nearly always overspend the value of their gift cards.

SD: Large businesses understand that the more gift cards you sell, the more customers you get coming into your store. They want their gift cards available in as many places as possible. Starbucks, for example, sells their gift card in at least three places: store, website, and grocery store racks. Local businesses that only sell their gift cards in the store are missing out on opportunities to put their gift card in the hands of customers who want the convenience of online shopping or the variety available in a gift card rack.

GCG: How does GiftLocal compare to a closed-loop gift card program?

SD: We encourage our merchants to have both. Many of our most successful customers have a closed-loop program plus GiftLocal, because they know gift cards bring paying customers into their establishments. They offer a closed-loop gift card that customers can buy from the counter. They are also part of GiftLocal to make their gift card available online to a national audience. Additionally, with our program, customers aren’t locked into using the payment processor who issued the closed-loop gift cards. They can switch processors and machinery as needed and our program will continue to work seamlessly. That cannot be said of a closed-loop program.

GCG: What other benefits do GiftLocal merchants get?

SD: Merchants who pay to be part of GiftLocal get a featured listing on GiftCards.com, the highest ranking and most trafficked gift card website on the Internet. They also get a dedicated landing page. Then all the merchant has to do is add a “Buy Gift Card” button to their own website and they can begin selling online gift cards immediately – no shopping cart required. We handle the complete transaction.

GCG: Tell me about your community program.

SD: One thing closed-loop gift card systems lack is the ability to offer a gift card for a group of stores without putting everybody on the same gift card program. Since we run off the Discover Network, we can group stores by category or by a variety of other designations. We are selling an increasing number of Community-based GiftLocal programs to downtown organizations, chambers of commerce, and shopping malls. It’s really a great way to support local business while still giving customers a great deal of flexibility.

GCG: I recently received a GiftLocal gift card for Downtown Livermore, a revitalized area not too far from my house. Since I hadn’t been to Livermore in a while, I strolled through the downtown area checking out the various stores and really enjoyed the shopping experience. I will definitely give a community gift card to someone else so they can enjoy a similar experience.

Ok, so last question. What is the best gift you’ve ever received?

SD: The gift of love, for sure. From a material standpoint, the Mophie Battery Case my kids got me for Christmas. It doubles the life of my phone during the day. I dropped several hints to get the Mophie last year. My children know that I’m on my phones (one personal, one business) a lot, and I complained that the batteries were always dead. Now, I’m no longer in desperate search for outlets to charge my phone in every time I stop. Plus, my five kids are always texting me, and they get frustrated if I don’t respond. Now I can’t use the excuse that my phone died.

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