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7 Things To Know If Your Business Accepts Gift Cards

Gift cards represent a safe and convenient way for customers to buy the products and services they love. In fact, Americans are so enamored with this payment option that in 2014 alone, they collectively bought $124 billion worth of gift cards for friends and family.

If your business doesn't currently offer gift cards, you're missing out on a huge slice of retail spending. However, before jumping in, you should understand the advantages and disadvantages of accepting payments via gift cards.

What Are the Pros of Accepting Gift Cards?
The most obvious advantage is that you're able to tap into a $124 billion industry, but there are other important benefits, including:

1. Credit Spillage
There's a reason that carnivals use tickets and casinos use chips. Some patrons never redeem the full-face value of these monetary substitutes.

The same thing applies to gift cards. Some plastic never gets used at all. Others are used once and then carry partial balances until they finally expire.

Note that "spillage" rates are trending downward — largely because of new card regulations. Though even 1 percent in unclaimed balances can have a powerful impact on your bottom line.

2. Free, Organic Advertising
According to research from First Data, more than 10 percent of gift card recipients had never (or rarely) visited a merchant’s location prior to receiving the card. This is better than "word-of-mouth" advertising. Loyal customers are paying you money for the privilege of gaining new business.

3. Sell More Products
Gift card recipients tend to be price insensitive, with many shoppers spending more than the face value of whatever cards they carry. They might arrive with a $100 gift card — and walk out with $101 or more in merchandise.

4. Customer Rewards and Tracking
With a well-designed gift card program, it's possible to capture contact information and track purchasing behavior. These types of analytics allow you to improve your marketing efforts and generate more sales in the future.

Are There Disadvantages to Accepting Gift Cards?
There are a few downsides associated with gift cards, including:

1. Upfront Costs
You’ll need to spend money up front in order to design and manufacture branded plastic for your organization. Using third-party gift cards removes this cost, but there are usually additional fees and guidelines involved.

2. POS Upgrades
You may have to upgrade your POS equipment so that it can properly add, accept, and account for gift card balances. These upgrades also include employee training.

3. More Logistics
You will also have to deal with more refunds, chargebacks, and "spillage" concerns. Rarely will the initial card buyer be present for these interactions. Instead, your staff will interface with gift card recipients who often have very different expectations.

Are Gift Cards Worth the Investment?
Accepting gift cards isn't without certain headaches. Yet when you look at the boosts in foot traffic, product sales and customer tracking, most would agree that the benefits far outweigh the costs.

If you're just starting, it's a good idea to introduce gift cards on a very limited basis — i.e. at certain locations only or with select customers within your network. If this pilot launch brings new business, you can adjust your gift card program accordingly.

For more gift card best practices, contact our sales support team today.

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