Gift Cards for Small Businesses – Full Guide for Implementation

You’re probably missing out if you haven’t implemented gift cards in your business. Gift cards have become essential tools for small businesses looking to increase customer loyalty, attract new customers, and generate consistent revenue. Offering gift cards can help you tap into new opportunities that would otherwise be missed. This guide provides a comprehensive look at why and how you can implement a gift card program in your business.

Benefits of Using Gift Cards for Small Businesses

Gift cards are a growing trend among small businesses, and it’s easy to see why. These programs open the door to a range of benefits, including the following.

Increase Sales

Implementing gift cards can provide an immediate boost to your revenue since payment is received upfront for future purchases. This not only enhances cash flow but can also drive up the average order value. Research shows that 74% of consumers tend to spend beyond the amount of their gift cards.

Improvement of customer relationships

Using gift cards is a great way to express appreciation to your customers. When customers feel valued, they are more likely to develop a positive perception of your business and form lasting connections, improving customer relationships.

Creation of loyal customers

Making gift cards available can encourage customers and recipients to return to your business to redeem them. This creates opportunities for repeat purchases, as people often enjoy the convenience of using gift cards. Over time, this can help build strong brand loyalty as they become accustomed to your brand.

Increase brand visibility

Gift cards serve as a powerful marketing tool because they can be customized to reflect your brand. For instance, Awards2Go customers can customize gift cards with their business names, logos, and brand colors. This ensures that each time someone sees the gift card, they’re exposed to the brand, sparking interest and increasing recognition.

Types of Gift Cards and How to Choose the Right One for Your Business

With various options available, it’s important to understand the different types of business cards out there. Choosing the right one can significantly maximize benefits.

Operational Models

Gift cards come in two operational models, which are closed-loop and open-loop.

Closed-Loop Gift Cards

These gift cards are designed to be used exclusively at a single retailer or brand, making them a common choice in local stores. They typically feature a magnetic stripe for easy swiping, and some may require scanning like a UPC. However, their limited usability can be a drawback since they restrict recipients to shopping with only one brand. Additionally, most closed-loop cards cannot be reloaded, meaning once the balance is spent, the card can no longer be used.

Open-Loop Gift Cards

Open-loop gift cards function similarly to credit or prepaid cards and are accepted at a wide range of locations. This makes them a more versatile option compared to closed-loop cards. They typically feature the logo of a payment processor like Visa or Mastercard and allow users to make in-store and online purchases. Additionally, you can often set up recurring payments with these cards. And unlike closed-loop cards, open-loop gift cards offer the added benefit of being reloadable.

The Two Types of Gift Cards

There are two specific types of gift cards. These are plastic and digital cards. While you’ll find cards that go by various brand names, no other types exist.

Physical Gift Cards

This type of card remains a favorite among consumers due to its tangible nature. They feel more like a thoughtful gift, and you can wrap them up for special occasions, such as birthdays or holidays. These cards offer a personal touch that digital cards lack.

Physical gift cards also offer tremendous branding opportunities for small businesses. For instance, Awards2Go cards can be customized with your brand colors, logos, and specific designs. This can boost brand visibility and generate word-of-mouth. In addition, many vendors provide fast shipping. In fact, Awards2Go customers can receive single and bulk orders in as little as two days.

Digital Gift Cards

As their name implies, digital gift cards are entirely electronic. Recipients receive a unique code that can be redeemed at online stores or select physical retailers. And with their rising popularity, digital gift cards are expected to soon surpass physical ones.

IMARC Group reports that the digital gift card global market reached US$ 396.1 Billion in 2023. They also expect the market to reach US$ 1,337.8 Billion by 2032, which is a compound annual growth rate (CAGR) of 14.5% between 2024-2032. 

Digital cards can also be delivered via email fast, which is convenient for both small businesses and consumers. Plus, like physical gift cards, Awards2Go clients can personalize digital cards with custom messages and branding elements.

How to Set Up a Gift Card System for Your Business

It’s simple to get started with Awards2Go.

1. Order Your Gift Cards

Reach out to the Awards2Go team to place your order for either physical or digital gift cards.

2. Input Gift Cards Into Your System

Once the cards arrive, add them to your system to enable tracking and redemption.

3. Create Gift Card Policies

Develop clear policies for handling lost, stolen, or unused cards. You should also have guidelines on expiration dates to ensure that customers understand how to use their gift cards.

4. Start Distributing and Tracking

With everything set up, you can begin selling and monitoring your gift cards.

Benefits of Electronic Gift Cards for Small Businesses

Electronic gift cards offer several advantages for small businesses, and we’ve touched on some of them. Let’s explore some additional ones.

Expiration Dates and Fees

Electronic gift cards have more flexible expiration dates. You can set these dates to align with local regulations, such as the U.S. CARD Act, which mandates that gift cards must be valid for at least five years from the purchase date. Also, inactivity fees can only be applied after a year of non-use and must be clearly disclosed. This flexibility helps businesses manage liability while encouraging customers to use their cards before expiration.

Regulatory Compliance

Compliance with federal and state gift card regulations is crucial for any small business. The CARD Act limits expiration dates and fees to protect consumers, and small businesses must ensure that their policies are in line with these rules to avoid fines or legal issues. Digital gift cards simplify compliance since transaction data is automatically tracked and easily audited.

Lost or Stolen Cards Redemption Rules

One major benefit of electronic gift cards is that lost or stolen cards are easier to manage. Unlike physical cards, which can be challenging to track, you can reissue a lost digital gift card by simply referencing the unique code. This can reduce customer frustration and maintain goodwill.

Balancing Inventory and Redemption

Electronic gift cards usually integrate seamlessly with POS systems, which makes it easier to monitor and balance inventory when customers redeem them. Plus, real-time tracking helps avoid overstocking or understocking. This level of efficiency reduces manual labor, as you can automatically reconcile sales and redemption.

Customer Communication and Transparency

Clear communication and transparency are essential to maintaining customer trust and building stronger customer relationships. And electronic gift cards make these things easy. For example, you can easily notify customers about remaining balances, expiration dates, and special promotions through automated emails or text messages. You can even increase the level of transparency for your customers by providing a gift card portal.

Best Strategies for Promoting Gift Cards

Promoting gift cards effectively requires a mix of both online and offline marketing strategies. That’s because it can ensure you reach all the different segments of your target audience.

Social media platforms like Instagram and Facebook are powerful tools for raising awareness, especially during peak seasons. Consider using engaging posts and ads to showcase your gift card offerings. For example, a headline like “Get Her a Gift Card. It’s Mother’s Day” can be effective during that period. Similarly, creating urgency with a limited-time promotion like “Spend $50, get a $10 gift card” may increase sales.

Email marketing also plays a key role in online efforts. For example, you can send personalized emails to your customers to highlight gift card discounts, remind them of unused balances, or offer easy links for last-minute gift card purchases​.

Offline promotion is also equally important. For instance, positioning gift cards at checkout counters and using signage throughout the store can keep them at the top of shoppers’ minds. Also, training your staff to mention gift cards during transactions and leveraging printed materials like flyers or posters for additional visibility can drum up sales.

Other offline promotions to consider include partnering with local events and running cross-promotions with nearby businesses. Overall, blending both digital and physical approaches is an effective way to promote your gift card program throughout the year.

FAQs

Should My Small Business Offer Online Gift Cards or Plastic Gift Cards?

Both options have benefits. Online gift cards are easy to distribute, eco-friendly, and perfect for last-minute shoppers. On the other hand, plastic gift cards offer tangibility or a physical, giftable option. Offering both covers a wider range of customer preferences.

Do Businesses Profit from Gift Cards?

Yes. Gift cards generate upfront revenue, and most customers spend beyond the card’s value when redeeming. Unused balances (breakage) can also contribute to profits.

Can Gift Cards be Used for Charity or as Employee Incentives?

Yes, gift cards are often used for donations, fundraising, and as flexible rewards for employees.​

How Do I Integrate the Gift Card System with Other Tools in My Business?

Many gift card systems can easily integrate with point-of-sale (POS) or e-commerce platforms. This enables seamless tracking, sales management, and reporting​.

Sources

https://www.awards2go.net/blog/gift-cards-for-small-businesses/ (February 7, 2023)

https://www.imarcgroup.com/digital-gift-card-market (2024-2032)