gift card use evokes change

White Paper New Systems Fulfill Growing List Of Demands Customers enjoy buying and receiving gift cards. In 2006 the NRF projected that holiday sales would total $24.81 billion. Furthermore, 52.8% of adults surveyed planned to request a gift card. The new challenge is for retailers to provide gift cards that mesh with the way customers want to use the cards. Many early systems cannot efficiently support the changes in demand. Gift Card Use Evokes Change Executive Summary G ift card use has exploded among adult consumers of all ages and economic segments. However, as more people are using gift cards, the limitations of the original systems are being strained. Buyers want to purchase cards of variable amounts through any channel. Gift recipients want equal flexibility in using the cards. And retailers want to satisfy these demands without breaking the bank. In addition, according to Datavantage’s research, many retailers underestimated the internal demand for gift cards to support marketing/promotional activity. Costs for those retailers may be higher than anticipated. Now there are ways to control those costs. New gift card solutions offer options not available just a couple of years ago: multi-channel functionality, lower operating cost, and more opportunities for customer involvement, just to name a few. The retailers who lead the gift card revolution need to re-evaluate their position and examine the opportunities now available. Customer Demand Is Changing Customers are still very interested in gift cards. While growth has been a boon to retailers, it has also been a source of costs. Most customers require at least two uses to use up the value on a gift card, and then end up spending more than the value of the card. While this behavior benefits the retailer, it also incurs more transaction and communication cost. As the average value of gift cards increases, so too may the number of store visits required to exhaust the balance. Additionally, some retailers offer loyalty points for the purchase of gift cards, encouraging the purchase of stored value cards for personal use. This also increases the retailer’s fees for loyalty card use. Finding a solution that keeps transaction costs low ultimately benefits the retailer without affecting the customer’s experience. Gift Card Use Increases With Income 70% 60% 50% 40% 30% 20% 10% 36% 57% 64% 51% Situation Analysis You have a gift card system installed, and it’s doing well. But you’ve learned a lot since you first began selling gift cards. The costs of operation are higher than you anticipated. And your customers want more flexibility. Are you stuck with the status quo? Not by a long shot. With the projected growth in gift card use, and the increased value per card, now is the ideal time to begin your search for a new stored value system compatible with the changes in the market. Under $30,000 $30$50K $50$75K $75$100K Source: Fiala National Consumer Survey 2002 The average gift card buyer purchases nearly $200 worth of gift cards in a year; usually spending the value among five or six cards. According to a recent survey by Fiala, Inc., a leading gift card packaging company, 45% of people with Internet access would be “somewhat” or “very” interested in purchasing a gift card online. Many retailers, however, cannot currently offer the same gift card online as they offer in their stores, making it necessary to support two systems. How the gift card recipient wants to use the card is also changing. The ability to use the same gift card online, in the store, or through catalogs is becoming increasingly important. General convenience is one factor. Another factor is proximity to a store. Just because the buyer is close to a particular store doesn’t mean the recipient is. Finally, customers feel frustrated when they are limited in how they redeem cards – to them, all your channels are one “store.” Differences in infrastructure are immaterial to customers. As more and more people give gift cards, the opportunities for redemption also need to expand. Retailers who hesitate are likely to be left behind. Cost Control Once a gift card program has been successfully launched, retailers begin to look for ways to keep the cost of the program under control. Transaction fees and communication costs add up quickly, especially if the retailer uses a gift card program that requires the use of leased lines. Most early gift card solutions were set up through credit card style processors. Naturally similar fee structures were instituted. Now other options are available and worthy of exploration. Licensing fees, ASP service fees, maintenance fees, and the cost of supporting software throughout the chain is also a factor worthy of periodic review. Were the projected costs in line with the actual costs? Would pulling the processing in-house save costs, or is an ASP arrangement preferable? How much flexibility does the current gift card provider offer in terms of changing from a hosted solution to in-house, or vice versa? 2 Multi-Tasking Systems Many retailers have one system for gift cards, one system for loyalty, and one system for store credits. They require different vendors, different software, and different procedures at the register. As those retailers prepare to upgrade, they need to consider one basic fact: The data their store system processes is the same for all three applications. It is a numeric value stored in a database. While supporting three separate processes has worked, it creates an unnecessary duplication of infrastructure as well as additional training requirements and additional opportunities for error. Today there is a card-based system that supports all three functions. Choosing The Most Flexible Gift Card Program One gift card program, Datavantage’s Relate™ Stored Value, offers retailers the broadest choices and greatest flexibility in designing and administering their gift card programs. Relate Stored Value is a true, multichannel stored value card that functions over the public IP network. Because of this connectivity, it can be easily integrated with a retailer’s store systems, Web site, and catalog call center. The retailer benefits from offering customers the flexibility they want while taking advantage of the least expensive form of connectivity. The transactions are also secure; Datavantage Relate Stored Value offers higher encoding security measures than banks use when they transfer funds. Flexible Deployment Models Originally designed on an ASP model, Relate Stored Value does not require software in stores or at corporate. Maintenance costs are low, and performance is high. Now it can also be licensed and installed on the retailer’s in-house server, or it can be licensed with the processing handled through the Datavantage Data Center in a managed services model. This flexibility allows the retailer to use the most efficient approach now, and to change it later without the expense of switching to a whole new gift card system. Platform For Loyalty Programs Since stored value cards are tied closely to marketing objectives, Relate Stored Value has sales reporting and analysis reports built in. The application can also interface to a CRM package such as Datavantage’s Relate™ Retail CRM application for more extensive analysis. As a leading developer of POS systems, Datavantage knows about transaction processing. Hundreds of retailers have installed the POS software in thousands of stores, ringing millions of transactions. Datavantage’s Relate Stored Value application takes advantage of that knowledge. It can be used to store any numeric value: currency, points, SKUs, etc. And one card can hold many different values. This gives retailers the option to produce gift cards and loyalty cards that are different in appearance but use the same infrastructure behind the scenes, or to have one card that performs many functions. For instance, a customer making a return could have the store credit loaded onto her preferred shopper card. so that they don’t have to carry multiple cards. Datavantage Relate Stored Value empowers customers with self service options. This can both increase customer satisfaction and reduce your cost. Spending More Than Face Value Age 18-24 yrs. Age 25-34 yrs. Age 35-44 yrs. Age 45-54 yrs. Age 55-64 yrs. Age 65+ = 70% = 66% = 64% = 59% = 59% = 38% Most respondents spent $17-29 more than the original value of the card. Source: Fiala National Consumer Survey, 2002 Summary Card Packaging If you have an established relationship with a card packager, there is no need to change vendors. However if you want us to enlist a new service provider to assist you with card packaging, we would bring in Fiala. They would work with you independently — Datavantage would not act as a middleman or mark up their cost. Fiala supplies cards to the majority of Top 100 retailers. They offer a full suite of card solutions including packaging, personalization, warehousing and distribution, Internet card services, and marketing support. The depth of their experience and the breadth of their support make them an ideal partner for the Datavantage’s flexible, multi-channel solution. Customers enjoy buying and receiving gift cards. The new challenge is for retailers to provide gift cards that mesh with the way customers want to use the cards. Many early systems cannot efficiently support the changes in demand. Datavantage’s multi-channel Relate is an ideal solution. Because of its ease of integration, flexible installation options, and ability to unite all stored value opportunities into one infrastructure, Relate Stored Value provides more alternatives than other stored value applications. Retailers tailor it to fit their needs and those of their customers. As those needs change, Relate ■ Stored Value changes as well. Corporate Headquarters 30500 Bruce Industrial Pkwy Cleveland, OH 44139-3942 USA www.datavantagecorp.com Sales information: +1 (440) 498-4414 +1 (888) 328-2826 (US and Canada) We're powering the hospitality industry.� MICROS Headquarters +1 (443) 285-6000 www.micros.com Asia Pacific +61-2-9485-1200 Europe/Africa/ Middle East +44 (0) 1753 501607 Latin America +52 55 3008-2872 Xstore, Store21, Tradewind, InStorePlus, XBR, Balance, Relate, Brightcard, Go2Team, and Retail that moves you are registered trademarks, trademarks, and service marks of Datavantage Corporation. © January 2007 Datavantage . Corporation, a subsidiary of MICROS Systems, Inc. All rights reserved. PN 299-200 Customer Self Service Because a card’s information is accessible using a standard browser, customers can take an active role in managing their accounts. Through a transparent interface on your site they can check gift card (or loyalty card) balances, add more value on the card, and even transfer balances from one card to another