As a business owner, we have ups and we have downs. Oftentimes we can even have both at the same time. Our duty is to do what we can to ensure that not only is the business and its employees operating comfortably but that our customers are satisfied. The trick to a successful business is doing both at the same time, especially during downturns like the economic crisis spurred on by COVID.
At the moment, small business owners like us are wondering what they should be focusing on in order to make the best of a terrible situation. Business owners should be focusing on taking advantage of Government support programs and thinking about the next step they can take to protect their business and keep its doors open. One such thing is gift cards.
Your customers are likely looking for ways to help their favorite business. Typically if a customer wants to help a business they would simply use your services. They would order their daily sandwich from your shop, or they would order a custom t-shirt as a gift for their friend’s birthday, or they would tell their friends about your business. As it turns out, gift cards are a great tool to open the door to the customers who are looking to support you, and even generate new ones.
During the pandemic, gift cards allow your customer to support you financially while not burdening your supply chain which may be under extreme pressure. That being said, that’s not the only reason gift cards are a great tool for small businesses right now.
The Gift of Gift Cards
Customers often shop for other people rather than themselves. Whether that’s for someone's birthday or a family event, customers will generally have a date on their calendar for which they need to get a present. This is especially true during national holidays like Mother’s Day or Christmas when gifts are typically exchanged.
If you’re anything like me, you may not know exactly what present you should get for your loved ones. So the next best option is to let them pick out the present for themselves. Typically this would mean that you would give them a wad of cash as a gift. Of course, we’re not in The Godfather and cash may be too informal so generally we avoid that route. Instead, we get gift cards. Gifting the gift of gift cards is not only a tongue-twister, it’s also a pattern of behavior that your customers likely exhibit during the holiday season so make sure you have some stocked up!
Building Brand Awareness and Loyalty
Let’s imagine for a second that a customer of yours purchased a $25 gift card for their sibling. There’s one of two possible scenarios for when the sibling receives the card. Either the sibling knows about your store, and loves it, or the sibling doesn’t know about your store and they just received free reign on a $25 budget to a store that’s been vetted by your original customer.
In the latter scenario where the sibling knows about your store, it becomes a great opportunity for them to build higher brand loyalty by continuing to purchase and use your products or services.
In the former scenario where the sibling was not aware of your store, they will now find out about it in the best way possible; by spending money at it.
So either you’re increasing brand loyalty or you’re increasing brand awareness, what’s there to lose?
Customers Are Less Price Sensitive
If a customer has a gift card for $25 but they want a $40 product, they have a big incentive to get it. The customer will feel as though the $40 product is still worth that much but they only have to pay $15 to get it! This works in a similar way to sales events - customers are very excited to pay less than they would normally have to in order to get a product.
This is a big deal. It means a higher average order value and therefore higher margins and higher revenue. This is true even if you give a customer a $0.88 gift card…
Time Value of Money
One of the biggest but often overlooked incentives to implement gift cards in your business is due to the time value of money.
If I was going to give you $10 for free, no strings attached - would you want it today or would you want it a month from now?
The $10 oddly enough is worth more today than it will be worth next month due to the inflationary behaviour of the economy. That’s why you always hear people say things like “$20,000 back in the day is worth $100,000 today”. Those numbers are made up - but you get the point.
A customer who purchases a $25 gift card today and then redeems it two weeks from today, is great for business. As a business owner you essentially got an advance on the customer’s purchase. It would be as if a customer said “I’ll give you $25 dollars today, and then 2 weeks from now I’ll come in and pick out a $25 product”.
It’s absolutely great for your cash flow position.
Support For Businesses in Need
The real reason why this article had to be written.
Customers like me are wanting to support our local business while staying safe in the home. Some of us may not be comfortable going to your store after calling ahead to pick up. Some of us may not even be comfortable ordering food to be delivered to our door. However, most of us are comfortable buying a gift card today that we will only redeem a few months from now when things aren’t as bleak. Think of it as a vote of confidence.
We are seeing people all over the world looking for ways to support their local businesses and this is a great way to do it. I would gladly buy a gift card for myself in order to advance some cash to the businesses I already know I will be spending at when the quarantine is over.
Sometimes as a business owner you may have thoughts like “How do I implement this new way of doing business without misusing my customer base or annoying clients” - this is not one of those times. People are looking for ways to help, and this is an easy method of taking infrastructure that is already built for you like e-gift cards and allowing your customers to advance you money that they already know they will use when the crisis is over.
So what are you waiting for? Let’s get to it!
