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How to… drive sales through gift cards

18 February 2011
How to… drive sales through gift cards

The restaurant, bar and pub sector faces many challenges in the current economic climate. The biggest, and possibly most fundamental of these, is how to get customers through your door. One solution to this challenge is offering a gift card.

The USA is the clear market leader in this regard, with restaurants harnessing gift cards to drive sales for years. This is mainly down to the large number of national chains and a six-year headstart compared with the UK and European markets.

The UK gift card market has experienced the same growth and trends as the American market, and it is expected that 2011 will be the year that casual dining gift cards take off.

Gift cards are an ideal customer acquisition tool. When low values are given away free as part of a promotional campaign, or as part of a work incentive scheme, they encourage sampling. Guests will remember enjoying themselves and will be more likely to return, bringing the benefit of repeat business. Satisfied customers are also more likely to give a restaurant gift card as a gift, therefore further spreading the word and benefits to the restaurant, pub or bar.

Gift cards are proven to encourage uplift in spend. On most occasions, the gift card won't cover the full cost of the meal, and customers will spend, on average, 60% over the value of the gift card. This, coupled with the margin on and over the value of the card makes for a good profit.

The gift card and voucher market in the UK is currently worth upwards of £4.6b per annum, and a huge opportunity exists for restaurants, bars and pubs to take a share. Gift cards are the single biggest driver of new and incremental business to retailers.

Why shouldn't this apply to restaurants, bars and pubs too?

Brian Dunne
Chief executive,
http://www.actionsolutions.co.uk" target="_blank" rel="noreferrer">Action Solutions


FIVE STEPS TO DEVELOP AND SELL GIFT CARDS

1.Seize the opportunity The first steps for any product development would be to seize the opportunity. Gift card development is no different. Careful consideration needs to be given to the competitive landscape and measuring the demand for such a product. Always try to speak directly to prospective buyers, both direct purchasers and consumers and potential corporate buyers, as they are the best indicators for potential volumes.

2.Adopt a simple but robust financial model Adopt a simple financial model that outlines the costs and benefits for a gift card solution. This way everyone in your organisation will understand the benefits and it will help you make better decisions with regard to discounting and distribution.

3.Define the product What will be your point of difference to other brands? Do you want to manage the product development in-house or outsource to more experienced project managers? It is worth considering the future of gifting and building in some potential to improve the offer over time, for instance, developing the card to a code that can be delivered digitally.

4.Get a high street presence Racks of gift cards located in high street retailers allow a restaurant brand a high street presence without the need for bricks and mortar. They capture incremental sales, impulse purchases or people who intend to purchase a gift card and choose yours because it was available. Sales in these third-party outlets have proved to be the biggest single driver of footfall for some casual dining chains in America. Once you have developed your gift card, you should immediately look to enter this market.

5. B2B is more In 2010, 45% of all gift card sales were in B2B. Sales of prepay into businesses help organisations by offering a straightforward way of offering incentives to staff. Prepay is cost effective, immediate and flexible, and with the margins available in dining, can be heavily discounted, encouraging purchase. Consult a specialist B2B reseller who will target the right market segments.

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