Gift cards are more than a commercialisation tool; they capture invaluable consumer data
Published: 25 November, 2009
The gift card industry has seen radical changes over the past decade. Initially seen as a commercialisation initiative, it now comes firmly within the marketing manager’s remit, according to Sue Boor, PruPIM’s head of shopping centre marketing.
Boor started working with market leader Flex-e-Vouchers eight years ago, initially with a gift cheque scheme at the Mall at Cribbs Causeway. “Vouchers had been run by retailers for years,” she says, “and to do it properly you have to think like a retailer.”
But Keith Sims, sales and marketing director at Flex-e-Vouchers points out that there’s a key financial difference. “A retailer hands over goods in return for its vouchers, so they’re effectively cash. But a shopping centre is merely the middle man taking cash from consumers and handing it to the retailers. That means managing the cost of the operation is much more important.”
By 2004 the gift cheque operation had expanded to include a Christmas Club and savings schemes but increasingly retailers were giving up taking cheques which would have limited the freedom of choice which makes mall-wide vouchers so attractive to consumers.
“Card payments were the only way to go,” notes Sims. “And the US experience was that card-based gifting programs worked for both closed-loop (retailer) and open-loop (mall) systems.” And after a lot of research the company opted for the Mastercard system.
However there were certain regulatory hurdles to overcome which meant that new partners had to be brought in. Newcastle Building Society, which is registered by the FSA as an ‘electronic money operator’ holds the funds in segregated and managed accounts. And Nomad maintains the books as a ‘third party processor.’
Equally, the terms and conditions attached to vouchers needed to be revised and, under the ‘know your customer’ regime used to restrict money laundering, malls had to capture the name and address of every customer buying a gift card.
This meant customers had to come into the centre to buy their card which was good for footfall. But the real benefit for mall operators was that for the first time they could capture their customers’ postcodes. And added to that they could track what those individual customers bought and when.
“For the first time we were able to capture card spend data,” remembers Boor.“No longer were we relying on theoretical catchment maps or customer services – we now had real data to work on.”
And over time that has changed the way mall owners see their card operations: no longer are they simply an income stream but their real value lies in how they inform a centre’s marketing.
Initially, to reflect the fact that malls cannot absorb the costs of running a card system, owners were forced to impose a service charge of £2 or £3. This met a degree of consumer resistance from shoppers who resented paying for something that was previously free of charge.
But by 2007 Capital & Regional became the first UK operator decided that the marketing benefits were sufficient to justify selling cards with no surcharge. “That forced us to reassess the business model to see if it could work free of charge,” says Sims. “The solution was to rely on what the industry calls ‘Month 13’ to cover the costs of operation.” Basically cards have an expiry date of 12 months from the date of issue, and any unspent funds then revert to the issuer.
“Mall owners are now able to identify funds that haven’t been spent by the expiry dates and draw them down,” Sims explains. “As soon as we proved that worked there was a wholesale migration in the market to free-of-charge cards.”
Manchester Arndale became the first mall to go card-only and that coincided with a fundamental rebranding exercise. “We had to treat it in a totally different way,” explains Boor. And others quickly followed, to the extent that only two out of the 66 malls in the Flex-e-Vouchers network still use paper vouchers.
For PruPIM’s Boor there’s no going back. “It’s now part of the armoury. We know who our customers are,” she concludes.
