Gift cards are a great way to optimize your cash flow, bond with your customers, create new ones and help them to spend more on the next purchase. On top of that, they are now free for every merchant as part of the Shopify COVID-19 help plan.

The most common uses of gift cards:

1. Price and value of a gift card is the same
2. Mostly used during holiday seasons
3. A common gift card that you can buy from apple, amazon, etc.
4. Price is lower than the value of a gift card
5. Good for adjusting your cashflow
6. Get the money this month and the next one too, due to overspending
7. If your average margin on one order and also AOV is small, you should be cautious about the discount you will give
8. Gift for a spend
9. Great way to motivate your customers to spend more and come back in less time
10. Average estimated overspend of a gift cards value is 20% (Thomas and Dillenbeck 2004)
11. In average 19% of gift cards are not redeemed or are under redeemed (Horne 2007)
12. you should scale the threshold for the average spend of your customers and average margins

If you are unsure how to set-up the gift card in Shopify, check out the video below, that you can find on this youtube channel.

Candy Rack – Gift Card cross-sell

Offer with a discounted price is a great idea to use while upselling. You will basically get your customers to spend money now, which will help you with cash flow and in the future, there is a fair percentage of customers that will overspend. Another factor that works at your favor is that some customers might not redeem the gift card at all, but that’s not where you aim with this approach anyway. You will give your customers the opportunity to have a great bargain and buy something they normally wouldn’t, just to spend the amount and make themselves happy.

The next perk that you could work within Candy Rack is to make the gift card customizable, then you are creating a new unique selling point, which you can combine with the option for a customer to send it to somebody’s e-mail. All that is possible with a custom note field, which you can enable while creating your upsell.

Candy Cart – Gift Card upsell

Upselling the gift cards for a full price or just slightly lower is the best way for merchants with low margins and customers who tend to stockpile.

For example, if you sell mainly dog food, it’s probable that people come to you let’s say once a month. If you give them a promotional gift card for free, they’ll just buy the same dog food with a long expiration date more times and stockpile it for next few months. With your low margin profits, that’s not the best scenario. But on the other hand, if you upsell the gift card for a full price or slightly discounted, you’ll have your immediate sale and some extra cash right now, with a really big chance that your customer will buy something “on the top of it” when he will be using his gift card later.

As proof could work a survey performed buy Accenture where 500 consumers stated that they buy something they wouldn’t normally do when redeeming their gift cards. Which means they might try the premium pet food, or buy a nice leash with treats on the top of the usual order.

Also, you have a good chance to speak to your regulars in your cart upsell and tell them that they can support you with a purchase of a gift card. It’s not a charity if you’ll do your math and provide them your services next month. Gift cards work great in cart upsells, because they’ll create a potential bargain for this whole purchase and also the future one.

Gift Box – Gift Card as a free gift

With Gift Box, you can try a different tactic to fulfil the potential of gift cards. You can set up a spend threshold, after which you’ll give the gift card with a certain amount as a free gift. This is a great way to encourage your customers to spend more with a clear positive economic prospect. But that’s not the only reason for you to use the gift card as a free gift. You also encourage your customer to come again, if you also set the expiration date on the gift card for a reasonably short time, you will create a sense of urgency to buy again. Also, you won’t be surprised in the future with the consequences of a campaign you did several years ago.

How to set the right expiration :

If you have customers with repeated purchases, check out how often they come back and set the date somewhere below. This type of promotion works best under time pressure.  you will get your customer to interfere with you again, spent some extra money on the top of your gift card, get him used to shop in your store, and even if he will give the card to someone else, you will get a new customer with word of mouth, which is the best possible way. In the end, repeated purchases are often the most valuable assets for you.

When to set a dynamic threshold:

When consumers do not have a spending constraint, then it is optimal to offer a single value gift card at a larger purchase amount than the average order value. If consumers have a spending constraint, then it may be optimal to offer increasing value gift cards at increasing purchase amount thresholds.

How is this better than just a discount:

To answer this I would like to quote a great explanation from the article of Mr. Khouja in the Journal of Retailing: “Consider the following example due to Dolan (1987): “Buy a case of assorted bottles and get 20% off” at the wine store. In this case, the revenue received by the retailer from a consumer who buys a case is reduced from $X to $0.8X at the time of purchase. Now consider the promotion “Receive $10 in-store gift card for every $50 you spend”. This time, the retailer receives all $X at purchase and incurs the cost of gift card redemption later.”

Leverage social media

Czech fashion marketplace Freshlabels is selling gift cards with a 15% discount, which means that you’ll buy a 100$ gift card for 85$. After purchase, you can use your gift card on any product even the ones on sale. Even when they aren’t the smallest business out there, they still have to face the struggle most of us do in recent days, which is the negative shock in cash-flow.

To market this “promotion”, which is a great help for them, they are heavily using their social media and if you have any point of contact and relationship with your customers. Don’t be afraid to use mail, social media, etc. and consider asking for help in a dignifying way, with a nice honest offer.