ROI Calculation Methodology:

Gift Card Program

Inputs: Number of Gift Cards Sold per Year, Average Gift Card Value, Number of Locations

Assumptions:

• Redemption Rate: 80% of gift cards will be redeemed.
• Average Purchase Over Gift Card: 30% more than the value of the gift card.

Costs:

• One-time Setup Fee: $199.
• Annual Subscription Fee: $35 × 12 months × Number of Locations.
• Cost to Produce and Ship Gift Cards: (Number of Gift Cards Sold per Year × $0.07) + $40.
• Gift Card Marketing: $200 × Number of Locations.

Calculations:

1. Total Revenue from Gift Cards = Number of Gift Cards Sold per Year × Average Gift Card Value.
2. Revenue from Additional Purchases = Total Revenue from Gift Cards × Redemption Rate × Average Purchase Over Gift Card.
3. Breakage = Total Revenue from Gift Cards × (1 - Redemption Rate).
4. Total Revenue from Program = Total Revenue from Gift Cards + Revenue from Additional Purchases + Breakage.
5. Total Costs = One-time Setup Fee + Annual Subscription Fee + Cost to Produce and Ship Gift Cards + Gift Card Marketing.
6. Gift Card ROI = Total Revenue from Program / Total Costs × 100.
7. Profit = Sales Increase from Gift Card Program − Total Annual Costs