How to Create a Gift Card Program for Small Business

Did you know that 74% of people regularly buy gift cards from small businesses?

Implementing a gift card program can transform small businesses by boosting upfront cash flow. This is especially true for those in the retail, hospitality, and restaurant sectors. 

Gift card programs for small businesses can be a remarkable tool for enhancing brand visibility, customer loyalty, and sales. This is evident from the fact that the US gift card market is set to expand at a rate of 12.6% between 2023 and 2030 to reach $6.9 billion by the end of the forecast period.

Younger consumers enjoy both digital and physical gift cards––both are perceived as more convenient and flexible gifting options while still feeling personal. Gift cards ease the pressure of traditional gift-giving while enabling recipients to pick the gifts they prefer. A win-win!

In this article, we'll go deep into the world of gift card programs and how they can open new doors of opportunity for your small business.

The Impact of a Gift Card System for Small Business Growth

Gift cards are a versatile and potent tool for driving growth and fostering customer engagement. They can boost financial resilience and help businesses build a loyal customer base. 

Let’s check out some of the advantages they bring to the table.

Increases Upfront Cash Flow

Gift cards generate revenue right away when customers buy them. 

They give small businesses a needed influx of cash even before the goods or services are claimed. This aspect can be substantially beneficial for managing costs and investing in growth. 

Add to that the fact that it can prompt increased spending. According to Capital One Shopping Research, 61% of gift card recipients spend an average of $31.75 more than the card's value while redeeming it.

Boosts Sales, Especially During Peak Seasons

Offering gift cards during holidays, celebrations, or promotions can boost sales significantly. The National Retail Federation reports that consumers usually plan to buy three to four gift cards during the holiday season and plan to spend an average of $49.43 on each card. 

This results in an average of $166.69 per shopper on gift cards alone.

Attracts New Customers Through GC Redemption

Gift cards serve as a bridge to bring in new customers to your brand. The resulting expansion of your customer base can be a game-changer for long-term growth. 

For example, what if new gift card recipients buy gift cards for their friends, and then those new recipients buy for their friends, and so on?

One report indicates that nearly 93% of US consumers have bought or sent a gift card. This shows how popular and versatile gift cards are, particularly on occasions like birthdays and holidays.

Knowing these stats and how gift card programs can create an almost exponential growth opportunity for bringing in new customers, it's clear that harnessing the power of a well-executed gift card program can foster lasting business growth.

Encourages Repeat Business and Enhances Customer Loyalty

Buying and redeeming gift cards creates a habit of repeat visits that reinforces customer loyalty. Here’s why:

• Familiarity and convenience: Once customers have visited and made a purchase using a gift card, they're familiar with the store, its products, and its services. This familiarity makes them more likely to return.
• Positive experiences: If their initial experience using the gift card is positive, customers are more likely to return and buy another gift card for themselves or others, perpetuating a cycle of repeat visits.
• Perceived value: Gift cards can feel like "free money," making customers more inclined to treat themselves to repeat purchases without the usual hesitation of spending out of pocket.
• Promotional opportunities: Businesses often use promo cards to introduce new products or services, enticing customers to return to use their cards on these new offerings.

Zippia quantifies the impact of customer loyalty with the following figures: A 5% rise in customer retention can lift profits by 25% to 95% while returning customers make up 65% of a company's total sales.

Finding that sweet spot with your loyal regulars is a huge key to success.

Provides Insights into Customer Preferences and Spending Habits

Gift card programs can provide a goldmine of data. They offer insights into consumer behavior, preferences, and spending. This data can guide inventory choices while also aiding efforts around marketing and personalized promotions. 

For example, say a local coffee shop notices that a significant number of their gift cards are redeemed during the afternoon––specifically alongside pastry purchases.

What could this mean for the business?

• It might consider boosting staff during afternoon hours to handle potential surges in traffic.
• It could offer special "afternoon pick-me-up" combos featuring coffee and pastries to further capitalize on the trend.
• It could ensure they have enough pastries on hand to meet the increased demand at this time.

Overall, the insights from cards will lead to better business and customer satisfaction.

Understanding Different Types of Gift Card Programs

There are primarily two different types of gift cards - closed-loop and open-loop. 

You can redeem closed-loop cards only at the issuing merchant or specific stores like Starbucks or Walmart. Businesses favor them as they encourage repeat visits. 

Open-loop gift cards are typically offered by major financial institutions and payment-processing companies. They carry logos like Visa or Mastercard and can be used at any establishment that accepts them. This makes open-loop gift cards a flexible option. 

Each type of gift card has clear benefits. Closed-loop cards promote brand loyalty, while open-loop cards offer wider purchasing power. 

In the broader analysis, however, closed-loop gift cards are expected to be the primary drivers of growth. According to Straits Research, they are expected to grow at a CAGR of 15.2% during the forecast period 2022-2030.

Legal and Regulatory Considerations

In the US, the Federal Trade Commission (FTC) enforces federal regulations on the issue of gift cards. FTC rules that became operational in 2010 are focused on protecting consumers from unfair practices. 

These rules govern fees and expiration dates on all gift cards, including retail and bank gift cards. They are aimed at making the use of gift cards fair and straightforward.

In Canada, each individual province oversees consumer protection legislation for gift cards.

In Quebec, regulations apply to prepaid and gift cards that require merchants to refund balances under $5 upon request. Exceptions exist for cell phones and prepaid credit cards. 

Similarly, prepaid cards cannot have expiry dates since June 2010. But there are exceptions for cell phone cards and bus passes. Merchants also cannot charge fees to activate or redeem prepaid cards. 

Fees are only allowed in certain cases like prepaid credit cards.

However, most other provinces have similar gift card regulations. For example, generally speaking, all provinces prevent merchants from placing expiry dates on gift cards and from charging fees.

You’ll also be required to outline any restrictions, limitations and conditions of the gift card on the card itself, on top of your company’s contact information or instructions on how customers can access more information.

Though there are some notable exceptions:

• Expiry dates are usually permitted for gift cards issued for charitable or promotional purposes.
• Alberta, British Columbia, Manitoba, New Brunswick and Ontario all allow expiry dates for specific goods and services. For example, a gift card for a local spa that can be used for any service at that spa can’t have an expiry date, but gift cards only valid for manicures at that spa and no other service can have an expiry date. 
• Alberta authorizes businesses to charge a discretionary one-time fee at the time a gift card is sold, and all provinces permit fees for replacing lost or stolen gift cards or for obliging a customer’s request to customize a gift card.
• British Columbia, Ontario and New Brunswick all exempt certain restrictions on “mall cards,” so named because they’re common at shopping malls where gift cards are valid at otherwise independent businesses located within the same mall. Such restrictions include dormancy fees, for example.

You can learn more about provincial regulations for gift cards in Canada from the Financial Consumer Agency of Canada, the same federal agency that oversees gift cards issued by financial institutions, otherwise known as open-loop gift cards, which the provinces do not regulate.

Choosing a Gift & Loyalty Program Based on Your Existing Tech Stack

When choosing a gift and loyalty (G&L) program, you need to consider whether it fits your point of sale (POS) requirements. Your chosen program needs to integrate with your existing systems smoothly.

This prevents disruptions, maintains data accuracy, and streamlines your operations.

Tech Factors to Consider

Your G&L program needs to seamlessly integrate with your existing technology to truly succeed. 

Consider these key elements:

• Your Current POS System: Compatibility with your existing POS system ensures effortless gift card sales and redemptions––along with reliable data synchronization between the systems. Consider potential additional costs for setup and integration, and check in with your POS provider for their recommendations.
  
• E-commerce Platform (if applicable): If you have an e-commerce presence, there’s no choice but to have a unified online and in-store gift card experience. Ensure your chosen G&L program integrates with your online store and allows online purchases and redemptions.
  
• Inventory Management Systems: Ideally, your gift card system should link to your inventory tracking. This helps manage stock levels and prevents accidental overselling of gift cards if inventory is low.
  
• CRM & Marketing Tools: Look for a G&L program that captures customer data (with consent) from gift card transactions. This data can then be integrated with your CRM system, enabling targeted marketing campaigns and personalized promotions based on gift card usage patterns.

G&L Program Features

Beyond compatibility, consider features offered by the G&L program itself to optimize its functionality for your business. 

Look for:

• Reporting and Analytics: Choose a program that provides embedded analytics and robust reporting on gift card sales, redemptions, outstanding balances, and other relevant metrics––essential for making informed business decisions.
• Customization: Does the G&L program allow you to brand your gift cards and create customized loyalty programs that align with your business identity?
• Scalability: Assess whether the program can grow alongside your business, handling increased volume and offering additional features if needed.

Third-Party Capabilities

While your core systems are covered, third-party services can extend the capabilities of your G&L program. Verify if additional services (accounting software, email marketing platforms, etc.) can integrate smoothly with both your POS system and your chosen gift card and loyalty program.

Choosing a Reliable Vendor

The vendor you select will be a long-term success partner––so, make sure they’re reliable. 

• Customer Support: Prioritize providers offering responsive and accessible technical support to minimize downtime.
• Vendor Reputation: Thoroughly research a vendor's reputation through reviews and client testimonials before making your decision.

Cost Factors

When picking a program, make note of all costs, including upfront or setup costs as well as ongoing costs like monthly fees or transaction-based charges.

With all this in mind, assess your return on investment (ROI). What are the potential revenue gains from increased customer loyalty and targeted promotions?

Designing Your Gift Cards

Your gift card design must be visually appealing and match the overall aesthetics of your brand. This applies to both physical gift cards and digital cards. 

An attractive design is crucial for improving customer experiences and your brand image. Consider incorporating your brand's color scheme, logo, and typography to maintain consistency. For physical cards, consider the card's material and texture to add a premium feel.

Digital gift cards can even offer the flexibility of dynamic elements or animations. 

Look to your brand values for inspiration. Make sure the design of your custom gift cards speaks to your audience and stands out—remember this is something special someone is receiving as a present and it could be their first interaction with your brand.

Utilizing design software like the user-friendly Canva or Visme, can help craft the exact look you want. More professional tools like Adobe Illustrator or Photoshop may be harder to use, but you can check out Adobe Express, which has a tool for gift certificates.

When using any of these tools, look through their templates before deciding to build from scratch. Either way, add text, images, and other design elements to represent your brand colors, logo, and any special themes (holidays, collaborations). Ensure important information like the card value and redemption terms are clear. 

When ready, send them to your chosen gift card provider––typically, they will handle the printing and production process. Many also have their own templates, so be sure to consider those too. Finally, ask about any specific design requirements or file formats your gift card provider may need.

Marketing and Promoting Your Gift Card Program

To market your gift card program, promote it in stores, online, and on social media.

At physical locations, use eye-catching displays at checkout areas to prompt impulse purchases. . Online, display gift cards prominently on your website's homepage and product pages to boost sales and customer satisfaction. Additionally, integrate gift card purchase options into your online checkout flow.

Use email to tell subscribers about your gift card program and craft engaging content around it on social media. This could include contests or exclusive discounts for followers who engage.

Another dimension you can add to your marketing is promo cards. These are often offered as a limited-time or exclusive bonus to incentivize larger purchases or reward loyal customers. They can be pre-loaded with balances and expiration dates tailored to your specifications.

For instance, consider offering a complimentary promo card with a minimum purchase amount, or provide special promo cards during holiday seasons.

Whatever the platform, make sure to highlight the benefits of your gift cards, like convenience and flexibility. 

You can also consider paid ads to target key customers and boost the overall visibility of your gift card program.

Usually, these might take the form of social media ads or search engine marketing (SEM)––both of these options allow for sharp targeting, whether based on demographics and interest groups or searches for related terms like “coffee shop gift cards”. 

Training Your Team on Gift Card Sales and Redemption

Educating your staff on the nitty-gritty of gift card sales and redemption details is crucial. Ensure your staff is well-versed in all program details. This is key to avoiding hassles and ensuring a smooth customer experience. 

Training should cover the technical aspects of processing gift card transactions. This includes sales, activation, balance checks, and redemption, both in-store and online.

It is also important to equip your team to troubleshoot technical errors or address customer inquiries. Your staff should be able to answer inquiries confidently, especially those about gift card policies. 

Demonstrate how to package gift cards using your pre-decided envelopes, holders, or any other branded packaging elements. Employees need to be careful while handling them to maintain a pristine appearance.

Depending on your G&L program, you must also provide clear instructions on what to do with redeemed or empty gift cards. If recycling gift cards, explain how to collect and return them to the designated location. If your program allows reloading empty cards, outline the procedure for re-activating cards and adding new balances.

There are a lot of points to consider when training your team, so it helps to develop a training manual or checklist outlining all procedures and common scenarios. You can use an online platform like checklist.gg to customize a training plan.

The best ways to motivate your staff to sell gift cards include generating enthusiasm about the new program, helping them understand how gift cards increase customer retention and satisfaction, sharing positive customer feedback, or even setting up friendly competitions to reward those with the most gift card sales.
The objective here is to motivate your team and make them promote your gift card program actively.

How to Measure the Success of Your Gift Card Program

Now that you’ve implemented your gift card program, how do you know if it is helping your business or not?

By tracking the performance of the program, you can determine the return-on-investment of your gift card campaigns to see what’s working and what needs improvement.

Here are the key metrics to gauge your gift card program’s performance:

1. Circulation Figures

Take stock of the number of your gift cards that circulate in the market. Since gift cards do not expire, having an insight into their numbers and their value will help you understand how your gift card program is performing.

If the circulation is high, that indicates a steady cash flow in your business and strong overall health of your gift card program.

2. Customer-Acquisition Numbers

Check how many new customers you acquire from your gift card program. Simply take into account who purchased a gift card and who redeemed it. The higher the number of redemptions, the higher your new customer base.

3. Total Percentage of Sales

Total percentage of sales helps you understand the number of sales that came through your gift card program. Do gift card sales outperform sales from other channels, such as in-store sales or online sales? Are they meeting your business’ sales targets for the gift card program?

When you can compare revenue metrics from gift cards to other revenue channels, you’ll have a good idea of how well your gift card program performs and can set benchmarks for future improvement.

4. Retention and Re Engagement

Does your gift card program help you attract new customers? Does it successfully re engage your previous customers? Monitor the amount and percentage of upsells and return revenue from gift card purchases and redemptions to help you improve your gift card program and take corrective measures if needed.

5. Over Expenditure

Also known as a sales lift, an over expenditure is when customers redeeming a gift card spend more at your store than the original amount on the gift card.

When you have overexpenditures from your gift card revenue, you are nailing your gift card program, so your profits can soar.

Maximizing Holiday and Seasonal Gift Card Sales

Use custom promotions around the holiday season to improve the visibility of your gift card program. Holiday-focused design elements can be a big draw for customers looking for gifting options. 

Similarly, special deals like bonus cards with a minimum purchase can be great at jogging sales. Meal kit delivery service, Fresh Prep, offered a seasonal gift card bonus––10% extra credits on the purchase of any $100+ gift card. This limited-time offer was valid only for customers signing up for a new account. This heavy incentive leveraged seasonal gift-giving trends to attract new customers and get them to spend immediately. 

These deals benefit most from both online and physical promotion. Besides social media, use dedicated displays at your stores to catch shoppers' attention. Email marketing can help remind customers of gift card options. And don’t forget to highlight your cards as the perfect gift for hard-to-shop-for friends and family!

Real-world Success Stories and Case Studies

Integrating gift card programs can significantly boost small businesses by enhancing customer engagement, loyalty, and revenue streams. 

Marketing principles—innovation, customer engagement, and strategic marketing—are core to successful gift card implementations. 

Let’s explore a few case studies for key takeaways and best practices that can inform and inspire small businesses contemplating or currently managing gift card programs.

Aberdeen Gift Cards: Power of Community

Aberdeen is the third largest city in Scotland––and it came up with a unique idea for promoting businesses all across their territory. 

An Aberdeen gift card can be used city-wide, including hundreds of local businesses as well as some big brands. You can choose to gift a physical gift card or an e-card––both easy to buy and well-integrated into all participating stores.

This gives buyers and recipients even more flexibility and choice. Although it is mostly exclusive to a single geographic region, it offers great value to those who live there. 

Key Takeaway: You can organize a gift card program for your own local area! Coordinate with a G&L program willing to take on the challenge and leverage the reach of a supportive community of businesses!

Torchy’s Tacos: Running Limited Editions

The restaurant chain, Torchy’s Tacos, holds an annual gift card sale for its limited edition “Torchy’s Tacos Gold Card”. This card comes with a unique benefit (a free Green Chile Queso with every in-store purchase till December 31) but unlocking it requires $250 on gift cards.

This climb to $250 dollars worth of spending is made easier with bonuses for every $25 and $100 spent. Each of its 117 locations has an equal but limited number of Gold Cards.

This clever tactic incentivizes increasing gift card purchases while also adding a supply and time constraint.

Key Takeaway: Scarcity and exclusivity can transform your gift card program from a purchase to a desired prize.

Harnois Énergies: Revolutionizing Loyalty Programs

Harnois Énergies, through its Proxi Extra loyalty program powered by DataCandy, exemplifies excellence in customer loyalty strategies. Its gift cards are practical, flexible, and easy to purchase. 

The range of gift cards offered includes the Proxi Extra, Harnois, Esso, and Pétro-T

 –– each which can be used at a different combination of gas stations and convenience stores. These gift cards are also intertwined with the loyalty program and customers earn loyalty points for each transaction.

Considered the best loyalty program in Canada, Harnois Énergies also rewards customers with points for gas and convenience store purchases that are redeemable for discounts and products. 

Key Takeaway: A robust gift card program attacts and initiates customer loyalty whereas a rewards system with tangible benefits enhances it.

ZIBO! Restaurant-Bars: Expanding Reach with Gift Cards

ZIBO! Restaurant-Bar is a food and drink restaurant chain with ten locations, two different concepts, and over 700 employees. 

The chain implemented Datacandy’s gift card program and witnessed great results. 

Initially, they began by offering physical gift cards. Following the success of these, they introduced digital gift cards, and then, eventually, the option to place bulk corporate gift card orders. The company cited DataCandy’s Gift Card Program as integral to its success, especially due to its ability to activate gift cards in mass quantities.

Adding digital and bulk gift cards led to new customers, more sales, and greater convenience. In some months, as much as 50% of gift card sales come from corporate B2B orders, and in others, over 80% of gift card sales are done online.

Key Takeaway: Versatility in gift card offerings helps accommodate different consumer segments.

Edo Japan: Streamlining Operations

Edo Japan is a quick-service restaurant with over 150 locations. It shifted to DataCandy’s gift card program, which made the physical gift card selling and redemption process faster and smoother. Alongside, it focussed on digital transformation; the restaurant launched gift cards via its My Edo mobile app.

The transition turned using gift cards at their restaurants from a clunky, burdensome process to just a single swipe or scan. 

Key Takeaway: Operational efficiency in gift card processing directly impacts the customer experience and satisfaction, ultimately making a big splash on business growth.

Mission Thrift Store: Enhancing Brand Loyalty

Mission Thrift Store is a volunteer chain of over 50 thrift stores across Canada. It provides a department store-like experience for used goods and devotes its revenue to leadership and literacy programs around the world.  

DataCandy’s gift card solution solved the issue of an overreliance on cash transactions. Refunds were taking money out of the store’s pockets, but issuing these in the form of store credits on gift cards kept revenue within their ecosystem––these opportunities for future sales were crucial to their philanthropic vision.

Additionally, the new gift card program also helped them donate to its local ministry without cash. Prepaid cards were more feasible for their own organization as well as preferred by ministries, who often did not want to distribute cash. 

Tracking these gift cards through Payston’es online hub, complete with a results dashboard and detailed reports, helped keep track of this widening network. 

Key Takeaway: Gift cards can be leveraged for more than individual purchases. Offering gift cards, instead of other resources, might be more appreciated and help widen your brand’s network of consumers. 

Pandora Masonville: Elevating Customer Experience

Technical challenges can majorly hamper your G&L program. Pandora Masonville, an international jewelry retailer, faced connectivity and service issues with its payment terminals. Additionally, security issues threatened the loss of both time and money.

DataCandy helped them by enhancing payment security and operational efficiency, as well as providing dedicated technical support. It introduced countertop and wireless point-of-sale solutions, which increased convenience and reduced wait times during busy seasons. It’s an achievement that highlights the importance of integrating reliable payment solutions to support a superior shopping experience.

Key Takeaway: Reliable payment solutions go a long way in both usual sales as well as availing gift cards. Security is the backbone of a good gift card program. 

Canva: Embracing Digital Platforms (bonus idea!)

Canva, the online graphic design giant, offers easy-to-use tools for creating everything from social media graphics to presentations. Its journey from a startup to a multi-billion dollar business speaks to the tremendous potential of digital platforms in modern commerce. 

Co-founders Melanie Perkins and Cliff Obrecht overcame the ‘freemium paradox’ by focusing on user experience (UX) and offering professional tools at a subscription cost lower than hiring a graphic designer. Their strategy highlights the importance of leveraging digital platforms for product distribution, including gift cards, which can benefit from similar accessibility principles and ease of use.

While Canva doesn’t offer gift cards, their SaaS model is perfect for positioning gift cards as a practical and valuable gift for a creative person. It could be a short-term subscription to the platform’s paid version. This essentially functions as a “free trial” for the recipient. If they benefit enough from the platform, they’re likely to continue as a paid subscriber even after the gift membership ends. 

Key Takeaway: Digital platforms are easy to access and can provide tremendous value to the right customer. Gift cards can be a way to share your service to help potential new customers get a taste.

Unleashing Potential with Gift Card Programs

The journey through the various benefits and strategic implementations of gift card programs for small businesses has highlighted their undeniable value in driving growth, enhancing brand visibility, and solidifying customer loyalty. Gift cards are a versatile tool for business expansion and customer engagement.

They offer a dual advantage: immediate financial uplift for businesses and a seamless, personalized shopping experience for consumers. 

Their ability to generate upfront cash flow, boost sales during peak seasons, attract new customers, encourage repeat business, and provide valuable insights into customer preferences is unparalleled. 

Integrating digital platforms and social media marketing has further amplified the reach and effectiveness of gift card programs for small businesses, making them indispensable.

As we've seen from real-world success stories, embracing gift card programs can significantly enhance customer loyalty with strategies such as offering tangible rewards, aligning offerings with community needs, leveraging USPs, and utilizing social media for market penetration. 

The strategic deployment of gift cards, be it through innovative loyalty programs or as a tool for brand differentiation, plays a pivotal role in fostering long-term customer relationships and driving business growth.

Integrating a gift card program offers a promising avenue for small business owners contemplating the next steps in their growth strategy. With the global gift card market on an upward trajectory, now is the opportune time to capitalize on this trend. 

By implementing a gift card program tailored to your business's unique needs and customer preferences, you can unlock new doors of opportunity and make every transaction an investment in your future success.

Maximize Your Business Potential with DataCandy's Loyalty Programs

Retail loyalty programs have consistently proven invaluable in establishing enduring customer relationships, enhancing sales volumes, and navigating fluctuating economic conditions. 

Their ability to engage customers, collect important data, and provide personalized rewards makes these programs crucial to modern retail strategies. 

Businesses can strengthen their position and achieve long-term success in a dynamic market by using platforms like DataCandy.

Boost your customer satisfaction with DataCandy. Sign up today to transform loyalty in your business.

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