this issue>distribution

Incentives an Untapped Market for Gift Cards
New Growth Opportunity for Retailers, says First Data

DENVER, CO (Aug. 1, 2005) While the gift card industry’s growth continues at a blistering, double-digit pace, the introduction of gift cards as customer incentives creates a new growth opportunity in an untapped market for diverse retail and service industries, according to a study by the newly formed First Data Prepaid Services, a division of First Data Corp. First Data Prepaid Services includes ValueLink and Money Network, providing bank- and merchant-issued gift and spending card solutions as well as paycard offerings.

Research interviews conducted with 68 customer incentive program decision-makers within U.S. businesses of 100 or more employees indicated that nearly 10 percent of the companies surveyed are offering incentives for their customers. More than three quarters, 77 percent, of the respondents said their incentives are geared toward customer retention. Just over half, 51 percent, said customer acquisition was a key objective.

Of the companies offering some form of customer incentive, 40 percent are using gift cards most often, second only to product or service discounts at 52 percent. Twenty-nine percent said that their primary use of gift cards was for the consumer market, while roughly the same number (28 percent) said their primary audience for gift card incentives was for the business-to-business market. The remaining 43 percent split their use of gift cards as incentives among consumers and other businesses equally.

“This is very good news for merchants and service providers across a multitude of industries,” said First Data Prepaid Services vice president of global marketing, Karen Larsen. “Our ongoing consumer research, coupled with gift card industry sales, have proven that consumers crave the convenience, flexibility and choice offered by gift cards. We have now identified yet another untapped market for businesses to reach out to their customers with a product that is well known, well accepted and well used.”

According to the companies surveyed, the most popular gift cards given as customer incentives are for:
• Sit-down/table service restaurants, 67%
• Specialty stores, 56%
• Department stores, 45%
• Large, discount stores, 40%

Similar to ValueLink’s 2004 Corporate Incentive research, the 2005 Customer Incentives research showed a strong interest by incentive decision makers in expanding use of gift cards for customers in the coming year. Twenty percent of the companies currently offering gift card customer incentives said they will increase use in the coming year, and 52 percent of all companies surveyed said they are likely to use gift cards as customer incentives in the coming year.

Top reasons for the strong interest in gift cards are similar to previous ValueLink studies:
• Easy/convenient to give and use
• Valued and seen as a good reward
• Strength in meeting customer relations objectives

“Favorable consumer response to gift and spending cards continues to drive opportunities for the prepaid industry,” said Ed Labry, president First Data Prepaid Services. “While we’ve enjoyed tremendous growth throughout the past decade, we will continuously and carefully listen to our retail, restaurant, employer and banking clients, as well as their customers, as we expand the horizon for these products.”

Data for First Data Prepaid Services’ Customer Incentives Research was collected in April 2005 and is viewed as directional in nature. Interviews were completed with manager or higher level individuals in sales, marketing or human resources who are responsible for making incentive program decisions in companies with 100 or more employees.

Source: First Data (firstdata.com)