It seems like a great idea – you collect money now that your customer won’t actually spend till later. As we all know, some NEVER redeem the cards – free cash for plastic. And then some redeem $49.72 from a $50 gift card. The balance is called “breakage” … that too is money in your pocket.
Also, these cards can help keep your business in the forefront of your customer’s mind, particularly if there’s an expiration date. When the money represented by that gift card “burns a hole” in their pocket, they’ll be back. It’s possible they’ll purchase more than is on the card. That means more money for you.
Gift cards can help create a habit of returning to your store and help establish a relationship with either a new customer or cement your relationship with an older customer.
But there are nightmares ahead if you don’t know what you’re doing.
Nicole Reyhle’s article Gift Cards 101 – Things To Consider is an extremely valuable primer to this important subject.
HT: Maine Business