Magazine Article | May 1, 2002

Play The Gift Card Game

Source: Innovative Retail Technologies

Before you enter the gift card game, arm yourself with the knowledge needed to implement a successful program.

Integrated Solutions For Retailers, May 2002

You can't go into a retail store or restaurant these days without seeing a gift card promotion at the register or throughout the store. Even tier-two and tier-three retailers understand the value of tracking and maintaining balances on stored value gift cards, and retail marketing campaigns have shown that customers like to receive plastic promotional cards better than paper coupons. If a gift card program is part of your technology plans this year, it's time to act. As you get closer to the end of the year and prime gift-giving season, it will be harder to research and install a program. Most gift card companies need 60 to 120 days to go live. But, before you add the cards to your product offering, you should understand the relationship between gift card vendors and database providers, recognize that certain quality standards need to be upheld, and consider the advantages of outsourcing gift card database management.

Two Vendors Are Better Than One
A retailer's first inclination when looking for a gift card program might be to contact the actual gift card manufacturer. Jake Jacobs, senior VP of sales at Arthur Blank & Company, Inc., said that is okay to do, but the process needs to involve both card manufacturers and database integrators. Companies that manufacture gift and loyalty cards, like Arthur Blank, usually have partnerships with various database system integrators that can help retailers integrate a card system with their POS systems, activate cards online or through the POS, and track card usage across the chain. "If retailers plan to operate their gift card databases in-house, a card manufacturer can work with them directly. However, we don't recommend that they implement their own database," Jacobs said. "A third-party integrator can evaluate the current retail system and make recommendations for the integration." Retailers shouldn't be concerned that they need to work with two different vendors for the gift card solution. In fact, Jacobs said the retailer would realize the benefits of a best-of-breed solution if the providers stick to their core competencies and work together.

Insist On Quality Standards
Regardless of the expertise of the vendor, retailers should closely examine each vendor's quality control standards that ensure the gift cards are unique and in numerical order. "We are printing a tender, and if there are any issues with the card's numerical integrity, it causes huge customer service problems," Jacobs said. "Both the card manufacturer and database provider must adhere to quality assurance (QA) procedures throughout the printing and packaging process." The QA procedures should include an automatic card scanning process that is tied to a database of card numbers. The scanning checks that the card manufacturer is encoding each one correctly and that any mistakes are caught before they leave the printing facility. "Checking numerical integrity is not a process that can be left to human operators because so many cards are produced at a high rate of speed," Jacobs said. Tier-one retailers order millions of cards each year and ship them to thousands of stores, so it is important for everything to be right before they get to the stores.

Once the card database established by the card manufacturer is turned over to the systems integrator, quality standards need to extend to card distribution and database reliability. "Considering what is required to manage a gift card program - card production, card fulfillment, customer service, reporting, etc. - it benefits the retailer to work with a vendor that has database expertise," said Mike Berry, executive VP and general manager at Stored Value Systems. The database vendor should offer redundant backup systems, as well as the latest interfaces to major POS (point of sale) software products. "Although gift card programs are not designed to capture individual cardholder demographics, a retailer should be able to track the results of specific promotions, evaluate the spending habits of consumers, and determine the incremental revenue attributable to the gift cards," Berry said.

Just like a card manufacturer recognizes that database management is not its core competency, many retailers take the same approach and allow a third-party system integrator or database management company to maintain their gift card programs. "By using an outside vendor, a retailer can concentrate on selling merchandise and running its operation without managing the technical and logistical aspects of a card program," Berry said. This way, a retailer does not have to maintain redundant systems, staff a round-the-clock call center and network monitoring facility, or keep up with the latest trends or best practices in the industry. With all this in place, any retailer can raise the ante and win big with a gift card program.