How to win the gift card wars

Don’t take our word for it that gift cards are one of the best holiday season cash flow-boosters your restaurant can offer. Instead, take a look at how aggressively some savvy operators are going after gift card business this year, even while adding restrictions to better control how card purchaser bonus rewards can redeemed.

Let’s start with a quick review of why gift cards are such a good deal for restaurants.

In addition to delivering their face value in cash up front, gift cards literally are the gift that keeps on giving to those who sell them. Card redemption brings new customers into your restaurant, and card industry figures show that 61 percent of card recipients spend more than the face value of their card. How much more? A lot—60 percent more is typical. Factor in the large number of cards that go unredeemed or partially unredeemed and it’s no wonder restaurant operators have long been eager to sell more cards.

Even better, operators continue to figure out how to further leverage gift card sales into additional business via assorted bonuses given to the people who buy the cards as gifts. A look at the fine print on some of this year’s card offers show that limits on how and when bonuses can be redeemed have been rewritten to give operators necessary controls and encourage usage during traditionally slow times of the year.

And best of all, gift cards work for operators in every segment, from QSRs and buffets up to and including fine dining.

Quaker Steak & Lube got a jumpstart on the competition with a pre-Black Friday gift-card “blowout sale” that ran from Nov 19-21. Customers who bought a gift card during this period could buy a second card for half off, with the caveat that the second card couldn’t be used until after Dec. 26, 2012. Those who missed this early sale could still get a 20 percent use-later bonus on their gift card purchase. So, a customer who purchases, for example, a $25 gift card between now and Christmas gets a $5 card for his or her personal use. Again, that bonus can’t be used until after Christmas.

More offers

Fleming’s Prime Steakhouse & Wine Bar gives customers who purchase a $100 gift card a $20 bonus card, but keeps tight control over its redemption. Here are the details on its offer:

“To receive $20 Bonus Cards, Gift Cards must be purchased between 11/1/12 and 12/31/12. $20 Bonus Cards are valid from 1/1/13 to 2/10/13. The $20 Bonus Card is a promotional card. THIS IS NOT A GIFT CARD. Card cannot be used for alcohol, tax or gratuity. Food and beverage only. Cannot be sold, reproduced or exchanged. Internet distribution or resale is strictly prohibited. Card must be presented for redemption and relinquished at time of redemption. Not valid with any other discount offer. Limit of one card per visit, one card per table and one use per card. This card will not carry an unused balance.”

Chicago’s Lettuce Entertain You Enterprises offers an even-juicier reward package this year: a $25 holiday bonus certificate goes to the buyer of a $100 gift card. LEYE, too, places significant restrictions on the use of these bonus bucks.

“In order to receive the Holiday Bonus each individual purchase must be $100 or more and some restrictions apply. Holiday Bonus Certificates may be used Jan. 2—April 10, 2013. Holiday Bonus Certificates are not valid after 3 pm on Saturdays. Frequent Diner Club points are awarded at purchase only if Holiday Bonus Certificates are not selected. Holiday Bonus Certificates are not accepted for payment for delivery orders, private parties or catering events.”

Celebrity chefs are getting in on the action, too, but with fewer restrictions. New York City-based David Burke gives card buyers a straight 20 percent discount on their card purchase for customers who buy them online. Dallas-based Kent Rathbun gives a $20 bonus for a $100 card purchase, with the lone restriction being that the bonus can’t be used at the time of purchase.

One place card purchasers can get immediate gratification is at smoothie chain Jamba Juice. If they wish, customers who buy a $25 holiday gift care are rewarded with a free 16 oz. smoothie on the spot.
No matter how you structure your restaurant’s holiday gift card promotion, be aware that the market for them has become more competitive. Anecdotally, it looks like 20 percent is the default reward customers are coming to expect. However, these customers are also willing to accept ever-tighter restrictions on how their bonus rewards can be used.

There’s still time to kick your restaurant’s gift card or gift certificate program into high gear for the holiday season. It’s worth doing, because a well-designed program has little to no downside—a claim few other restaurant marketing and promotion initiatives can make.