They are a great way to diversify your revenue stream.
It is the season of giving and what better way to celebrate it than with a gift card. Consider these stats that point to why gift cards are an excellent marketing strategy and a lifeline (given current conditions) for restaurants
- A 37 percent increase year-over-year of egift cards
- 56 percent of the customers said they want a gift card from their favorite restaurant.
- 65 percent of the gift card recipients spend 38 percent more than the face value of the gift card.
- 44 percent of consumers said that gift cards encourage them to try new restaurants that they would not have visited otherwise.
Restaurant gift cards are a great way to diversify your revenue stream. Besides being an immediate source of revenue, gift cards encourage repeat visits and help you reach new customers.
Why do you need Gift Cards For Your Restaurant
Attract New Customers: When it comes to advertising, a referral or word of mouth advertising is the best. A customer who purchases your gift card for friends or family is effectively your brand advocate personally recommending your food and services to others. It encourages the recipients who might not otherwise visit your business to try out your restaurant
Encourage Repeat Visits: Up selling gift cards to your existing customers is an excellent way to encourage repeat business. Encouraging customers to reload their cards can encourage repeat visits and also help you cut down the costs of printing new cards.
Boost Sales: Gift cards can help you to boost sales not only by expanding your customer base, but also the average spend on gift cards usually exceeds the value of the gift card. Studies show that 72 percent of gift card holders spend more than the original value of the card. Sometimes a customer may spend less than what is on the card, but then they are more than likely to return to use the remaining balance. In either case, your restaurant stands to gain.
Branding: Gift cards are a great marketing tool to ensure that your restaurant brand remains on top of your customers' minds.
Dealing with dissatisfied customers: Most restaurants deal with dissatisfied customers by providing a refund or free food item. This can turn out to be expensive in the long run. Offering a gift card to these disgruntled customers can encourage them to revisit your restaurant while giving you another opportunity to impress them. In addition, in case they choose not to return, you can try to follow up with them to make sure they are taken care of.
Immediate Cash Flow: Restrictions on restaurant operations have resulted in a significant decrease in sales all over the country. Restaurant gift cards provide a quick injection of cash which can be used to cover operating costs during the current crisis.
Types Of Gift Cards
As gift cards can bring many benefits to your restaurant let us look at the different types of gift cards available to restaurants. Depending on the costs and operational issues, one can choose which option works best.
1. Electronic Gift Cards
Going for electronic gift cards is one of the easiest and the most convenient options available to restaurants. Given the current COVID situation, it is also one of the safest. There are several service providers that provide restaurants with digital gift cards. Customers can purchase digital gift cards online for personal use or gifting. These cards can be redeemed online or instore by either scanning the barcode on the eGift Card or manually entering the numerical code mentioned on the card.
You can set up digital gift cards through your PoS solution or via a third party integrations/app. While eGift cards have no production cost, there may be a set up cost, monthly charge or per order commission depending on the service provider.
2. Physical Gift Cards
Physical gift cards provide a great opportunity for branding and can be customized according to your requirements. It can cost you anywhere between $.3- $2/piece to print these cards.
There are two types of physical cards to choose from
Barcode Based Gift Cards
Each card comes with a unique barcode/QR code. Once a customer purchases a gift card all his information is associated with the unique code on the card, which can be used to access his information. You will need a barcode scanner to scan these gift cards.
Magnetic-Stripe Gift Cards
Magnetic stripe based gift cards have superior data security as compared to barcodes but they have shorter life as the magnetic stripe wears out over time. Customers can swipe their cards at your credit card terminal to redeem.
Ways To Implement A Gift Card Program For Your Restaurant
Offer Gift Cards Through Your PoS
One of the most convenient and efficient ways to implement gift cards is through your PoS solution. It enables you to easily create, promote, send or track sales, redemptions and overall performance of gift cards. While some PoS solutions include gift cards as a free functionality on all accounts others have it as an additional add-on and may charge an extra fee for it. In either case, if you opt for physical-card based gift cards you will have to pay for the cost of printing the cards.
Square PoS provides gift card functionality free on all Square accounts. They offer fully customizable physical or digital cards that can be purchased in-store or on your website or social media handles. These cards can be redeemed both online and in-store. Square charges you a standard credit card processing rate of 2.9 percent plus 30 cents every time a customer purchases a gift card online.
Clover app has a free gift card functionality and provides both physical and digital cards. Clover gift cards can be redeemed in-store only by swiping of physical cards or scanning of digital cards. Online redemption is available through third party apps.
Toast PoS provides the gift card functionality as an add-on at $50 per month. They provide both physical and digital cards and you also get a choice between QR based cards and magnetic stripe based cards. However these cards can be redeemed in-store only
Third-Party Gift Card Company integrated with your PoS
If your PoS solution does not have an inbuilt gift cards functionality, you can check out third party solutions that can be integrated with your PoS so you can seamlessly transfer information from your gift card program to your PoS.
Standalone Third-Party Gift Card Company
If your PoS does not have any gift card integrations or if the gift card company you want does not integrate with your POo, you can opt for a standalone solution. However, in this case you will need to process gift card transactions separately from regular transactions.
Standalone web-based gift card apps allow you to create and track Gift cards through mobile app or dashboard . You can sell eGift cards on your website, app or social media handles and they can be redeemed both online and in your store. Again two types of cards are available on these apps. For barcode based cards, all you need to do is download the app to your mobile device, and use it or to scan the barcodes/QR codes on customers mobile devices. The other type of cards generate numerical codes that you can key into your terminal.
Many of these apps can be integrated with your PoS system to help you streamline all your back-end processes. These apps or companies usually charge a small monthly fee or a commission on each gift card sold.
Gift Up! for example, can be integrated to your website to sell gift cards. There are no monthly or setup fees but they charge a fee of 3.49 percent/gift card which either the restaurant owner or customers can pay.
GiftFly provides a merchant dashboard and an app that enables operators to scan and redeem gift cards. They charge a processing fee of 2.70 percent plus 30 cents per card transaction.
Marketing Your Gift Cards
Create a Marketing Strategy
Creating a marketing plan is an important first step. Examine your target audience and work on a strategy to reach out to them via multiple channels and platforms. Decide on the budget and then proceed to create a well-defined marketing strategy for each of your social media platforms.
Your staff should be aware of all the operational details of how gift cards work. Train them to up-sell gift cards to dine-in customers. If need be incentivize them on the sale of gift cards (as some employees would not see any tips on selling these cards) and have a friendly competition to promote sales.
- In-Store Promotions (Posters at hostess stand, in waiting area, at the cash register, Menu Call-outs, Menu Inserts, Table Tents)
- All in-store digital display boards
- Email Campaigns
- All Social Media Channels
- Your Website /App
- Offline and Online Advertising
Make it easier for your customers to purchase online and gift it. You should ensure that you offer gift cards in several denominations to provide more choice to your customers. If you only have the capability to send physical cards, then take the address of the customer and mail it to them (it is a painful process but it's worth it).
Use Community Gift Card Platforms
Community Gift Card Platforms aggregate gift cards from several restaurants so customers can find and purchase gift cards from restaurants they want to support.
Rally for Restaurants is one such platform that not only lists restaurants gift cards available for sale but also donates $1 for every gift card purchase shared on social to organizations that help restaurant workers.
Providing customers a discount can encourage customers to purchase a gift card for the future. Consider offering a discount of 10–20 percent on the face value of gift cards. Another option could be to offer a second smaller denomination card on purchase of a higher value card e.g. $5 card on purchase of a $25 card. There might be a chance that these two gift cards will be given to two different potential customers thereby increasing your restaurant’s reach.
Check with other local restaurants to see if you can partner with them to provide gift cards that can be redeemed at any participating restaurants.
Approach schools & PTAs—most schools purchase teacher gifts around this time. See if you can work with the PTAs to push your gift cards.
- Approach apartment complexes and see if they can buy $10 gift cards for their residents birthdays
- Approach local businesses (realtors, insurance agents, doctors offices, hospitals etc)
Seshu Madabushi is the founder and CEO of mKonnekt: A serial entrepreneur with a focus on restaurant marketing, Seshu Madabushi has more than 18 years of experience. His latest venture, mKonnekt, is a restaurant technology platform that collects and analyzes data to create personalized customers' experiences. mKonnekt platform is an all-inclusive end to end marketing platform with multiple apps that enables customers interactions with restaurant brands.