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Perspective: Consumer Insights Drive Merchant Success with Prepaid Gift Card Programs

Today's consumers are turning their growing appreciation for gift cards into an all-out public embrace. According to First Data’s 2011 U.S. Prepaid Consumer Insights Study, the average amount spent per closed-loop card grew in 2011, increasing by more than 23 percent compared to 2010. The average total amount consumers spent on closed loop gift cards increased to $211 from $161 last year.

However, while consumers continue to open their wallets and spend more on gift cards, it’s crucial for merchants to take the time to stay on top of industry trends and understand how consumers perceive and use gift cards. But that’s not all that is required. To experience the true benefits of effective prepaid gift card programs, merchants must dive deeper into how attitudes, behaviors and usage vary for different segments of consumers. That’s why First Data, in partnership with Market Strategies International, conducted the two parts of this year’s Prepaid Consumer Insights Study.

Equally important to helping merchants enhance their gift card programs and ensure success, the first part of the study provides an aggregate view of U.S. consumers’ attitudes and behaviors related to gift cards and compares year over year data, while the second part explores attitudes and behaviors for five distinct consumer segments.

Part I: Understanding Industry Trends and Consumers’ Use of Gift Cards

First Data reveals a number of implications that could help shape how merchants position and market gift cards:

  • Utilizing technology to support both physical and virtual gift cards:The ability to store gift card information on a mobile phone is appealing to 43 percent of consumers, helping eliminate burdens such as always carrying the card, not knowing the remaining balance and worrying about losing the gift card.
  • Incentivizing reloads: Reloading closed loop gift cards is still a niche application. The majority of reloads are still done by coffee shop customers, typically younger (25-34 years of age). Adding “bonus bucks” to a reload would encourage nearly two-thirds of consumers to consider reloading.
  • Communicating that gift cards are highly valued by receivers: For more than half of gift card recipients, a gift card valued at $25 is nearly equal in value to a gift valued at $50. Gift cards benefit the recipient by allowing them to select a gift of their own choosing as well as treat themselves by purchasing an item they did not plan to purchase with their own money
  • Offering e-gift cards: E-gift cards are not yet main stream; retailers would be wise to market them to the subset of consumers who have an interest. Overall, more consumers (47%) are interested in receiving a gift card than in actually sending one (22%), indicating an opportunity to educate consumers on the ease of sending and redeeming e-Gift cards.

Part II: Defining Consumer Segments by Values, Attitudes, Behaviors and Demographics

We analyzed results by five distinct consumer segments called “Budget Tamers,” “Card Enthusiasts,” “Helpful Husbands,” “Convenience Shoppers,” and “Last Resort Consumers,” to share characteristics and opportunities associated with different types of gift card purchasers.

The average spent per closed loop card increased by over 23 percent from last year, with consumers spending on average $34 per card in 2010 and $42 in 2011. Budget Tamers, on average, purchased the most closed loop cards (6.7) while spending the highest average amount ($79), compared to consumers in the Last Resort segment, who purchased the least amount of cards (3.3), and Convenience Shopper, who spent the least average amount on cards ($47).

Gas stations or convenience stores received the highest amount of total dollars spent (82%) by Budget Tamers, but the least amount from the other consumer segments. This is largely in part due to the fact that today’s economic challenges have consumers trying to stretch their dollars; a common characters of the Budget Tamer.

Overall, gift card buyers are an extremely diverse group in their attitudes and behaviors toward different types of cards, the number of cards they purchase, preferred purchase locations and affinity for e-gift cards. Understanding how to develop specific strategies and tactics targeted at each of the five consumer segments can significantly benefit merchants’ card programs.

Over the past 17 years, First Data has enabled tens of thousands of companies to establish and operate successful prepaid gift card programs. Our client companies range from small to mid-market retailers, restaurants and service providers to some of the world’s largest merchants.

Read more about First Data’s findings in Consumer Insights into the U.S. Gift Card Market: 2011 and The Face of Gift Card Consumers: Meeting the Needs of Five Consumer Segments.

Michael Hursta is the Closed-Loop Prepaid Category Manager at First Data.