You've Got a Friend in Gift Card Resellers
April 07, 2008
Gift Card Resellers Have Your Solutions
By Alex Palmer
Planners often praise the flexibility and convenience of gift cards. But for those looking to expand their winners' choices even further, the best option may be to go with a reseller. And they may even save time and money too. Third-party incentive houses and resellers that help develop, run and fulfill the rewards for gift card programs may offer a much stronger alternative to buying directly from retail stores, and can also provide solutions to the administrative and financial challenges that in-house programs can sometimes present.
"Usually if [companies] are looking for Starbucks cards, for example, they're looking for three or four other cards at the same time," says Joan Travelstead, vice president of business development for the National Gift Card Corporation (NGC), a reseller based in Crystal Lake, Ill. "We're kind of a one-stop shop, and it's easier to pay one price, or pay one shipping fee than to pay four." The NGC has partnerships with 150 separate retailers, several it works with exclusively. According to Travelstead, by going through NGC, clients are able to order from any number of these vendors, at any quantity.
Travelstead says that there are some clear cost-saving advantages resellers can offer clients that wouldn't be enjoyed if they went directly to the retail suppliers. Because resellers are ordering large quantities of cards for many clients, they are able to pass on at least a portion of the bulk discounts they receive from their partners. Travelstead adds that working with a reseller like NGC generally saves clients 5 to 6 percent of the regular cost that they would pay at a retailer.
"Even within a major corporation, even if you were spending $5 million, $10 million, $20 million on [an in-house gift card program], it's not the same as when one guy works with twenty or a hundred clients and spends $50 to $100 million a year on it," says Michael Ruege, executive vice president of Atlanta, Ga.–based USMotivation, a full-service incentive house that incorporates gift cards into its reward options.
Keith Fenhaus, president of gift card incentive planner Hallmark Insights, based in Minneapolis, Minn., cites some administrative advantages in working with resellers that go beyond basic cost-saving, recalling a client who recently reached out to Hallmark for help putting together a gift card rewards and recognition program. Prior to looking to Hallmark, the company had self-administered its million-dollar gift card program, buying an equal number of cards from four different, popular retailers with the expectation that the variety of cards would be equally well-received by the winners.
"Well, they weren't," explains Fenhaus. "One [or the cards] they blew out in the first thirty days, and they had to go out and buy more, but they were sitting on $750,000 of other inventory."
The shortage of one card meant some employees did not receive their first choice, while the extra inventory raised security concerns, since the cards were stored on-site and had to be protected from theft and carefully monitored. Fenhaus points to this as an example of why many in-house program planners avoid offering too many card choices. He says resellers can be valuable partners because they can handle a vast amount of inven- tory for dozens and sometimes hundreds of partners that clients can choose from (Hallmark works with over 350 retail partners), without worrying about over- or under-stock.
Not only can Hallmark Insights handle the inventory, shipping cards to winners directly, it actually has permission to print gift cards and certificates on demand. This means the client incenting its employees never runs out of inventory, and also avoids any excess orders. Additionally, because Hallmark prints them, any expiration dates or nonuse fees its retail partners enforce (though these are becoming increasingly less common among retailer-issued cards) will be less of a concern, since the cards are printed on the day they are requested.
"It's that old marketing maxim," says Ruege. "Do what you do as a core business and do it well, don't try to be everything to everybody." Going through a gift card reseller, according to Ruege, allows an organization to offer its employees a more expansive gift card program, while "a lot of administration and a lot of additional costs and reporting that you'd have to do if you were just a standalone person" can be handled outside of the organization.
Because their "core business" is gift cards and fulfillment, many resellers also provide the online platform on which employees redeem their rewards. They can create Web programs for the individual company, which can include the client's logo, theme of the incentive program or any other customization appropriate to that particular program, and in which the reseller remains invisible to the recipient. In this way, recipients are not losing the motivational boost or brand connection that a smaller program run in-house might provide.
Fenhaus cites a reward and recognition program his company put together for a major financial corporation. Hallmark set up an interactive site that launched off the company's intranet, with all cards branded to their particular institution. The rewards mirrored the organization's look and feel, and could be printed in any amount, "whether $5 or $10,000." Additionally, the rewards could be broken down however the employee chose, so a $100 reward could be used as $5 for Blockbuster, $20 for Omaha Steaks and $75 for Macy's. Fenhaus emphasizes that this flexibility also allows these kinds of platforms to work either for occasional lump-sum awards, or for incremental point-based awards, where an employee could save up for a large certificate, or cash out as often as he chooses.
The extra influence resellers have with their partners can also allow organizations to create more unique gift card reward programs. The Portland, Ore.–based marketing and loyalty company Chockstone worked out such a program with one of Yahoo's California offices. Yahoo's leadership wanted to offer its employees quality coffee drinks that would provide a soft incentive boost to performance on a daily basis, but they felt it didn't make sense for them to install a coffee bar in the office.
Chockstone, working with the local branch of a West Coast coffee shop chain, a retail partner of Chockstone's, set up a gift card program that gave Yahoo employees a monthly credit at the shop that they could redeem for anything they liked. At the beginning of each month, the card was "topped up," according to Chockstone's President and CEO Jeffrey Lipp. The employees had a steady supply of tea or coffee, and were more inclined to stay close to the office during breaks. Chockstone's partnership with the coffee shop was a significant advantage in negotiating the terms of the program.
Beyond choice, cost and convenience, resellers emphasize the more targeted service they offer corporate planners. Since resellers work especially with the incentive business sector, they are able to offer stronger assistance once the program is up and running. "The customer service level is obviously much more in tune with your needs," says Ruege, pointing out that many companies that offer gift cards are not geared toward fitting them into a full corporate rewards program. "We give you a different way. We have more leverage, so if there are marginal customer service issues, we can get engaged and make that right for you."
Send comments to alex.palmer@nielsen.com.
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