Question

A. How do gift cards benefit retailers? Does the benefit depend upon whether the good is normal or inferior?

B. How do gift cards benefit consumers?

Answer 1

A) Benefits of Gift Cards for retailers

• Gift cards does not cut into profits. It is seen that more than 40% of customers spend more than the gift card amount. They are loyal too. In this way by giving the gift card to the trusted customers, retailers do not cut into their profits, rather profits are increased through these gift cards.
• Gift cards help in getting funds in advance. They immediately improve the cash flow. The retailers are paid in advance when a gift card is bought.
• More selling is done through gift cards. Customers are more happy with gift cards as they have ready cash to be spent and they are more likely to visit the store many times for spending the gift card amount resulting in spending more and the retailer gets more profits through this.
• Gift cards are more convenient than any other selling techniques. The person or the retailer himself who give the gift card for them too it is easy to give it and the customers also find it convenient easy to use and carry it.
• Some types of gift cards also more promotional opportunities. They come with inbuilt advertising materials which the customers are tempted to use.
• When these gift cards are given it helps in building a brand awareness. The customers who do not buy from a particular retailer, even they come to know about them and their facilities when their gift card is given to these customers.And if they are happy, they may even refer to other customers.
• The distribution also increases with the help of these gift cards as they serve as a promotional benefit. They can reach to far off customers too.

Definitely the benefits of the Gift card depend a lot on the quality of the goods. Though the gift cards are a sort of free to the customers either they get it as a gift from their loved ones or from the retailer themselves as a promotional activity. But the end users are the consumers and cheap quality of goods are never accepted by the customers. If the reatilers want to really increase their sales and profit then the quality of the goods should be certainly the best in normal sales and even through gift cards, then only customers will come back to them and refer them to other customers.

B. How do gift cards benefit consumers?

• Gift cards come as a boon for the customers who are afraid of loosing cash. These cards are kept whenever they want to spend.
• Gift cards are handy and ready to use for the customers who hate using cash every time.
• Digital gift cards are even better as there is no need for the customers to actually carry a card.
• The amount spent on shopping can be controlled with such gift cards as the amount that is spent is fixed here.
• Rather than gifting something which is not useful to the customers it is better to give a gift card as the customer himself can decided what to be bought with this card.
• Gift cards generally come with a time frame to be used, customers can plan their spending and shopping accordingly.