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Breaking the Code

Digital gift cards – quickly acquired, used, and gifted – are gaining speed in the marketplace

By Andrea Montello

The cell phone is the most quickly adopted consumer technology in the history of the world, reports Pew Research Center’s Internet & American Life Project, a non-profit research organization. Cell phone ownership among adults has exceeded 90 percent, according to Pew.

The Millennial generation, adults younger than age 34, are on the cutting edge of this technology. They use their phones for going online, sending email, playing games, listening to music, and recording videos. Electronic or digital gift cards, also known as e-gift cards or virtual gift cards, that are delivered via e-mail or text incorporating an award code, offer instant gratification, exactly what this demographic group is used to.

“These types of rewards certainly fulfill the needs of the super-connected 20 and under crowd. This crowd lives digitally, so it makes sense to reward them that way,” says Bill Grassmyer, president of Morris County, NJ-based MediaTree, a leading provider of digital incentives for the promotional products industry and consumer marketing agencies. “It doesn’t stop with Millennials. People of all age groups are widely connected these days. We live in a multi-screen society. Everything we want and do is a click away. It’s only natural that consumers and employees expect more.”

Incentive managers can send digital gift cards instantly without having to worry about the costs involved with physical cards like postage and inventory. Plus, people carry their smartphones everywhere they go. During an impromptu trip to the mall, the mobile gift card will be in one’s pocket while an actual plastic card will probably be left back at home.

“We believe the trend for incentive, loyalty, and recognition programs using digital gift cards over plastic gift cards is in line with the trends we are seeing in the consumer marketplace,” says Alex Rogow, director business development, CashStar, a digital gifting and incentives company. “CashStar’s first quarter e-gifting growth is nearly six times greater than the first quarter year-over-year overall growth of e-commerce sales, which Internet Retailer reported at 14 percent. As consumers adopt digital gift cards in their every day lives they come to expect them from their rewards programs. Agencies and program administrators are beginning to take notice and are adding them to their catalogs.”

Overall, the growth rate for mobile purchases is very strong, with busy, on-the-go shoppers comprising an ever-increasing segment of the population. “E-gift cards purchased on a mobile device the week of Mother’s Day went from 9 percent in 2012 to 12 percent by Christmas week 2012. 2013 mobile purchases the week of Mother’s Day jumped to 16 percent (a 74 percent increase over 2012), and then soared to 25 percent on Mother’s Day itself,” reports Rogow.

Gift cards as an award in general are extremely popular. According to the Incentive Research Foundation, in partnership with the Incentive Gift Card Council, 52 percent of U.S. businesses use gift cards, which encompasses $22.7 billion annually.

Instant Gratification

In a typical incentive/loyalty environment, fulfilling a plastic gift card can take anywhere from three days to three weeks. With a digital gift card, the consumer receives it instantly. “In addition to improving the client experience, incentive and loyalty partners appreciate the fact that digital cards lead to less customer service calls, they are better for the environment, and they cost less to fulfill,” explains Mike Fletcher, senior vice president marketing and sales, Giftango, a Portland, OR company that specializes in digital gift cards.

Although digital cards are gaining momentum in the marketplace, plastic cards are still more popular. Des Plaines, IL-based SVM, a global leader in gift card incentive and reward solutions, had Erickson Research conduct a survey of some of its incentive and rewards customers on the sales and marketing and employee sides. In both areas, there is growing interest in digital gift cards but the preference right now is for plastic cards.  In the sales and marketing arena, 84 percent prefer plastic for reasons that include they are tangible and are something that can actually be placed in a recipient's hand. Another factor is not having everyone's e-mail address. On the employee incentive side, 91 percent prefer plastic gift cards for the same reason, they are tangible. They can be handed to a recipient face-to-face or at an event as opposed to delivering a code to their e-mail, cites the survey.

"Our experience with digital gift cards is it is growing rapidly but is still a relatively small part of the gift card incentive market," says Jim Leroux, president of SVM. "The advantages of the digital side are instant gratification, speed, and convenience of delivery. As mobile technology continues to advance and smart phones and apps enable more convenient use of digital, this will continue to support the adoption of digital cards although the tangible aspect of plastic gift cards will always be important."

The Plugged-In Generation

Millennials are always plugged in. Many have navigated smart phones all their lives. They live in the world of texting, Twitter, Facebook, and Instagram, where their posts receive instant feedback. Digital gift cards appeal to them.

“Those in their mid-twenties and early thirties want instant gratification and that’s what digital gift cards provide,” says New York City-based Melissa Wahlers, senior manager, sales and operational administration, EGR International, a New York-based engagement agency. Wahlers reports that EGR began offering digital gift cards in February and so far 10 percent of gift card redemption’s have been e-codes. They do have a certain time and place, she admits. “I feel they lose their power if it’s something a CEO is giving to his or her employees. In that instance, it’s best to have something physical in your hand that will offer an emotional attachment. But for a points-based program where recipients earn digital cards for certain goals they achieve, they are perfect.”

Trending Toward Digital

Elgin, IL-based National Gift Card Corp (NGC), a leading marketer and supplier of gift cards for use in loyalty, incentive and rewards programs, began offering digital gift cards early in 2011. "We strive to be innovative, not only in the range of gift card brands we offer, but with our methods of delivery and fulfillment,” says Rick Rubin, NGC’s senior vice president of strategic partnerships. “We saw several years ago that the market was trending toward digital, and wanted to make it easier for our customers to have a broader choice of how their gift cards are delivered. Digital is particularly popular for incentive and loyalty programs with a younger demographic, savvy with smart phones, and with recipients who want immediacy."

Digital cards, like traditional plastic gift cards, are retailer and merchant specific, says Rubin. The brands span across all categories including dining, apparel, and home improvement. NGC delivers digital gift cards in two major ways. NGCecodes delivers a code via e-mail to recipients covering a wide range of retail, dining, and entertainment brands. The second method, NGCrewards, operates through a portal that can be customized, and allows recipients to pick out a gift card from a range of pre-selected brands for fulfillment by NGC.

On The Spot

Coppell, TX-based Frosch Rewards & Incentives, a company that offers comprehensive incentive management services, launched MyRewardPoints™ that can be digitally delivered via e-mail a year and a half ago. “This product has certainly taken off for us. It is a larger percentage of our sales than all our other solutions,” says Melanie Miller-Pusateri, Frosch senior vice president.

This is a popular product for on-the-spot rewards. “We have clients who order them every single day. They go in, place the order, specify who they want it to go to, and boom, it is delivered to that person’s e-mail inbox.”

MyRewardPoints™ is a solution for those companies that do not have a need for a full-fledged ongoing points program, explains Miller-Pusateri. Another popular use is for incentivized wellness programs where rewards in various forms are used as extrinsic motivators to drive employee engagement in these programs.

Digital cards also work well for companies where employees work remotely. Omaha, NE-based GC Incentives™, a division of GiftCerticiates.com, has a product called the SuperCertificate®, which is redeemable for over 200 brand-name gift cards and is available in three formats: physical, digital, and greeting cards.

“The digital format works great for workforces with multiple locations. The ordering process is easy. As soon as you hit send, the SuperCertificate® is delivered to everybody’s inbox instantly,” says Anne Jetter, director, merchant services and channel sales, GC Incentives. “They decide what gift card they want. It’s up to them. That’s what we provide: The Reward of Choice.”

Choice, speed of delivery, and the elimination of shipping costs are just a few of the attributes that are contributing to digital cards gaining momentum in the marketplace. E-gift engagement is here to stay.

The Benefits of Going Digital

For some, digital gift cards reign supreme. Portland, ME-based CashStar reports that benefits include:

  1. Immediacy of delivery. Instantly recognizing or delighting the program participant.
  2. Greater customization. Branding, design, and message personalization reinforces loyalty and reward at the time of use.
  3. Flexible denomination. Because cards can be issued in any denomination, lower denominations create a hook for faster participation in loyalty programs.
  4. Lower costs. Postage costs, lost in mail/replacement issues, as well as overhead associated with plastic like storage and security, are eliminated.
  5. Convenience of mobile. Digital cards increasingly have the ability to be added to mobile wallets like Apple’s Passbook, which enables proximity-based notifications to drive redemption and ensures recipients always have easy access to their eGift Cards at the point of sale/redemption.

You Gotta Have Art

Works by Vincent van Gogh…Henri Matisse…Ansel Adams are all a click a way at Art.com. Innowave Marketing Group, a leading rewards company providing high-end, luxury, and innovative reward solutions unique to the consumer loyalty, sales and channel incentive and consumer promotion marketplace, is now offering art.com to the incentive industry with gift cards and gift codes. “I had never seen such a robust selection of art that is so easily accessible in the space. There are over a million and a half different art choices available on this platform that appeal to all demographics. Having so many choices is much more effective than cherry picking up to 20 art pieces which is historically how art was served in this marketplace,” says Stu Birger, CEO of Silicon Valley, CA-based Innowave.

Although there may be some discounts when buying gift cards in bulk, historically those discounts have not been that significant. This is not the case with Art.com. “There is a pretty aggressive discount structure leveraged on the platform,” says Birger. Interest in www.art.com has run the gamut from small incentive houses, large loyalty marketing companies, gaming companies, financial institutions, beverage companies, to multi-level marketing companies.

Art.com has 12 million customers worldwide and is said to have the third highest virality rate of any brand on Pinterest. The premise of the company is connecting people to art and that’s exactly what it is doing.

Art.com gift cards are available as traditional gift cards, e-certificates, and e-codes to serve every program type in the marketplace. Innowave believes there is a significant momentum and a continued growth opportunity in the e-code segment of the industry and uses state-of-the-art technology to deliver Art.com e-codes immediately to program managers and program participants through its technology applications.

Digital Media in Great Demand

Coral Gables, FL-based Choose Digital offers a digital marketplace featuring the latest music, movies, TV shows, eBooks, and audiobooks. This material can be integrated seamlessly into loyalty and incentive programs allowing users to redeem their points or miles for the latest digital content.

Studies show that digital movies, music, and books increases engagement and traffic on any program website that offers them. Plus, digital media appeals to all age and demographic groups.

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