Overview
Navigating the landscape of gift cards and comp cards and their implications is vital to ensure you are using the correct one for your business. This article will discuss both card types, including their benefits, challenges, and best practices.
What are gift cards?
Gift cards are prepaid debit cards loaded with a specific amount of money and used as cash. However, businesses must report and manage gift card sales as taxable revenue.
Revenue: Gift cards are prepaid revenue; cash is in the bank immediately.
Customer Acquisition: With gift cards, businesses easily acquire new customers, especially during holidays and special occasions like birthdays, anniversaries, and spur-of-the-moment decisions.
Spend More: Consumers may spend more with gift cards vs. their own cash, which leads to greater revenue.
Customer Retention: Reward dollars, or bonus gift cards offered because of regular gift card purchases, can be offered as part of a promotion to retain customers.
Simplify: Gift cards simplify payment; customers can pre-load funds and manage spending with a few taps on their smartphone or other device.
What are comp cards?
Comp cards are not sold but are given away for free. They’re a powerful tool for employee and customer relationship management.
Customer Satisfaction: Comp cards can fix service issues or exceed customer expectations, increasing loyalty.
Employee Incentives: Giving away comp cards as rewards may boost employee morale and productivity.
Marketing Tool: Comp cards can be used for marketing campaigns and offer complimentary items to attract new customers.
Cost Control: While comp cards can increase customer satisfaction, strict controls to prevent abuse and financial loss are key.
In a broader business sense, gift card sales generate upfront cash and new customers. Comp cards solidify existing relationships and improve service perception. When used wisely, both cards will improve the customer journey in different ways.
What are the benefits of gift cards?
Understanding how to leverage gift cards effectively can turn a simple promotional tool into a powerful driver of repeat business.
Let’s get into some of their benefits:
1. Revenue Boost
Gift cards bring in immediate cash, but they’re considered advanced sales on deferred revenue. This upfront cash debit can be used to grow your business, invest in inventory, or improve your restaurant’s customer experience.
2. Customer Acquisition
Customers often buy gift cards online as gifts for friends, family, or colleagues. When someone gets a gift card, they are introduced to the brand and future purchases increase. Gift cards can also attract customers during slow periods or promote specific products or services.
3. Increased Customer Loyalty
Gift cards can increase customer loyalty by providing a convenient and thoughtful gifting option. By offering gift cards, businesses show customer appreciation and encourage repeat business. Loyalty programs often include reward dollars or buy-one-get-one-free (BOGO) gift card deals, creating a loop of customer engagement.
Read the articles: Gift Card Escheatment, Expiration, Exemption, and Dormancy and How Do I Order Gift or Loyalty Cards? for further important information on gift cards.
What are the benefits of comp cards?
While comp cards are an expense for businesses, they can be a powerful tool when used wisely.
Here’s how to get the most out of them:
1. Service Recovery
Comp cards are gold when it comes to turning a bad customer experience into a good one. Offering comp cards that provide discounts on future services can effectively mitigate customer dissatisfaction with service failures.
For example, a restaurant may give a comp card to guests who had a long wait or a lousy meal and ask them to return when things are better.
However, clear guidelines for employees on when and how to use comp cards are crucial for fair and consistent use. Tracking the reasons for comp cards can give valuable insights into where service needs to improve.
2. Employee Incentives
Comp cards can motivate employees. By rewarding reliable performance with complimentary products or services, businesses can boost morale and get employees to go the extra mile.
A clear and transparent comp card incentive program with performance metrics will ensure fairness and maximum employee engagement. For example, employees with consistently positive customer feedback can be rewarded with comp cards, which creates a culture of excellence and customer-centric service. Learn more about managing an employee comp program by reading: Managing your Employee Comp Program Participants through the Client Portal.
3. As a Marketing Tool
Comp cards are also a marketing tool within the restaurant and hospitality industry. They are strategically valuable for introducing new menu items or services, attracting visitors during off-peak periods, and re-engaging with customers who haven’t dined or stayed.
For instance, a comp card won as a prize in a dining competition can significantly boost customer engagement and participation. Hotels and restaurants can hand out comp cards at local festivals or community events to get attendees to try their food or service and turn occasional visitors into regulars. Partnering with influencers or bloggers for comp card giveaways can create buzz and attract new customers.
4. Tracking Your Results
Managing comp card distribution and tracking is critical to get the most out of them. A tracking system will help monitor redemption rates and their impact on sales and customer retention. This data is valuable for adjusting strategies and understanding the business's ROI on comp cards.
By maintaining detailed reports on comp card usage, your restaurant can pinpoint which promotions or special offers drive the most traffic and customer engagement. These insights help optimize operational decisions, such as adjusting staffing levels during promotions or improving menu offerings based on customer preferences. This strategic use of data ensures that every decision is backed by real-world activity, improving overall business efficiency and customer satisfaction.
For more ideas on how to use comp cards and managing a comp program, please read What is a Comp Program?.
Why not use both?
Gift cards and comp cards are valuable tools that can significantly impact your business when used strategically. Gift cards drive revenue and customer acquisition, while comp cards drive customer retention, employee motivation, and damage control.
To maximize the benefits of both, it’s essential to understand their strengths and weaknesses.
Here are a few recommendations for creating a sound strategy:
Segment Your Audience: Use gift cards to attract new customers and comp cards to reward loyal customers and employees. This targeted approach ensures that each card type serves its purpose effectively.
Incentivize Specific Behaviors: Offer gift cards as incentives for first-time purchases or referrals. Use comp cards to reward employees for exceptional performance or to compensate customers for service issues.
Monitor and Analyze Performance: Track both gift and comp card usage and redemption rates through detailed analysis and reporting. This data-driven approach allows you to identify trends, measure success, and make informed adjustments to your programs.
Compliance and Legal Considerations: Ensure you know and comply with financial regulations related to gift card sales, redemptions, and fees. This will help you avoid legal issues and maintain customer trust.
By implementing well-managed gift and comp card programs, you can increase customer satisfaction, boost revenue, and improve your brand reputation. If you have questions, please reach out to your solutions consultant, customer success manager or email Paytronix Support at [email protected].
Additional Resources
What is a Comp Program?
Managing your Employee Comp Program Participants through the Client Portal
How can I use Comp & Gift Cards in a Holiday Bonus Program?
Gift Card Escheatment, Expiration, Exemption, and Dormancy
How Do I Order Gift Cards?