Restaurant Gift Cards: Do they really work?

Gift cards have consistently ranked as the most popular holiday gift in the United States according to the National Retail Federation. In fact, it has topped the consumer’s wish list for a record 13th time in a row.

Even in the restaurant industry, particularly, gift cards are known to make for popular holiday presents. According to Paytronix's annual Gift Card Sales Report 2019, restaurant gift card sales grew 10.4% in 2018 compared to 2017.

During last year’s holiday season, which was shorter in length, restaurants reported a slight decline in both the number of gift cards sold and in the dollar values of those cards. However, despite the slight road bump, gift-cards are likely to perform well in the long-term with the global gift card market expected to post a CAGR of more than 13% between 2019-2023, according to a recent report by Technavio.

The growing demand for gift cards is driven by several factors including a rise in gifting culture, ease of cashless transaction and advanced payment solutions. Busy lifestyle, preference for flexibility, advancing technology and the prevalence of smartphones are other factors contributing to the haul.

When it comes to restaurant gift card sales, Starbucks rules the throne. They have used gift cards as a marketing strategy to bring in new customers, elicit loyalty from the existing ones and make all of them spend 20-25% more than usual. In 2014, Starbucks cards represented over 30% of the company’s transactions in the US alone.

If you’re still on the fence about it, here are some of the key rewards offered by restaurant gift cards.

Enjoy higher checks

Customers tend to spend much more on the check when redeeming gift cards. In fact, in a small survey conducted by our team, it was observed that most people use gift cards for a weekend get-togethers and family reunion dinners. Thus, the gift cards will bring you an average of 15 to 35 percent increase in average ticket size that can easily change the outlook of your restaurant’s bottom line at the end of the year.

Get instant revenue

Selling a gift card ensures you receive immediate revenue as the buyer purchases the card upfront. Even if the gift card is never redeemed, you still have secured a revenue.

Introduce new customers

Immediate and extended family and friends are the top recipients of gift cards. Many among these may not have dined at your restaurant before and a gift card provides an opportunity to introduce your brand to newer customers.

Drive traffic

Gift cards are a great way of driving traffic to the restaurant. Statistics show that 35% of the customers redeem gift cards within a week, while 21% of them do so within a month.

Encourage word of mouth marketing

When a person buys a gift card from you, they do so because they believe that dining at your restaurant will make for a great present to their loved one. While this brings in revenue, it also encourages priceless word of mouth marketing among your customers.

Find corporate partnership

Companies are increasingly offering incentives to their employees in the form of restaurant gift cards. U.S. businesses spend more than $20 billion on gift cards each year as reward programs for their customers, employees and sales teams. You can increase your sales by tailoring your gift cards to suit such corporate requirements.

Increase brand awareness

Gift cards can also enable brand awareness and recognition, especially when the card is well-designed. Whenever customers and their friends, family, and acquaintances see the card, they’re reminded of your business.

Things to keep in mind when offering restaurant gift cards

Make it easy to discover

Discoverability should be at the top of the lists when selling gift cards - whether online or offline or both. This means that customers must be able to locate the section on the site or the app where they can buy a gift card.

Offer partial redemption option

By allowing guests to use the card more than once due to partial redemption option, you are giving them more flexibility. Such a practice will be more appreciated by your customers as opposed to one-time use cards. You are also ensuring future dining experience when you allow the card balance to be carried forward for future purchases.

Don’t put restrictions

Besides partial redemption options, gift cards with little restrictions like having no expiration dates hold much more appeal to customers.

Focus on the design

As mentioned earlier, gift cards can be used for brand awareness and for this to happen, your card has to have a memorable design and appropriate content. A logo is a must, so is your contact details. Also, ensure that you’re painting brand consistency in the design.

Promote gift cards throughout the year

December is certainly the peak season for sale of gift cards, but you stand to benefit by promoting gift cards all year-round. 48% of gift card sales for full-service restaurants and 58% for quick-service restaurants take place during the first 11 months.

Have both online and offline gifts cards

Mobile phones are integral to shopping and payment experiences today. If you’re not offering mobile gift cards, you’re losing out on a large chunk of customers.

Set regular reminders

While a lot of businesses feel that unused gift cards are “free money”, the truth is that it would be more beneficial to have those customers spend their gift cards. Simple marketing gimmicks like newsletters, social media posts and push notifications can be good reminders to boost those redemption rates.

What would a smart restaurateur do? Launch an effective gift card program!

Restaurants that aren’t offering gift cards are missing out on huge engagement and profitability opportunities. Gift cards are extremely effective marketing tools that can be displayed at the cash register, as well as on the website and mobile ordering app for easy access.

Speak to our experts today to learn more about how you can implement a gift card program into your restaurant website and mobile app.