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A Fistful Of (Electronic) Dollars
Category: Gift Cards
Methods: Market-Share Tracking, Consumer Trends
Summary
After a two-year downturn that mirrored the recession, gift card purchases
bounced back strongly for the 2010 holiday season. Estimates of the gift card
market vary greatly depending on who you ask, but no one can argue the growing
trend of purchasing gift cards in lieu of a fruitcake, a tacky tie, or the unsolicited
“gift” of workout clothes. Even if the market size is closer to
$50 billion (the Federal Reserve estimate) instead of twice that (the gift card
industry estimate), no retailer wants to miss out on this opportunity, given
every major retailer, and many mom-and-pop shops, is in the gift card game.
Strategic Issues
Gift cards pose a multitude of opportunities and possible risks to a retailer.
Opportunities for a retailer include incremental revenue over the gift card
amount, converting infrequent shoppers to loyal customers during the gift card
redemption trip, and the possibility of nonredemption (for example, due to a
lost card). Risks for the retailer include the cost of the gift card program
(including management, inventory control, and security of the cards), purchase
of items the customer would have purchased anyway, and losing a visit from loyal
customers because they received a gift card from a competitor. Our client, Retailer
A, a Fortune 100 company and one of the gift card market-share leaders, was
interested in better understanding its competitive place in the gift card market,
as well as understanding the gift card purchase decision and gift-card redemption
experience. Decision Analyst recommended using quantitative surveys among both
purchasers and recipients to capture gift card market share, as well as a deep
dive into the motivations and behaviors surrounding a gift card purchase.
Research Objectives
The primary purpose of the study was to gain insight into the gift card market
in general, and to measure Retailer A’s performance against its key competitors,
based on a nationwide survey. Additionally, by surveying gift card purchasers,
the deep-dive surveys provided specific feedback into the impulse nature of gift
card purchases, who the recipients are, and the specific occasions of the purchases,
if any. From the recipient survey, desired findings included the incremental value
of the gift cards (in terms of both dollar amount and number of trips) and the
influence of the gift card on the purchase.
Marketing Research Design and Methods
This project was conducted using a series of quantitative online surveys, both
short market-level snapshots of the gift card market and more detailed questionnaires
at the purchase/redemption level. The surveys were conducted two times a year
to capture the seasonality of the gift card market, using a representative,
nationwide sample of respondents. Respondents were screened for having purchased
and/or received gift cards in the past six months. By asking purchasers who
the gift card was for, the data included recipient information for children
and teens, whose information would not otherwise be captured by the recipient
wave (respondents were screened to be 18 or older).
Survey invitations were issued across the United States, sampled from the American
Consumer Opinion® Online panel, Decision Analyst’s online panel
of over eight million respondents worldwide. In order to give holiday gift card
recipients enough time to redeem their gift cards, we staggered the purchaser
and recipient waves of the survey.
The market-share data were captured from a short screening survey among a
robust sample of respondents. The survey asked the number of gift cards purchased,
the value of each card, for which retailers they were purchased, and from what
venue the cards were purchased. These questions were first asked for all members
of the household, and then the process was repeated for the respondent personally.
A smaller number of qualified respondents were then led into a more detailed
questionnaire, assigned to either a gift card purchaser or recipient section
for one specific gift card, based on previous responses. Asked of the purchasers,
this longer survey addressed such topics as general shopping behavior, the occasion
and recipient of the gift, and future gift card purchasing. Recipients were
asked the amount over the gift card value spent on the trip, the influence of
the gift card on the purchase, and categories of items purchased with the gift
card.
Results
From the data obtained, we were able to calculate the relative market share
in terms of both gift card volume and dollar share. Profile for both the gift
card receiver and gift card purchaser were developed and monitored over time
for a wide variety of retailers. For the gift card receivers, the profile included:
- How they used the card (both during the holiday and nonholiday seasons),
- Whether they were frequent shoppers at the gift card store or not, and
- How much over the gift card they spent.
For the gift card purchaser the profile included;
- Whether the purchases were planned or unplanned,
- If a gift was included with the gift card, or
- If the gift card was purchased only to receive a special discount or promotion
available to only those who purchased a gift card (and then if the gift card
was kept by the purchaser to be used for necessities).
Gift card competitors (both major competitors and upcoming competitors) were
identified and monitored over time.
Implications for Retailer A included having gift-card displays throughout
the store to encourage supplemental gift card purchases. Compared to its key competitors,
Retailer A also had a larger share of infrequent shoppers redeeming gift cards,
offering the client the opportunity to impress these shoppers and potentially
expand its core customer base.
In addition, a concept screening survey was conducted to optimize the best
design for the targeted audience and the targeted occasion. Improving the understanding
of gift card purchasers and recipients provides valuable information that helped
Retailer A grow their gift card market share and expand their customer base.
Copyright © 2011 by Decision Analyst, Inc.
This case study may not be copied, published, or used in any way without written
permission of Decision Analyst.
Marketing Research Services
If you would like more information on Tracking
Research , please contact Jerry W. Thomas (jthomas@decisionanalyst.com)
or Joel Mincey (jmincey@decisionanalyst.com)
by 1-800-ANALYSIS (262-5974) or 1-817-640-6166.
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