This holiday season, many retailers have discovered a big source of revenue that restaurants have been using to boost fourth quarter sales for years – gift card bonuses.
Retailers have joined local and national restaurants in offering customers a freebie. Customers spend $25 to $100 on gift cards and get a free bonus gift card for $5 to $25. Some retailers discount their gift cards instead, offering a $100 card for $80.
Bonuses, which took hold during the recession, are a big part of the reason gift cards remain popular. More than four in five shoppers plan to buy at least one this year, spending at least $155 for the cards, according to the National Retail Federation. Thats the highest amount in the surveys 10-year history, amounting to about $110 billion in the United States.
Bonus cards are effective at driving traffic, have a high perceived value and a great deal of consumer appeal, said Hal Stinchfield, CEO and founder of Promotional Marketing Insights.
Although consumers love pocketing the savings, the bonus promotions are especially attractive to merchants. Twenty percent of all gift cards are not fully redeemed, according to American Express. While cards with a value of $100 or more have a high redemption rate, many cards for $10 to $50 never get spent, giving merchants a free ride.
Theres no doubt about it, Stinchfield said. Theyre an absolute money-maker for merchants.
Merchants also see the bonus card offers as a way to bring in customers during the lull that inevitably happens after consumers get their credit card bills in January.
Bonus cards are also a cheap, easy way to gain new customers, said Eric VanderSchaaf, director of marketing at Giftcard.com. Consumers will take a chance on a business or a restaurant theyve never been to before with an incentive.