Viewpoint: Let’s Make a Deal (October 2013)
By Tammy Durston, Blackhawk Network
Bargains, deals and discounts. We all want them. According to eMarketer,1 90 percent of U.S. shoppers compare prices before making a purchase. Worry about the economy has caused consumers to be tightfisted with their money and searching for bargains is now a popular activity. Knowing how to spend money well has become an important component of how Americans view success.2 Coupling the quest for bargains with the proliferation of smartphones (estimated at 61 percent of mobile subscribers3), consumers now compare prices and scan for deals while in checkout lines.
|The Numbers – The national survey details results of those who had purchased at least one gift card in the past year. This group of gift card buyers consisted of a slightly higher percentage of women (56 percent) than men (44 percent). About half had children in the home. Forty-three percent had bought from a prepaid voucher site, such as Groupon, and about a quarter had purchased something from an online flash sale.Thirty percent of those surveyed had purchased discounted gift cards, and 20 percent had purchased multipacks with bonus cards. Seventeen percent had purchased two gift cards for the price of one.
Those who had not purchased any of the discounted gift cards described were asked about their interest in purchasing each type. Most were interested in purchasing gift cards with discounted prices, bonus cards and multipacks. Fewer shoppers, although still a sizable number (42 percent), were interested in purchasing product gift cards.
The survey also asked questions about how consumers would use gift cards they purchased as part of a deal. The results show a high proportion of self-use among respondents, suggesting that deals are encouraging more consumers to use gift cards for their own spending. Consumers who purchased or were interested in purchasing multipacks with a bonus gift card said they would:
Heavy gift card buyers (those who have purchased more than seven gift cards in the past year), those who utilize prepaid vouchers (i.e., Groupon) and women were significantly more likely to purchase bonus gift cards. Consumers who indicated they had children in the household also were significantly more likely to purchase discounted gift cards.
Overall, those that have purchased gift cards online were significantly more interested in purchasing all of these types of gift card deals. As for proposed recipients, multipacks were more oriented toward friends, siblings, neighbors, co-workers and service providers and less likely for self-users. Respondents also did not expect new offers to constantly be available—44 percent said they would expect new offers every couple of months while 22 percent said every six weeks.
Gift cards, one of the most popular gifts, are not immune to the deal-driven consumer. Although retailers traditionally had balked at offering discounted gift cards, many are shifting strategies to keep up with consumer demand and are increasing overall sales.
We at Blackhawk Network conduct consumer research regularly to help guide our strategy and that of our retail and card partners. Earlier this year, we examined gift card deals to find out more about which offers are most attractive to consumers.
The national study of 414 gift card buyers showed a majority of consumers have high interest in a variety of gift card discounts, and oftentimes the deals spur them to buy gift cards for their own use. What’s more, participating retailers have seen strong double-digit sales growth with almost no cannibalization.
“The deals and discount program is an additive program as it offers unique products at different price points that appeal to the price-sensitive consumer,” says David Tate, Blackhawk’s general manager, closed- and open-loop gift.
“And it offers an alternative to the drastic discounting of the Groupon or LivingSocial type offers,” he says.
For our survey, we asked about five types of deals:
- Discounted gift card: A gift card purchased for less than face value. For example: A $50 gift card on sale for $40.
- Bonus gift card: A gift card with a “bonus” card attached to it. For example, a consumer buys a $50 gift card and a $5 bonus gift card for the same retailer is included with the purchase.
- Multipack with bonus card: Included in the multipack are several gift cards grouped together and packaged with an extra gift card.
- Product gift card: A gift card the recipient uses to purchase a specific item (usually online). For example, a consumer buys a product gift card (which includes a discount on the item), purchases the item and keeps it or gives the product away as a gift. Or, a consumer buys the product gift card to give as a gift.
- Two gift cards for the price of one.
What we found is that with the overall popularity of gift cards and the proliferation of deals and discounts, shoppers are responding because they feel they’re getting the most bang for their buck. For a closer look at the survey results, see “The Numbers” on the right.
The new “normal” means retailers have to make consumers feel satisfied with “smart” purchases. A recent gift card offer featuring two gift cards for a discount has achieved 70 percent growth since launch, according to Wendy Patrick, Blackhawk Network’s discount program director.
Adding a discount gift card promotion can extend a retailer’s product line without cannibalization worries or heavy price slashing—as with some other daily deals—while appealing to consumers’ strong desire for discounts.
Tammy Durston is senior director of research at Blackhawk Network, a Pleasanton, Calif.-based provider of prepaid and financial payments products. Her research helps guide Blackhawk’s strategy for its diverse product lines and geographies. She can be reached at firstname.lastname@example.org.
1 eMarketer, “Cheapskates Online” (April 2013).
2 American Express, “LifeTwist Study” (April 2013).
3 Nielsen, “Mobile Majority Newswire” (June 25, 2013).