Forget cash. Gift cards are fast replacing dollars in rebate promotions.
For starters, they must be used in the store, whereas cash can be spent anywhere. And they can lead to additional sales and loyalty, as several retailers have found out.
Take PetSmart. Last summer, it ran a two-month promotion called Gift Card Days, offering cards worth up to $50 on certain purchases. Requests for the cards could be submitted online or through the mail.
The program had an “excellent” return on investment, generating hundreds of thousands of new e-mail addresses. And the company plans to use these as part of its marketing efforts, Chief Marketing Officer, Mary Miller said during an analyst meeting.
PetSmart spokesperson Michelle Friedman adds that gift cards “encourage our pet parents to return to the store and try out the variety of products that we offer, as well as our services.”
Gift-card promotions have also been conducted by Lowe's, Linens-n-Things, Best Buy and CompUSA.
But there's a rub: retailers have to be careful about how they word things.
For one thing, rebates should be accurately described, says Albert Shelden, acting senior assistant attorney general for California's Department of Justice.
“If they use the word ‘rebate’ alone, without further disclosures, there could be major problems,” Shelden says. “A $15 rebate, without any other details, means to a consumer that they're going to get $15 cash back and that they're not going to have to go back to your store or Web site to buy something with their rebate.”
Hal Stinchfield, CEO of Promotional Marketing Insights, concurs.
“You can't just imply that it's dollars and then send them a gift card,” he says. “That won't fly.”
PetSmart appears to be getting it right. One recent promotion stated that consumers can get a gift card worth up to $10 by mail with the purchase of specially marked aquatics products.
Some marketers offer rebates only in the form of gift cards, while others provide a choice: a gift card or cash back. Not everyone is happy with a branded gift card.
“The consumer will always want choice,” Stinchfield says. “The minute you start putting restrictors on an incentive or reward vehicle, you're going to lose some of the target audience.”
Walgreens offers both options as a “convenience.” A recent promotion on the cover of its EasySaver catalog, which can be found in its stores, reads: “10% bonus on all rebates — When you choose a Walgreens Gift Card instead of a rebate check!”
“If a customer is getting their money back on a Walgreens gift card, they have to spend that at our store,” says Walgreen's spokesperson Michael Polzin. “It's a very good way to bring them back for future purchases.”
Walgreens highlights the rebates in Sunday newspaper inserts and through its five-year-old Easy Rebate Program. In addition, the EasySaver catalog alerts customers to all offers.
The program allows customers to collect cash or gift card rebates over a one-month period and then submit them on one rebate form instead of applying for each individual rebate.
“Customers can send in one envelope, use one stamp and get back one rebate,” Polzin says. “It saves on postage and the customer gets one sizable rebate back.”
In addition, both PetSmart and Walgreens allow customers to reload dollars onto the gift cards. And this drives loyalty, the companies say.
“I love recharging my [Walgreens] card because I get my credit so much faster than waiting for a check or new card in the mail,” said a consumer in an online discussion room.
Will gift cards improve overall rebate response? That's not clear.
One-third of all gift cards sold during the holidays are not fully redeemed, and the percentage is the same for cash rebates under $20. But cash rebates valued at $50 to $80 have an 80% redemption rate, says Britt Beemer, CEO and founder of Americas Research Group.
One downside to gift card rebates is that they can cost 15% to 20% more to fulfill than self-mailing checks, Stinchfield says. And that's because of the printing process.
The cards are affixed to a card carrier and inserted into an envelope that must then be labeled. Rebate checks are run through high-speed printers that print the value on one side and the address on the other. The mailers are then folded three times, glued, sorted and dropped in a mail sack.
“There are extra labor steps that don't exist for a self-mailing rebate check,” Stinchfield says.
And for consumers, it takes just about as long to redeem a gift card as it does a check. They are faced with the lengthy, often complicated process of saving receipts and filling out forms on deadline.
Coupled with that is the four- to six- week wait to get the rebate. The process often leaves consumers frustrated. And they often complain to legislators leading to problems for retailers.
For example, CompUSA had to settle with the Federal Trade Commission after a supplier failed to fulfill thousands of rebates. The computer retailer agreed to make good to consumers.
Shortly after that, Best Buy announced plans to phase out its mail-in rebate program over two years after numerous consumer complaints. And OfficeMax, one of the nation's largest office-supply distributors eliminated the majority of its mail-in rebate programs.
California plans to keep a close eye on the growing use of gift cards as rebates, Shelden says.
“We're going to pay attention and we're going to take a look at what really is happening,” he says.
Campaigns in brief
Monster Works Giveaway
Monster.com is supporting its 2007 marketing theme Monster Works for Me, with an online sweepstakes. Consumers can vie for a chance at $20,000, a Toyota Prius, a trip to Florida or a donation to a charity. Consumers register on www.Monster.com and write a short essay about why they work. Five grand prizes will be awarded. The promotion runs through Feb. 20.
Agency: Brand/Content, Boston.
Jackson Hewitt Tax Service
Jackson Hewitt 500
Playing to its role as “the tax service of NASCAR,” Jackson Hewitt is launching this sweeps to bring in customers. Race fans can sign up at races, at participating Jackson Hewitt locations or online at www.JacksonHewitt.com/500. More than 500 prizes will be awarded, including the grand prize of up to five times the winner's 2006 tax refund, to a $25,000 maximum. Other prizes include VIP experiences to the first race of the 2008 season. The promo runs through April 17.
Agencies: Just Marketing, Zionsvillle, IN, handles the sweeps. Eprize, Pleasant Ridge, MI, handles sweeps logistics.
Hunt for More
A 30-day treasure hunt sends people across the U.S. on a search for 23 hidden gold coins worth a collective $1.7 million. The on-pack game drives consumers to www.DrPepper.com to find clues revealed each day that test players' knowledge of geography, history and world events. The clues tie to treasures hidden in that consumer's region, based on the ZIP code they use at registration. The game ends March 9.
Agency: Circle One Marketing, Norwalk, CT, handles creative. SoftCoin Inc., handled the code generation and is hosting the Web site.
U.S. Postal Service
Guess & Win Sweepstakes
This sweeps celebrates the launch of the Postal Service's 2007 With Love and Kisses stamp, which features Hershey's Kisses and a red heart. Consumers submit guesses of how many Hershey's Kisses will fit inside a Postal Service Priority Mail flat-rate box to www.GuessandWinSweeps.com. The winner will receive a $10,000 getaway. Viral e-mails can be sent from the site. The promo ends Feb. 15.
Administrator: Strobe Promotions, Hicksville, NY.
The Dream Ace Contest
This national contest offers entrepreneurs the opportunity to compete to win their own store, valued at $1 million. Consumers can enter the contest, which runs through March 15, at www.DreamAceHardware.com. There, they take a “suitability test” and answer three essay questions to see if they have what it takes to run a hardware store. Two 45-foot buses called the Dream Ace Machines are making stops at stores in 40 cities to promote the contest.
Agency: Mars Advertising, Southfield, MI.
New Day, Your Way
Kmart's 16-week program offers weekly rewards when members lose weight. Members get coupons from Slim-Fast, Caress, Neutrogena, Pantene and others. A contest in 19 markets puts 10 semi-finalists in each market on Slim-Fast's online weight-loss program for 16 weeks, then sends four winners to New York City in October for a makeover and photo shoot. The grand-prize winner gets $10,000. All four winners get a membership to Bally Fitness, Kmart gift cards and workout equipment. The contest runs through June.