Gift Certificates

... for one of the nicest things about mathematics, or anything else you might care to learn, is that many of the things which can never be, often are. You see it's very much like your trying to reach Infinity. You know that it's there, but you just don't know where — but just because you can never reach it doesn't mean that it's not worth looking for.
— Norton Juster, The Phantom Tollbooth

If you have any type of business, you need to consider offering gift certificates. Sometimes these are called stored-value cards as the value resides on the card and not on a computer.

Gift certificates are so attractive because they bring current and future customers into your business. That is, if I give a gift certificate to my daughter, it ensures that she will go into the store to buy something — at least I hope so. Even in the case that she does not, companies like giftcardsagain.com, which buy and sell gift cards, provide a way for cards to be redistributed. Card holders generally receive 60% for gift cards they sell, and others can buy them at a 10 to 15% discount. Regardless of the resale discount, the benefit to your business is the same as you still sold the card at face value, and a customer will still come into your store.

Another attribute that makes gift cards so attractive is that customers pay for the card up front. This interest-free money is great. For every $100 certificate that is not cashed out in a year, you earn 10% interest. The longer the customer takes to cash the certificate, the more money you make through the time value of money. Additionally, since there is no requirement that these funds be kept separate, you are free to do with the money whatever you decide.

Another advantage of gift cards is that many of these cards get lost, stolen or misplaced. It has been estimated that over 5% of certificates never get redeemed. Many of the businesses that we work for have a much higher non-redemption rate.

Many stores that offer gift certificates place a limit on the length of time within which these certificates can be redeemed. I have seen limits of 1 to 5 years on various certificates. Currently, California is one of the few states that say these limits are illegal; however, over time, I would guess that more states are going to eliminate this limit. Time limit or no time limit, gift cards are still very attractive items to offer.

A final advantage of gift certificates is that they are very easy to manage. However, in the case that you decide that you do not want to handle them yourself, there many firms that will manage the service for you at a very low cost.

Gift certificates, while predominately sold around Christmas, can be sold year round for birthdays, anniversaries and other celebrations. Therefore, in order to sell them, you must train your staff at the checkout counter what to do when a customer would like one. Just putting up a sign is not enough.

Now go out and evaluate if your customers need to give gifts. If the answer is yes, you should begin offering gift certificates. Providing a new source of revenue and new customers, gift certificates can be very profitable.

You can do it!

Jerry Osteryoung is the Jim Moran Professor of Entrepreneurship in the College of Business at Florida State University. He is also the Director of the Entrepreneurship Program at FSU and Executive Director of the Jim Moran Institute of Global Entrepreneurship. He can be reached by e-mail at jostery@comcast.net or by phone at 850-644-3372.

Tags: Florida Small Business