Use Gift Cards to Drive Sales

Use Gift Cards to Drive Sales and Reduce Processing Costs

As the holiday shopping season winds down, I reflect on some of the activity that I witnessed. Specifically here, I'm really just talking about how I saw Gift Cards being used. This year, unlike many in the past, there were several large retailers as well as national restaurant chains offering things like "Buy a $20 Gift Card and we'll add an extra $5 on us", or, "Buy a $50 Gift Card and we'll add an extra $10". Obviously, if the big national chains are doing it, then there must be excellent benefits to it driving future sales. Let's take a look at some ideas that you may be able to incorporate into your marketing that maybe you aren't utilizing yet in regards to Gift Cards. All of this, of course, takes into consideration that you are currently using Gift Cards in your establishment.

GIFT CARDS TO CAPTURE PINNED DEBITS AND SAVINGS:

If you have a pin pad in your establishment, then savings on your processing costs are available right at your fingertips. If you haven't already been enlightened, pinned debit transactions save you money over running them as credit transactions. But, many merchants, and their employees, don't do a great job in attempting to get customers to enter their pin number. I recommend to all my merchants that they put up a counter top sign that says something to the effect of "if you're paying with a debit card today, please enter your pin number as it saves us in processing costs". Or, of course, you could come up with something to that affect. But, here's a way you could utilize Gift Cards to help in this endeavor. Get yourself a fish bowl and preload a bunch of your Gift Cards with values ranging anywhere from $1 to maybe $20 (you can decide the values but just try and mix it up some). Then, put a sign on the counter that says "Enter your pin and win" or "Enter your pin and take a dip"....something along those lines. So, once they enter their pin number, they get to pull a card out of the bowl and it will be good on their "next visit". The obvious goal here is to get them back into the store again and they will virtually always spend more than the value on the card. National averages indicate that gift card holders tend to spend at least 20% more than what's on the card.

GIFT CARDS TO INCREASE YOUR AVERAGE SALE TODAY:

Here's an idea that could help boost your average sale today. Everybody likes a deal, wouldn't you agree? Let's say you have a customer comes to the counter and their purchases come to $42. Why not put up a sign that says something like "Purchases over $50 earns a $5 Gift Card" or "Purchases over $50 earns a 10% bonus on a Gift Card". It may just be an enticement for them to go back and find something else to add to their purchase today. And, of course, the Gift Card they are awarded is good towards their "next visit". Let's face it, if you're keystoning everything in your store and you give a $10 Gift Card, it's really only costing you $5 and will bring in more future sales.

GIFT CARDS ON RETURNS:

This is a strategy that could always be used when someone comes in with a return. Most often, buyers or recipients of gifts simply want a credit to their credit card or cash whichever is more appropriate. Of course you want to be accommodating to whatever they want. But, doing either of the aforementioned returns sends them packing with what was once a sale and money in the till. Offer them what they want but possibly give them an alternative such as "we're happy to refund your money on this transaction, however, as an alternative, we'd like to offer you a Gift Card for your refund with an additional 10% bonus, or $5 bonus, or whatever". Again, the idea here is to try to get them back in the store and respend what was originally spent and hopefully, more. Actually, they may come back, use some of the Gift Card and not deplete it completely which would bring them in again. The more often you can get them in your store, or restaurant, the more likely you are to do future business with them.

GIFT CARDS AS LOYALTY CARDS:

Some merchants use Gift Cards as a form of Customer Loyalty card if they aren't actually using real loyalty cards. For example, tell your customers, or display in your establishment that "all purchases over $20 earn a reward of some percentage automatically added to a Gift Card". And, once again, this Gift Card is good towards future visits. The difference between using Gift Cards as a form of "rewards" type program over using an actual Loyalty Card is that Gift Cards are in dollar denominations and loyalty cards can be either dollars or points. You get the idea...just keep looking for ways to drive those sales.

Well, hopefully these ideas help to get your creative juices flowing. My goal is always to go above and beyond in trying to help my merchants to save on their costs and increase their sales, I pray that 2011 will be a prosperous year for you. Have you capitalized on the phenomenon of mobile text marketing yet to drive sales? I can share ideas with you on that subject as well that will blow traditional marketing methods out of the water at a fraction of the cost.

Credit Card Processing Rates! Enlightened, Confused, or Mad? Make it better!

I've been in the merchant services business for many years and rarely, if ever, have I come across a merchant that feels that their fees for processing credit cards are FAIR. I think part of that comes as a result of a lack of transparency that is provided to them. There are numerous types of pricing models that can be implemented and, as you might imagine, most of them are more in favor of the processor, not the merchant. While in the field, I have always utilized the consultative approach with my merchants and taking care of their credit card processing needs. I ask numerous questions regarding their business and how they typically transact business. I'm always looking to determine what the absolute best, least expensive, pricing model will be for them. In addition, I search for other tools that may help them increase business with things like gift cards or check services. I never recommend equipment or services that won't be beneficial to their bottom line. Unfortunately, I'm sad to say, many in our business don't come close to taking that same approach.

American business owners, like yourself, are fed up with the unfair, hidden, and excess fees imposed by the banks and processors (you do know that those fees make up the majority of your Discount Rate, don't you?). In October, Visa and MasterCard posted their new Interchange Rates. Typically, adjustments are made twice a year (April and October). This time around, there were NO INCREASES that I was able to see but yet, I know of many merchant services providers, that imposed increases to their merchants (primarily those that are on a Tiered pricing model). Does this seem fair to you? I'm guessing the answer is a resounding NO. This, once again, is why, as I've written about many times in the past, is all the more reason for being priced in a more transparent form utilizing a Cost-Plus Pricing model. This way, no increases that aren't actually imposed on the provider, can be passed on or "hidden" from you.

Studies have shown that Americans pay the highest swipe fee rates in the industrialized world. Forty-four countries around the world have enacted some form of swipe fee reform that has brought rates down. In my opinion this industry has been broken and unregulated for far too long. Back in the early 1980's, big banks, Visa and MasterCard demanded that credit card swipe fees (a huge source of income for them) be shielded from free market forces. Well, guess what....they won that fight and the result has been an unfair, uncompetitive system of escalating swipe fee charges to you during a time that, do to advanced technology, their actual cost has gone down.

Senate Bill 1212 has been proposed to STOP THE BLEEDING . This bill is a great starting point to the interchange fee situation prevalent in the US. The bill simply stands for the proposition that powerful credit card companies should have to play fair and disclose prices and terms. I encourage you to stand up, join business owners like yourself, take action and be heard and add your name to the petition by going to THIS SITE .

With all that being said, you know how quickly things move through the legislative process so what can you do for yourself in the meantime? You got it....you need to be more proactive and get a better, more thorough understanding of how this industry works. More importantly to you, is the need to get a better grasp on how pricing works and absolutely make certain that you know EXACTLY what you're paying in fees for every card and transaction type in your business. What are you waiting for? Pick up your phone, right now, and get your rep or your processors Customer Care on the phone and ask the questions. If you don't feel like you're getting the straight story or an outright runaround, start looking elsewhere. Thanks for reading!

October 2010 Visa and MC Interchange Rate Changes

Well, it's that time of year again when Visa and MasterCard make adjustments to their Interchange Rates. Typically, these adjustments take place in the spring and the fall, usually in April and October. If you're unfamiliar with what Interchange Rates are, let me present what Visa identifies them as on their website:

"Visa uses interchange reimbursement fees as transfer fees between financial institutions to balance and grow the payment system for the benefit of all participants. Merchants do not pay interchange reimbursement fees; merchants pay "merchant discount" to their financial institution. This is an important distinction, because merchants buy a variety of processing services from financial institutions; all of these services may be included in their merchant discount rate, which is typically a percentage rate per transaction."

Now, as you can see, they also call them "interchange reimbursement fees". Let me break it down for you a bit more clearly. You, as the merchant, pay your credit card processing provider, the acquirer, a Discount rate. This Discount rate is what you see quoted on your statements in various ways which, in many cases leads to your ultimate confusion....by design. This rate was either negotiated by you with your provider or was more than likely provided as a comparison to what you may have had with a previous provider. The Discount rate that you pay represents a markup above what the Interchange Rate is which is where your processor (the acquirer) make their profit for providing the service to you. In turn, the acquirer pays the interchange reimbursement fees to the card issuing entity and those fees are utilized for the "benefit of all participants" as indicated above.

So, these fees are for numerous things like the cost to issuing banks of issuing cards, maintaining accounts, sending statements, monitoring transactions for authorization, collecting payments from card holders, etc, etc. These fees are also used for paying rewards to those card holders that have such cards. You, in turn, pay higher rates for accepting these cards and therefore, in a way, are paying your customers for shopping with you. With the huge and ever increasing numbers of these types of cards ("What's in your wallet? ") in existence these days, you better know what you're paying for the privilege of accepting them.

As of this writing, we know there will be adjustments and, in fact, your provider may have already notified you on your September statement of just how much they will be increasing your rates, effective with your October processing month. Neither Visa or MasterCard has posted the October rates yet, however. So, what I would recommend that you do, RIGHT NOW is to go the VISA SITE and the MASTERCARD SITE find, and download the April Interchange Rates. Then, in a couple weeks, go back to these sites or even sign up for their RSS feed so you will be notified, and get the October rates when they become available. Do the comparisons to see where the actual increases were, compare them to what you're paying and see where you stand. I'd say, you should then probably get with your rep (if you can locate them) or Customer Care and get a total rate review of your account.

If you've read any of my articles in the past, you know that I am a strong advocate of becoming more thoroughly educated on credit card processing. It is an ever-increasing cost center in your business and it's crucial that you are fully aware of what your costs are and if there is anything that can be done to reduce them.

Thanks for reading and if you have found this article to be helpful, please pass it along to others that you know could benefit from it. I wish you continued, prosperous endeavors in your business.