The Gifts & Loyalty
The Gift & Loyalty

Shoring Up a House of Cards

The production of a major brand’s gift card scheme can present numerous challenges for Retail Managers, says Dannie McDonald, Managing Director, Gift & Loyalty Co. But it doesn’t have to be this way…

In my opinion, gift card managers for major UK brands don’t get the recognition that they deserve. Theirs is a tough role – not only do they need to synchronise the operations of numerous and varying suppliers in order to deliver schemes within budget, they also need to do so according to cast iron deadlines set by the promotional schedules their cards are designed to serve.

The expected returns on these campaigns are significant; fiscal ROI is just the start. Senior management expect, not unreasonably, that their gift card schemes should demonstrate a quantifiable and positive impact on brand visibility, customer loyalty and footfall, and of course increased spend. But because the different service components required to deliver and manage a gift card product are conventionally supplied by a range of different partners, the pursuit of these goals often requires the manager to marry internal and external resources, which can easily draw their focus away from other priorities, like planning the next line of gift card promotions.

The commercial gains from these initiatives, however, are well known and with more major brands offering gift card schemes than ever before, the market in the UK is both big and growing (currently estimated to be worth around £4 billion per year[1]).

More schemes mean that there are now more gift card managers than ever before. And from my recent conversations, they all seem to be asking the same question: ‘isn’t there a better way of doing things?’ Unquestionably, the answer is ‘yes’.

This issue of ‘service fragmentation’ in gift card programme management is hampering the gift card industry’s operational agility. When this issue is resolved (and it can be, quite easily) the world starts to look like a very different place indeed.

Currently, many gift card managers are committing a great deal of time and money to programme management, which could be invested elsewhere, in getting ahead of the pack; analysing customer behaviour; or focusing on new innovations in order to inform the next wave of cards. In extreme cases, service fragmentation creates an environment where the manager spends all of their time fire fighting; battling fluctuations in transaction charges, locking into partner negotiations in order to overcome service rigidity, or attempting to access, isolate and interpret meaningful customer data held externally.

This can result in a loss of strategic control and prevent brands from budgeting effectively for their gift card schemes. What’s worse is that this can cost a brand its competitive edge because its own processes prevent it from responding to market and customer requirements in a timely fashion.

The solution lies in the consolidation of providers. Engaging a provider that has total ownership over all the implementation and management processes required to launch and operate a gift card initiative will vastly reduce service fragmentation and enable managers to retain (or offload) as much of this work as they wish to, thus buying back the time they need to keep pace with ever customer dynamics and opportunities in the marketplace. There are less than a handful of providers operating to this model across Europe (Contis is one), so a strategic review of the category shouldn’t be too onerous.

Potential benefits include:

Increased speed to market: programmes can be developed and brought to market in a fraction of the time typically experienced with a fragmented services model.
Heightened agility in programme development and expansion: schemes are scalable and can be customised easily in line with customer and market needs. A single provider has an integrated view of all aspects of card delivery enabling a new level of management control.
Cost efficiency and transparency: brands receive a clearly structured pricing model with low transaction costs. Unlike providers engaged in a fragmented model, end-to-end providers are not constrained by single sources of revenue (e.g. transaction charges) or multiple margins and are free to mould a solution specific to a client’s individual requirements.
Simplicity of management:  simply put, an end-to-end provider gives in house managers ‘one throat to choke’.  Despite this, best-in-class providers are breathing comfortably, enabling their clients to reallocate internal resources to business and programme development.

It’s good to know that gift card managers have the grit and determination to make their programmes successful and grow the gift card industry. But at its core, this is an argument about business process efficiency and resource allocation, not about who can handle the most pressure.   Senior management will be most responsive to evidence of enhanced performance, agility and innovation in their brand’s gift card schemes. A new end-to-end model for gift card delivery is, in my opinion, the fastest and most economical way to achieve this.

This entry was posted on Thursday, April 10th, 2014 at 5:01 pm and is filed under Latest News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.