The Pros and Cons of Gift Cards

Rewarding employees or customers with gift cards offers them great personal choice, but be sure to match the goods with your goals

The success of any reward program depends on how well your chosen awards are matched with your recipients. While retailers and marketing organizations increasingly tout the benefits of card and gift certificate programs, weigh the advantages and disadvantages of this corporate gift idea before deciding if this reward tactic is right for your program.

The plus side of gift card programs

High perceived value. If you match your target audience well, gift cards can be great trophies, allowing recipients to redeem points for what they want, when they want.

Turn-key convenience. When you opt for gift certificates over giving merchandise, you instantly save on administrative costs and reduce complexity. Many card programs are turn-key, including all the backend recordkeeping and reporting, and you'll have fewer tax or accounting issues to deal with.

Flexible terms. You can slice and dice your awards to just about any denomination, whether gift cards are loaded up with $1 or $1,000 or more. This makes tiered programs a breeze to design and administer.

Quick turnaround. If you're in a pinch to meet a tight deadline, gift certificate orders can often be fulfilled within a day or two, from larger organizations.

Reach any demographic. With all the gift card choices available, you can opt to keep award choices as mainstream as possible, or choose to target your audience with precision through select specialty retailers or services. From spas to music to trendy apparel to cultural events to restaurants, you can appeal to young or old, rich or aspiring, trendy or conservative.

Downsides of cards, to be aware of

Unredeemed awards. This can be money left sitting out on the table, if recipients don't see the value of their reward. A well-matched corporate gift program should minimize this, but beware of built-in design flaws, such as rewards in too-small denominations to be redeemed at a big-ticket retailer.

Retail pricing. When you use merchandise in reward programs, you have a much greater ability to negotiate prices and volume discounts, and get more bank for your buck in terms of perceived value versus cost. It's harder to use your corporate clout when buying gift cards, although not impossible.

Looks like cash. Pleas of "just give me cash" are always a risk when using gift card programs, particularly with employee groups that may mistake the program as compensation. This calls for time and effort to develop communications that present your program for what it is: a reward, above and beyond, for special recognition.

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