Historically, gift card loyalty programs were used almost exclusively at major department and “big box” chain businesses since they had the resources and customer base to capitalize on such programs. Meanwhile, small businesses may lack the tools or traffic to make customer gift card programs feasible or worthwhile.

Those days are gone: consumers are increasingly patronizing small businesses, whose unique products and services are often more popular than those at large corporate chains. Shoppers also want to be perceived as unique gift-givers, which is why gift card programs for small businesses make more sense than ever. Offering gift cards will increase your revenue, bring new customers to your business, and help you build customer loyalty.

Here’s how you can manage a successful gift card program.

Types of Gift Card Programs

Gift cards have by now all but replaced gift certificates, both in terminology and in form. However, there are different gift card programs, so it’s essential to choose one that will work for your business and patrons. Here are the main categories to consider.

Open-Loop vs. Closed-Loop Gift Cards

You can purchase open and closed-loop gift cards from a merchant bank or gift card vendor. These categories simply pertain to where customers can use the card. For example, shoppers can use an open-loop gift card at multiple locations, but vendors may charge fees to business owners.

A closed-loop gift card can only be used at a single location but is typically free to implement, apart from the cost of the physical cards themselves. Therefore, if your business consists of a single location, the closed-loop gift card system may be best for you.

It may be easiest to choose gift cards already offered by your point of sale (POS) provider. However, if your POS doesn’t allow for gift card options, you can find other options here.

E-gift Cards

E-gift cards are particularly popular now as contactless gifts because people can safely and conveniently use them. Because e-gift cards are a digital form of payment, you’ll need to have accounting software that can accept them. You may have to pay a processing fee for these, but the advantage is that you won’t need to pay for physical cards. Your customers also won’t lose them as long as they or the gifter can access the related email. E-gift cards additionally reduce the risk of fraud.

Electronic Strip and Barcode Gift Cards

Electronic strip and barcode gift cards resemble credit cards and are much sturdier than the old-fashioned paper gift certificates of the past. These are more expensive than e-gift cards but also can be wrapped or boxed nicely for in-person giving. The vendor you choose will likely offer customizable formats that align with your brand styling.

How to Choose a Gift Card Program

Choose the gift card program that works best for both your business and your customers. Factors to consider are cost comparisons, branding, pandemic safety, fraud, and even your local culture. Also, consider getting to know your customers better to determine what kind of gift card options they might prefer.

How to Run a Gift Card Program

Enter your cards in your POS (point of sale) system. Once you’ve selected a gift card type, you’ll need to enter your cards into your POS system so they can be rung up. First, swipe or scan a blank card, then enter the amount in the appropriate menu box. This is the amount your customer will pay when they purchase the card; it should come up as a payment option in your system when they redeem one.

Establish your gift card policies. Decide your gift card policies and train your employees to eliminate any confusion for them or your customers.

Observe applicable gift card laws. Be sure your policies and procedures align with federal gift card laws and state gift card laws.

Sell and track your gift card sales and redemptions. Set up your POS system to track gift card sales so that you can see how profitable your program is and analyze other related data points. You may also be able to track how many new customers your gift card program is bringing in.

Gift card programs can be a great way to take your operation to the next level. Running a successful gift card program will help your business continue to thrive.

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The information in this blog is for general informational purposes only and may not reflect the most current resources and recommendations available. Please consult with your financial, tax, legal, and other relevant advisors when making decisions about your small business.