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Gift Cards in the New Economy

Rhana Pytell April 2011 issue of Skin Inc. magazine

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Do you have unredeemed gift cards tossed in a drawer? The businesses that sold these cards have already enjoyed the benefits of cash flow from the sale and, as a bonus, you may be one of the 20% who never gets around to redeeming the gift card for products or services. As long as the gift card sales are higher than the redemption rates, the business appears to be ahead. Is that true? Is it optimal?

Without consistent redemption, the gift card liability increases to the point that business equity and value are significantly diminished by unsuspecting gift card holders. Although the recipients may have forgotten who gave them the gift cards, it is likely that the gift-givers haven’t and somewhere in the back of their minds they wonder if the gift cards were redeemed and whether or not the products or services were enjoyed. When purchasing a gift for someone, you are motivated by the intrinsic value of bringing enjoyment to your recipient. If the gift card is never redeemed or is held onto for years, the buyer’s enthusiasm may wane and the value of the gift card may even be unintentionally diminished.

With hundreds of millions of people spending 55 minutes a day on Facebook, it is clear that we have moved into a relational—as opposed to a transactional—economy. In a transactional economy, spas and other retailers promote and sell gift cards where value is distributed to people who remain anonymous to the business until the day they arrive to redeem the card. A relational economy, on the other hand, relies on a sense of belonging and connection to drive many choices.

Relationship is everything

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