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Behind the Line: Gift cards go digital

Restaurants like Red Lobster turn to eGift cards instead of plastic

Restaurant gift cards trail only retail gift cards in popularity.  - Photos courtesy of Red Lobster
By Lauren Kramer
December 01, 2012

If there’s one thing Jake Guiang knows about restaurant gift cards it’s that a gift card program has to be kept fresh and creative, and provide as much of an assortment of card offerings as possible. As gift card manager for Darden Restaurants, Guiang heads up a 12-year-old program that includes traditional gift cards, e-gift cards, combo pack products such as dinner and a movie and the soon-to-launch family fun pack gift cards wherein dinner is bundled with book stores or gaming cards.

Darden sells most of its gift cards in the third-party retail space in grocery, drug stores, big-box and convenience stores but they’re also available for purchase in the chain’s more than 2,000 restaurants and online. In April 2012 the company launched e-gift cards, or gift cards delivered by email instead of the traditional plastic card. 

“The purchasing party can personalize their card not just with a photo, but also with an audio message,” Guiang says. “They can even socialize the experience on Facebook.”

Restaurant gift cards are becoming an increasingly popular gift. They are the No. 2 gift card of choice, second only to retail gift cards, says Shaun Krusmark, VP of education for the Incentive Gift Card Council

“They’re just so giftable,” she says. “When you think about giving someone a nice gift, nothing says it better than sending them to your favorite, or their favorite restaurant. There’s a good memory associated with the experience as well.”

A December 2011 National Restaurant Association (NRA) survey showed that 26 percent of Americans planned to give a restaurant gift card as a holiday gift last year, and 59 percent indicated they’d like to receive one. Women were slightly more likely than men to want to receive one, and 58 percent of all respondents said they’d want the gift card to be for their favorite restaurant. Eleven percent said they’d prefer to use a gift card for a restaurant they weren’t otherwise likely to visit. 

“Gift cards can be a good way for restaurants to boost sales by bringing in both repeat and new customers,” says Hudson Riehle, senior VP of research at the NRA. “Our long-term research shows that gift cards remain a top item that Americans would like to receive on gift occasions, with 78 percent saying they would like to receive them as gifts.”

Gift cards can significantly enhance a restaurant’s bottom line because consumers redeeming them spend between 20 and 50 percent more than the amount on the gift card, says Krusmark. And as more restaurants opt for digital and mobile gift cards, consumers are redeeming their cards sooner than they did with plastic cards, because the cards are always with them and accessible on their cell phones. 

“Technology has really helped the gift card industry,” she reflects. That’s because they are offering the possibility of a personal touch, thereby resolving the No. 1 lament associated with gift cards in general: They can seem impersonal. “With digital gift cards you can now create that sentiment,” Krusmark says. “At Applebees, for example, you can purchase a digital gift card, send it via email, customize it with a personal message, record your voice singing happy birthday and even upload a photograph. When the gift is delivered, it’s much more personal.”

For restaurateurs the challenge now is to find ways to drive consumers into their restaurants sooner. Some are using technology to communicate with customers online and offering them extra incentives, such as a free dessert or appetizer, to entice them to take action. “California Pizza Kitchen, for example, offered diners a free dessert when they purchased a $25 gift card,” says Krusmark, who is also an account executive at Transaction Wireless.

Digital gift cards are catching on fast and within one year of launching a digital program, digital gift cards typically capture 50 percent of online gift card sales. The fact that they can be delivered instantly and with very little effort makes them an attractive option for last-minute gifts, and particularly around holidays and special occasions, Transaction Wireless’ clients have seen an overall lift in sales in double-digit figures. 

Darden Restaurants experiences its highest gift-card sales in the last quarter of the year, with additional spikes during peak holiday periods like Mother’s Day, Fathers’ Day and graduations. 

“We also see upticks in sales during non-traditional holidays such as Secretary’s Day or Teacher Appreciation Day, those Hallmark-type occasions that aren’t really official,” Guiang says. 

Digital gift cards are marketed primarily on websites for Red Lobster, Olive Garden, Long Horn Steakhouse and Bahama Breeze, but will be carried through all the brands eventually. Like the plastic gift cards, they will also be redeemable across the brands. “We’re happy with sales generated by digital gift cards so far but it’s still too early to determine how much of those sales are incremental versus share shift,” he says. “The longer they’re out there, the more data we’ll be able to generate.” 

Contributing Editor Lauren Kramer lives in Richmond, British Columbia


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