When Stacy Mahaffa-Simon and Daniel Radell opened the doors of California Monster Salads in 2011, the odds weren’t in their favor. Situated down the street from world-famous 3rd Street Promenade in Santa Monica, Calif., the entire area was packed with restaurants both big and small. But a dedication to healthy, delicious ingredients and a breezy, cheerful atmosphere have won them a steady flow of loyal repeat customers.
One special and popular ingredient happens to be their gift cards, which have been a key to their success. We all know how gift cards work, but let’s see if they can work for your business, like they did for California Monster Salads.
Using Cards to Build a Community
“We have our own California Monster Salads gift cards,” Stacy said. “They’re a point-of-sale system, and we’ve seen an increase in new and repeat customers as a result, so we’ve kept using them. In fact, for the last two years, the City of Santa Monica has purchased 5,000 gift cards from us annually to give to their employees for health incentives. Everyone really seems to appreciate them!”
As Stacy and Daniel have come to find, one of the advantages of running a small business, as opposed to a giant corporation, is the relationship they’ve been able to foster with both their customers and the local community. And as Monster Salads has shown, this relationship can be both personally and monetarily fulfilling.
The best way to build this type of community is to instill trust in your customers and encourage repeat visits, and gift cards are a great way to do just that. In fact, studies have found that 72% of gift-card users return to the gift-card issuer’s place of business to make additional purchases.
But the benefits of gift cards don’t stop there. While they certainly help foster a community around your place of business, they also help drive revenue, which is something small businesses should never overlook.
Returning Customers Means Recurring Revenue
In addition to repeat customers, gift cards represent guaranteed purchases and can increase impulse buys. Even the 10 to 18% of gift cards that never get redeemed mean revenue for your business, as the purchase was already made, but no goods or services have been exchanged.
No matter how you look at it, gift-card programs mean big money for small businesses, as shown by some encouraging stats from recent studies:
- In 2014, $124 billion were spent on gift cards in the U.S.
- 65% of gift-card users spend more than the face value of their cards; these users spend 38% more than face value.
- On average, $40 is spent on each gift card.
- 55% of gift-card users make at least two trips to the store to redeem their entire card balance.
- 25% bought items they didn’t plan on buying.
As these stats show, gift-card purchases rarely result in simply redeeming the card. Instead, they encourage customers to spend more and spend more often. And with many gift-card users making repeat visits, impulse buys and out-of-pocket purchases, the benefits of gift cards seem to outweigh their costs.
Implementing a Gift-Card Program
If these stats have you convinced to launch your own gift-card program, you have a number of options when starting out:
These gift cards are valid only at your store or a group of stores. These are typically provided by credit-card processors, merchant banks or third-party gift-card vendors, and they rarely have purchase or dormancy fees.
These cards are run by various credit-card companies and can be redeemed almost anywhere. For example, if your business accepts Visa credit cards, you can also accept Visa gift cards.
Many companies also offer e-card services. These programs are web-based and allow for new customers to discover your business online. Social sites like Yelp offer programs that incentivize new customers to give your storefront a shot, and many mobile-payment processors allow for easy gift-card redemption and recharging.
Many gift-card services also offer buyer incentives to bring in even more business to your storefront. For example, some cards offer $10 promotional coupons for every card purchase worth $100. This gives your business two potential customers (the gift-giver and the gift-recipient) who are likely to become repeat customers.
Check out GiftCards.com for a full primer on your options for gift-card programs.
Gift Cards, Coupons and Loyalty Programs
While gift cards may be successful in driving revenue, depending on your business, loyalty programs and coupons may not be as effective.
California Monster Salads have tried loyalty and coupon programs in the past, but their particular market didn’t respond positively to the programs.
Speaking of their forays into these programs, co-owner Daniel Radell says, “We initially tried Mogul and then SweetFrog [… but] right now there’s no ‘salad war’; there’s only a few of us salad places in the area. And we found that our customers […] tend to be a little more affluent. Fifty cents, a dollar here, it doesn’t make a difference for them.”
“For example,” Radell elaborated, “we use a lot of kale, and when kale prices go up by 35 cents, and we have to charge more, our customers don’t even blink an eye. If we had another salad place right next door or across the street, it would make more sense to use a loyalty program to remain competitive, but we were paying $70 a month for these different programs, and it wasn’t worth the extra cost.
“Since we’re not a chain,” he continued, “we know most of our customers personally. When we recognize you after a few times, we’ll start to offer you a free topping or a free cucumber lemonade. This personal approach has been way more beneficial to us than any paid program.”
Gift-cards and similar programs may not work for all businesses, and as with all new initiatives, it’s vital to perform your due diligence to see how your market and customers will respond to the new program. And as California Monster Salads proves, success in these programs always starts with connecting with your customers as human beings and sharing with them the passion you have for your business.
To see how another small business found success with loyalty programs, see our interview with Willow Spa. If you need help implement card services in your own business, see our complete guide to EMV processing.