Building Brand Advocacy Through Gift Card Programs

With gift card spend projected to reach $267.3 billion by 2028, it’s clear that gift cards are an influential force in the market. And the rise of digital gift cards, a trend that continues to gain momentum, is opening up new avenues to engage younger generations.

During a recent PaymentsJournal podcast, Blackhawk Network’s (BHN) Sarah Kositzke, Director of Research and Hilary Spidaliere, Director of Product Marketing, as well as Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, explored, analyzed, and amplified the insights from this year’s Benchmark Report: 2024 Digital Gift Card Leaders, conducted by NAPCO research in partnership with BHN. This market-leading report on the gift card industry, which evaluated the digital gift card programs of 100 U.S. merchants, identifies best practices and opportunities for how retailers can optimize their own gift card programs.

PaymentsJournalBuilding Brand Advocacy Through Gift Card ProgramsPaymentsJournal Building Brand Advocacy Through Gift Card ProgramsPaymentsJournal

Gift Card Industry Trends

During the 2023 holiday season, the average individual received around three gift cards, totaling roughly $160 in value. However, when recipients made their purchases, they spent an average of $78 more than the card’s value¹. Leveraging a gift card to purchase a bigger-ticket item is commonplace and one of the reasons why gift cards are so valuable to retailers – driving that additional overspend and store visits.

“About a third of people said their favorite gift was a gift card,” Kositzke said. “Most people are still getting single-branded cards, like Starbucks or Amazon, which account for 75% of gift card buys. The Visa and Mastercard options and multi-branded cards are picking up steam though¹.”

According to BHN, 77% of purchases were physical cards, even when the transactions occurred online. Physical cards are considered more personal, especially when there’s an option to customize the card. Despite the increasing popularity of online shopping, most gift card transactions still happen in-store, making up 85% of purchases¹. But that is likely to change.

“Looking a little further out to 2030, digital cards are going to continue to gain ground,” Hirschfield said. “By the end of the decade, it’s likely to be a 50/50 split. That’s driven by Gen Z and Millennials, who are also significantly more likely to extend their purchases beyond the gifted amount. Digital options are going to be a great way to reach those generations.”

2024 Gift Card Benchmark Report Criteria

NAPCO Research, in partnership with BHN, examined the gift card programs of 100 U.S. merchants with a specific emphasis on the e-commerce gift card experience. NAPCO developed 130 criteria, across to four major categories.

“First and foremost is discoverability,” Spidaliere said. “How easy is it to find that brand’s gift card program? Next, they’re looking at personalization. Can I pick my own gift card design, or add a personal message? Third, they’re evaluating the checkout experience for efficiency and payment flexibility. Finally, they’re evaluating the recipient experience. Does the card feel like a gift? Is it easy to redeem?”

The end goal was to fully evaluate the purchase and recipient experience for each of the merchants across all platforms.

Speaking to the assessors who reviewed each gift card program, “They’re like a secret shopper,” Spidaliere said. “During the process, they capture hundreds of screenshots and use them to score each of the merchants across the established criteria. Then they crunch the numbers and not only come up with the rankings list, they also identify industry trends and best practices.”

Areas of Opportunity

One of the main takeaways from the study is there’s plenty of room for improvement—even for the companies that ranked in the top ten.

“Everybody across the board has something that can be fine-tuned,” Kositkze said. “These are opportunities to drive additional revenue. It could be the placement of cards or making the most of the fact that 9 out of 10 people are buying other gifts are the same time they’re buying gift cards. That’s a perfect chance to build loyalty¹.”

The report found several common denominators among the bottom 20 companies. For one, they were less likely to sell cards across all their devices and channels. Lower-ranked companies were also less likely to support gift card purchases in their app, which is a missed opportunity with younger users especially. But that wasn’t th...