Costs of Gift and Loyalty Card Programs

Typical gift and loyalty cards services can seem pricey, but not if you understand how they work. Once you understand what the costs of the program will be, it is then easy to implement a profitable campaign for your business.

Gift and loyalty card programs have four main costs:

Initial set-up cost $100 - $400 Fixed, one time cost

Monthly maintenance / system access $35 - $45 / month Ongoing, monthly cost

Gift & loyalty cards $0.75 - $1.50 / card Price depends on artwork requirements

Loading & Unloading Card Transactions $0.0020 - $0.0030 Ongoing, per transaction cost

Consider a typical small business with products in the range of $25 - $50 that has ordered 150 cards. The company sets the value of 100 cards at $25 each and sets the remaining 50 cards at $50 each. That's $5000 in gift cards overall.

Industry averages tell us that for most companies the "costs of goods and services" is around 45% of a product's retail price. Using this average, when you sell $5000 in gift cards you will spend $2300 of that to cover your hard costs, leaving $2700 of profit on the table.

Out of the $2700 in profit you deduct your cost. In this example the costs would be roughly $250 - $625, plus your ongoing costs. With these cost of the cards factored in, you still have a profit margin of over $2000.

Breakage and uplift increase profits

Gift and loyalty cards have indirect benefits. Not everyone will use all of the money on their card and many people will spend more than the value of the card in your store. In fact, studies have found that people will usually spend 30% more when using a gift card, which is known as "uplift" in the industry.

Add to that the fact that 15-20% of all cards are never fully redeemed - a phenomena the industry refers to as "breakage" - and you are left with even more profits from your gift and loyalty programs.

Using the previous numbers, the business owner would increase his or her profits by $1300 or 25-35%.

$5000 X 20% = $1000 extra profits for unredeemed product or services

$5000 X 20% = $1000 X 30% = $300 in extra sales

These two benefits alone will see gift card and loyalty programs pay for themselves. Go ahead, play with the numbers, you will get excited. There is a reason, 8 out of 10 "Big Store Chains" have an aggressive Gift & Loyalty Card Programs in place.

Discover the Psychology Behind Gift Card Marketing - Click Here