STRETCHING OUT THE HOLIDAY SPIRIT
Using Gift Certificates & Gift Cards
by Scott Eric Barrett
Thanksgiving traditionally launches Americas hyped and hallowed holiday season. The joy and jubilee typically lasts through New Years Day; however, witty small-business owners spread the festivities deeper into the new year by actively selling and aggressively promoting the benefits of gift certificates and gift cards.
Certifying Future Services
Selling a gift certificate is like receiving prepayment for a purchase. Salon operators receive the payment and give the customer a form that allows him or her to make a purchase at a later time. Gift certificates are particularly helpful for small business owners for two key reasons, says marketing consultant Wendy Tanenbaum of Creative Edge in Los Angeles: Theyre a cost-effective form of advertising and they also help cash flow.
Small businesses Ive worked with that offer gift certificates actually prefer people to buy certificates over merchandise, she says. Why? They bring new customers into the store who may never have come in if they hadnt received the gift certificateTanenbaum calls them free invitationsand not all gift certificates are redeemed. And even for the ones that are, between the time of purchase and use, theyre like an interest-free loan to your business, she says.
Greg Klesius, president and owner of Soakin Up The Rays, Inc. in Paris, Tenn., agrees. He believes offering gift certificates, especially during the holiday months of November, December and January, is one of the smartest money-making strategies around.
They are the perfect gift for husbands to buy for their wives, boyfriends to buy for their girlfriends, etc., he says. So salons need to be promoting them as such.
While tannings key demographic may be women, its important to remember that husbands and boyfriends often dont have a clue what to buy their significant others, so salon operators need to make a pitch to the guys during the holidays. Run coupons or fliers in weekly mailer magazines in November and December focusing on guys and buying gift certificates, he says. Take a bunch of fliers and drop one on every car at a popular sports bar. Guys are into speed shopping, so guarantee to have them in and out with a gift certificate in their hand in 10 minutes. If you just put the message out there where a guy can read itits a surefire way to double gift-certificate sales.
Offering gift certificates and selling them are two different approaches. Salon operators must do more than simply hang a sign in their lobby that says Gift Certificates Available. People are looking for a value around this time of the year, and its the salon owners ability to generate revenue at this time of the year that really makes a difference.
Customers give you hard cash in exchange for a piece of paper that may or may not be redeemed at some future date, Klesius says. In the meantime, you have free use of their money to purchase inventory, pay the rent, or help make payroll.
Flash Some Plastic
Gift cards take the benefits of gift certificates to the next level. Widely introduced in the mid-1990s, gift cards are popular with merchants because they provide quick up-front cash, and many card recipients end up spending more than the value on their card.
According to Bain & Co., a consulting firm in Boston, gift-card sales in 2002 were expected to total between $36 billion and $38 billion, up 20 percent from the preceding year. Tanning salons can capitalize on this boom just as easy as Starbucks or Target, says Chuck Williams, CEO of Dr. Merchant Business Services LLC, a Charleston, S.C., company that specializes in payment-processing services for merchants.
Businesses of all sizes are realizing the true benefit of gift cards, he says. They can boost sales and improve customer retention and are an excellent tool to create and build your image, while separating yourself from the competition.
Unlike gift certificates, there is no cash back for unused amounts on gift cards. A customer can put additional amounts on the card over and over again.
With gift cards, the risk of theft is reduced because the cards are not activated until they are sold to the customer, Williams says. They easily can be accounted for. Salon operators always will know how many cards have been sold, the number of cards in stock, who sold the card, redemption, and outstanding cards in circulation.
Of all those benefits, the biggest is a term called slippage, which refers to the amount of money that a merchant retains when a gift card is not fully redeemed.
This could be as much as 5 percent to 7 percent of gift-card sales to your bottom line, Williams says. It is money that is never spent. Even if the customer recharges the gift card, there comes a time where some money is left on the table. It is something you would rarely hear about, yet its the beauty behind gift cards.
Its smart to jump aboard the gift-card craze quickly because this is a trend that is going beyond gift giving. Consumers are using gift cards for themselves and for their families.
Consumers prefer to have a card rather than a piece of paper folded in their wallet, Williams says. Studies show that people spend more money with plastic than with paper. Merchants are issuing prepaid cards for returns and rebates rather than paying cash. Companies are issuing gift cards as incentives, bonuses and payroll. It keeps the money in the business. It is a practical alternative to paper gift certificates.
Hassle-Free Setup
The cost of implementing a gift-card program is small compared to other promotions. Should a salon operator desire to offer gift cards to its customers, there are several points they need to consider, Williams says.
Can they incorporate gift cards into their existing point-ofsale (POS) system? This will save money, but what type of POS system they have will determine whether they should upgrade. Many times by upgrading the POS system they can integrate their credit, debit, checks and gift card on a single POS device.
If they currently process credit cards, are they willing to switch credit-card processors or would they prefer a stand-alone gift-card system? Finally, they need to decide how they want to customize the card with company logo and contact information.
Launching your own gift-card program is faster and less expensive than most people realize, Williams says. A lot of companies like ours customize an affordable solution for small businesses of all sizes. In as little as two weeks, a tanning salon can roll out its own unique gift-card program.
The holiday season may not be as important to the indoor tanning industry as it is to Wal-Mart, but it is a time when people tend to be able and willing to spend money on other people. By actively promoting and selling gift certificates and gift cards, salon operators can close the calendar year on a joyous note.
Loyalty Cards
While gift certificates and gift cards are effective at getting shoppers into stores, loyalty cards ensure that those customers come back. They are designed to perform two functions, says Bruce R. Shirey, vice president of business development at Cardservice International in Moorpark, Calif. They have value so consumers can use them to buy things, but they also feature some form of a reward. Loyalty programs can be very simple, he says. Take, for example, a coffee shop.
A consumer purchases a card and the coffee shops cashier punches a hole in the card or scans it every time the consumer makes a purchase, he says. After 10 purchases, the coffee shop rewards the consumer with a latte.
Loyalty cards also allow small-business owners to create special promotions and overcome slow sales by offering extra points on purchases made during off-peak months.
I know a lot of tanning salon operators who offer their tanners a free upgraded tan after they buy three bottles of an intensifier, or give them a free T-shirt whenever they spend more than $50 on lotions or candles or any other add-on item, Shirey says. Telling a customer they can save $5 on a package if they sign the dotted line right then and there and giving them that free T-shirt or upgraded session is not the same thing. Customers value something for free much more than something merely discounted.
Chuck Williams is CEO of Dr. Merchant Business Services LLC, but also owns a beauty salon. He says he has regular customers but wanted to increase visits, so he launched a loyalty program.
I sell $25 loyalty cards to my customers, he says. For every 10 visits within a 90-day period, they receive a free hair day, which includes a wash and color treatment or perm. Every time they get their hair done, I swipe their card for credit toward their free hair day. I also encourage them to put money on the card for an additional 10-percent discount. If a customer is not satisfied, I give them credit on the card rather than returning cash. My customers save money and get free services for being loyal.
Future loyalty cards are in the works that will actually track what customers are buying so salon operators will be able to keep tabs on anything they sell and know that customer X prefers a product with bronzers and stays away from hot-action ones.
Offering payment flexibility to shoppers always has been a great way for merchants to increase store traffic, boost sales and improve customer retention. Now, with the introduction of affordable loyalty-card solutions, more small-business owners can develop reward programs to suit their businesses and their customers.
