Companies bet on something like 2-5% of "breakage". That is the main profit motive behind gift cards. There are various claims of using them as marketing and a system to refund people without letting them out of your loop, but the major reason anyone pays what they do to a certain company to sell gift cards (almost nobody does it themselves anymore) is to get that breakage profit.
Gift cards are a subsidy from forgetful people to a business. Industry research also shows that people prefer to receive cash as a gift, but prefer to GIVE gift cards, because they are marketed as a "more thoughtful" gift, as if putting a brand name on some cash is thoughtful. Gift cards are an exclusively selfish gift.
prefer to GIVE gift cards, because they are marketed as a "more thoughtful" gift
That's actually fascinating. I would never give a gift card as an actual gift to people, because that strikes me as being lazier and less thoughtful than just giving them cash.
I want to expand on this. Companies use gift cards for all sorts of strange things. We once had a company that treated gift cards as tickets to their events. You bought a set price "gift card" on their website, and redeemed it at the event, but there was no other use of it.
Our sales pitch to companies is also about treating gift cards as a marketing tool, mainly by giving away gift cards for certain purchases during sales. For example, IKEA once had a promotion where they would give you a ten dollar giftcard for every one hundred dollars of gift cards you bought. Unlike most companies pushing one of these promotions, they chose not to set an upper limit. The result was hilarious and predictable.
I'm sort of offended by this because I do actually think about gift cards when I give them. I deeply consider the value and likelihood that the recipient will patronize the business and appreciate the card. If I do not know their preferences, then I will instead obtain a Visa gift card that spends anywhere, like cash.
I don't think it's a crime to give a gas-station card to someone who drives a lot, or a popular restaurant to someone who enjoys eating out, or a Google Play card to someone who owns an Android phone.
The problem is if someone gives me cash I just put it in to my bank account with all my other cash and it just gets spent on typical living expenses. Nothing I can label as a gift comes out of it.
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Companies bet on something like 2-5% of "breakage". That is the main profit motive behind gift cards. There are various claims of using them as marketing and a system to refund people without letting them out of your loop, but the major reason anyone pays what they do to a certain company to sell gift cards (almost nobody does it themselves anymore) is to get that breakage profit.
Gift cards are a subsidy from forgetful people to a business. Industry research also shows that people prefer to receive cash as a gift, but prefer to GIVE gift cards, because they are marketed as a "more thoughtful" gift, as if putting a brand name on some cash is thoughtful. Gift cards are an exclusively selfish gift.
That's actually fascinating. I would never give a gift card as an actual gift to people, because that strikes me as being lazier and less thoughtful than just giving them cash.
I want to expand on this. Companies use gift cards for all sorts of strange things. We once had a company that treated gift cards as tickets to their events. You bought a set price "gift card" on their website, and redeemed it at the event, but there was no other use of it.
Our sales pitch to companies is also about treating gift cards as a marketing tool, mainly by giving away gift cards for certain purchases during sales. For example, IKEA once had a promotion where they would give you a ten dollar giftcard for every one hundred dollars of gift cards you bought. Unlike most companies pushing one of these promotions, they chose not to set an upper limit. The result was hilarious and predictable.
I'm sort of offended by this because I do actually think about gift cards when I give them. I deeply consider the value and likelihood that the recipient will patronize the business and appreciate the card. If I do not know their preferences, then I will instead obtain a Visa gift card that spends anywhere, like cash.
I don't think it's a crime to give a gas-station card to someone who drives a lot, or a popular restaurant to someone who enjoys eating out, or a Google Play card to someone who owns an Android phone.
The problem is if someone gives me cash I just put it in to my bank account with all my other cash and it just gets spent on typical living expenses. Nothing I can label as a gift comes out of it.