Retailers add content – and value – to gift cards


From November 2007

By Len Lewis

The next weapon in the war for retail differentiation may not be traditional advertising, marketing, merchandising, pricing or product selection. Instead, value-added or content-rich gift cards could revolutionize retail sales.

Already a $76 billion business worldwide, sales of pre-paid cards continue to grow exponentially as more consumers accept them as a valued gift option, rather than as a gift of last resort. Moreover, the card business is growing at an annual rate of between 10 and 20 percent, according to some estimates.

Traditional cards may soon mature, however: optical or digital cards that double as DVDs, CDs and even videogames represent the next level of thinking and a huge new opportunity to increase sales.

“As the home improvement industry matured, it became more of a share game,” says Manish Shrivastava, president of Home Depot Incentives, which has launched a cutting edge gift card containing “How-to” demos. “We need reasons for the consumer to turn left instead of right, and this is a perfect fit for our brand.”

The move by Home Depot and retailers like Best Buy and Circuit City is part of a natural evolution, according to observers. “Five years ago, the market was booming and you could just throw a gift card out there,” says Dan Horne, an associate professor at Providence (R.I.) College and the director of research and board member of Giftex, a U.K.-based card information and analysis firm. “With everyone in the game, it’s a matter of how to differentiate one from another and content is a great way to do it.”

While the content-rich card business is still in its infancy, a variety of retailers, marketers, sports teams and associations have already jumped on the idea of a card that can be popped into a computer drive, a videogame system such as Xbox and Playstation or a freestanding CD or DVD player.

In the U.K., the wildly popular soccer club Manchester United mailed out DVD-readable postcards containing screensavers and other materials designed to get season ticket holders to sign up. A similar strategy was used by the U.S. Tennis Association, as well as to sell tickets for the Indianapolis 500.

Last year, Circuit City became the first U.S. retailer to sell a gift card bearing content. One included music, TV commercials and a videogame; another had trailers from the latest “Pirates of the Caribbean” movie and was produced by Disney and Serious, a New York-based media and technology company that is in the forefront of optical card marketing and development.

SpongeBob card
Best Buy has also produced several content-bearing cards, and last year was very successful with a SpongeBob SquarePants card that was also a DVD-ROM containing music videos and interactive games. (It is now selling as a collectible on eBay.)

Home Depot isn’t interested in producing collectibles; to Home Depot, the DVD card represents a powerful new promotional tool and revenue stream.

Each card contains three- to five-minute videos on seven different do-it-yourself projects, such as painting basics, hanging ceiling fans and installing faucets, which can be played on Windows or Mac platforms or videogame systems.

“We recently launched myriad regular know-how videos, and the ones that addressed top consumer needs were the ones we placed on the DVD card,” Shrivastava says, noting that the cards represent another way for consumers to “live with the brand on an ongoing basis.” Branded products are integrated into the video spots, albeit unintentionally. “They just happen to be the brands that fit the message,” he says.

The DVD cards are being promoted in-store and through some of Home Depot’s traditional marketing channels. Beginning this month, Home Depot “will have a 360-degree marketing campaign and we expect a strong response on the part of consumers,” Shrivastava says. “In fact, based on preliminary feedback, this will be one of our best sellers.”

While content cards have yet to hit the mass market in a big way, a number of companies are working on them, according to Bruce Bower, senior vice president, international, for Blackhawk Network, the gift card subsidiary of Safeway that supplies cards to 73,000 stores.

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