Gift card spending has grown from $40 billion in 2003 to over $100 billion in 2014, says the Mercator Advisory Group. According to the National Retail Federation’s Monthly Consumer Survey, they have topped the list of most requested gifts for the last eight years. In a newly published whitepaper, Blackhawk Network breaks down the process of gift giving and reveals why gift cards continue to experience such rapid growth. What motivates people to buy them and so eagerly want to receive them?
THE GROWTH OF GIFT CARDS
One of the most popular forms of prepaid products – gift cards – debuted in the 1990s and have enjoyed significant growth over the last decade. As one of the most requested gifts, their growth is expected to continue over the next several years. (see below: Gift Card Projected Growth 2003-2017). Gift cards come in two forms: open-loop gift cards, which carry the brand of a major payment system like Visa, MasterCard or American Express, and closed-loop cards, which are redeemable only at specific retailers.
(Source: Mercator Advisory, 9- 11th Annual U.S. Prepaid Cards, Market Forecasts)
Research on what makes gift cards so popular is lacking, although according to global prepaid network, Blackhawk Network, there are many studies that detail the specifics of the number, type, occasion and purchase locations related to gift card purchase.
But understanding why people give gift cards can help merchants, program managers and issuers tailor marketing messages and programs to increase sales. Blackhawk first conducted a study in 2008 to investigate shoppers’ motivations for gift card purchases in which consumers were clustered into groups based on their psychological motivations toward gift cards. This study was recently updated to reflect the changes since 2008 and have some surprising findings.
Blackhawk’s survey sample included 3,050 gift card buyers in the U.S., and of the total respondents, 63 percent had purchased at least one gift card in the last year. Respondents were asked about their gift card buying habits, as well as overall attitudes about shopping, online activity, and gift giving and gift cards.
KEY FINDINGS IN GIFT CARD GIVING
Some of the key findings from the study were as follows:
- About 1/3 of all gifts purchased are gift cards.
- 94 percent of respondents stated they would be likely to purchase a gift card in the next year.
- Birthdays (70 percent) and winter holidays (64 percent) were the popular occasions to buy gift cards.
- Most gift cards buyers (96 percent) had also received gift cards.
- On average, gift card buyers had received 4.2 gift cards in the past year.
A series of 31 constructs were developed from prior studies, previous gift card shopper research, shopping behavior and general societal attitudes. Factor analysis, a process of data reduction, which identifies underlying variables, was employed. Grouping interrelated variables into “factors” then reduced the data set.
The target? Gift card mall customers, profiled by comparing them to those who bought gift cards at third-party locations like convenience and grocery stores.
MOTIVATIONS OF A GIFT CARD MALL CUSTOMER
The data gathered by Blackhawk was reduced to the following factors:
- Overall interest in buying and using gift cards
- Online presence
- Degree of shopping urgency
- Need for emotional component while gifting
- Affinity for shopping
- Level of gifting (high, low)
- Use of coupons
- Need for practicality with gifting
After looking at the data, the Blackhawk data team organized survey respondents into four clusters.
Overwhelmingly, the largest number of respondents fell into the “It’s a Busy Life” cluster (33.23 percent), those who buy gift cards because it saves them time. The second most popular cluster (23.18 percent) had gift givers motivated to keep within a budget – and was actually a new finding since 2008. The third most popular cluster (22.45 percent) was driven by a gift giver’s desire to make people happy, and the final cluster was motivated by giving the receiver the chance to buy exactly what they want (22.22 percent).
To get the specifics on survey results and find out how merchants can make use of this data to better their marketing messages and boost sales, download Blackhawk Network’s whitepaper “Profiling Gift Card Mall Shoppers” below.