Why use gift certificates?

Why gift certificates are better than handing out cash? Sometimes I ask myself am I really saying this.

See the article about my friends water store and his is referrals

I see so many Gift Certificates that one can buy for $20 dollars and redeem for $20 dollars.  That has never made any real business sense to me. As a customer you are asking me to give you my money at no real advantage to me.  Then by me giving you my money for your store credits that I can only redeem at your location you are locking me into being your potential customer still at no benefit to me.  Then when I forget to bring my card with me to your store I am not turning back to go get it so, I give you more of my money and get locked into being your customer even longer.  I also have the disadvantage of loosing your gift card or letting it expire.  Oh I guess I was wrong I can see a real business sense to use them.  How come this deal makes me feel like when my brother asks me to play Monopoly just so he can beat me again.  Ok really I am the one that asks him to play so I can win, but I thought it would sound nicer if I was the victim.

I know I am not the only one who sees a flaw in this type of reasoning.  One would think that business could sale more gift certificates if they only sold them like the Treasury sales money. "Here buy this bond, it will be worth more when you cash it in."

A great closing sales question I have been told to use is, "Why would you pay full price for something that you can get for half off or free?" I use that when I am selling up front discounts to people. Especially when they tell me, "Oh, I will go in and try it out first."

So as with my friends business, offer the customer some saving on buying a gift card. What do you have to loose? A little discount on a sale you might not have gotten if they didn't buy the card.

Referral Marketing

Upon going to the public library I discovered why some small business might have trouble building a referral program. According to the card catalog there were books on marketing your business but they were just on in that library. Also the location of the books that might even talk about Referral Marketing seamed to be so out of place.  I found them next to the Auto Mechanic Manuals.  I looked around for other related books, There were books; on how to make money, how to invest money, how to have the law work for you, how to use online social website, but nothing on how to set up a referral program.  It makes me wonder if really there is just not that much to write about, or if people thing they are so easy that they don't need any help with creating one.  I did find a few books on line that talk about the secrets of referral marketing, supposedly the author had enough to write that it filled 118 page book and a couple of CD seminars. It all seams a little perplexing.  I don't think referrals should be all that complicated.

My steps to a referral program:

You have to decided:

• What it is you would like to sell more of?
• What discount or Special you want to run on that product?
• What kick back or reward do you want to offer for your referral?

As an example:

My friend had a water and ice store in which he sold purified water by the gallon for 25 cents.  He didn't think he has much to offer in the lines of a referral program. Of coarse he had business cards with a rubber stamp on the back that said 5 cents of every gallon.  People didn't really see the value in saving 5 cents even though it was a 20% off discount on an already cheap product.  In all reality my friend was giving away more money by handing out the business cards, not to mention what his time was worth.  Talk about jumping over dollars to save pennies.  Don't get me wrong, I love my friend and I wanted to see him succeed with his business. I had always thought his store was the cleanest water and ice type store in the entire area.  His water was even more pure than holy water. So why couldn't he sell more of it at better price and get more customers to come out of their way for it.  I always thought that he was the best advertisement for his own business, he saw hundreds of people in a week, many of them though other business as he did his errands and lunches.  If only he was able to tell them all that he was the owner of the local water store, they probably would have come in and changed some of thier buying habits just to support a friendly local business owner.

This is what I saw in his business that I thought would make a great referral program. Even though his product sold in the pennies I saw away to make the Kick Back or Reward for his customers to refer for him to be in the dollars. He had a great money maker if only he could take advantage of them.  He had gift cards.  I always say people don't have to use your products for you to make money, they just have to buy them.  But it does help when they use them too.

• What did he want to sell more of? $20.00 Gift Cards
• What discount or special did he want to run? $2 dollars off
• What kick back or reward did he offer. $2 dollars on a gift card

If you do the math the discount and the referral fee ad up to the same discount as 5 cents off a gallon, but now he is giving away dollars instead of just pennies.