How to Run a Gift Card Program

How do gift cards work?

Gift cards seem simple, but they involve several steps.   

1. A customer purchases a gift card. 

Customers can purchase physical gift cards in person or digital gift cards online. 

• In-person gift card purchases: If a gift card is purchased in a store, the cashier selects the gift card program from the point-of-sale (POS) system and activates it with the specified amount. The customer pays for and receives the gift card, along with a printed receipt with the gift card balance.
• Online gift card purchases: If the gift card is being purchased online, the customer selects the gift card option, enters or chooses the amount, types in the recipient’s email address and name, writes a note, and pays. The system automatically emails the recipient with the note, gift card amount and redemption instructions, which may include using a card printout, a digital gift card, a barcode or a QR code. (The system may also provide a link for the buyer to send.)

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2. The recipient redeems the gift card. 

Customers can typically redeem their gift card in person or online. 

• In-person gift card redemption: If the recipient redeems the gift card in person, they present the card (or digital equivalent) to the cashier. The cashier accepts the payment by selecting the gift card option in the POS system interface and swiping a physical card or scanning a barcode or QR code. 
• Online gift card redemption: If the customer redeems the gift card online, they typically choose “gift card” as a payment option and enter the card number. Customers with a preexisting account can log in, add the gift card balance to their profile, and store it for future use. 

3. The payment processor accepts the payment. 

The business’s payment processor or merchant account provider approves the purchase if the card has a sufficient balance to cover it. It deducts the purchase amount from the card’s balance. If the purchase costs more than the card’s balance, the POS system alerts the cashier that another payment method is required. For online purchases, the website indicates that an additional payment is due and the customer enters another payment method.  

4. The purchase is completed. 

If the gift card has a remaining balance after the purchase, the system prints a receipt showing the balance and the cashier returns the gift card to the customer. If there is no balance, the cashier can recycle the card. For online purchases, depending on how the business website is set up, purchases may be able to draw from the gift card balance until it’s depleted, or the customer can choose whether to use the gift card balance at checkout.

How do you start a gift card program?

Starting a physical or digital gift card program is straightforward. However, before you get started, you must ensure that your POS system supports gift card transactions. (We’ll highlight excellent POS systems that support gift cards later.)

Here’s how to start a gift card program: 

1. Decide which type of gift card you want to offer. 

First, decide if you want to offer physical gift cards, digital gift cards or both. 

• Physical gift cards: Physical gift cards give customers something to present to the recipient, and they serve as ongoing advertising for your business. However, they’re costlier and more challenging to implement. 
• Digital gift cards: Digital gift cards are growing in popularity and are inexpensive and easy for e-commerce businesses to set up. It’s easy to purchase them online and send them to recipients. However, they don’t provide the same level of branding as physical gift cards do.
• Both gift card types: Many businesses sell physical gift cards in-store and offer digital alternatives online. Some also offer physical gift cards for purchase online.

2. Set up your gift cards in your POS system and/or e-commerce platform.

Follow these steps to set up physical gift cards:

1. Research gift card providers. Some POS providers offer integrated gift card options. Other sources include merchant banks or third-party gift card vendors. Look for a provider with custom options that help you build your brand while making the gift card appealing to customers.
2. Design and order the gift cards. After you settle on a provider, work with the company to design and order your physical gift cards. Once your cards arrive, display them prominently near the register and begin selling them.
3. Establish and implement gift card policies. You must research and comply with all federal and local regulations surrounding gift cards. For example, federal law prohibits businesses from selling gift cards that expire less than five years from the time of purchase or from charging inactivity fees unless the card has been inactive for at least a year. Some states also have specific laws regarding gift card expiration and fees. 
4. Train your employees on gift card procedures. Employees must understand the process of entering new gift cards into the system, the gift card redemption procedure, card limitations, and how to promote them to customers. 

Setting up digital gift cards is a similar process, but it includes e-commerce integration. 

1. Select a gift card provider. As with physical gift cards, you must choose your digital gift card provider. Your POS provider may have built-in digital gift card features, and some third-party vendors specialize in digital options. It’s crucial to select a provider with secure, customizable options that integrate with your POS system and e-commerce platform.
2. Set up digital gift cards in your POS system dashboard. Depending on your POS provider, you may be able to set up digital gift cards for free, or you may have to pay a monthly fee for this capability.
3. Integrate digital gift cards into your e-commerce site. Work with your IT team, POS provider or e-commerce platform to ensure digital gift card functionality is set up properly and available to your customers. Your system should be able to automatically apply gift card balances and update them in real time. It’s a good idea to test the system before you make it available to customers.
4. Train employees on how to accept digital gift cards. Customers may redeem digital gift cards in person, so your sales staff must know how to scan a printed or digital barcode or enter a unique gift card number. Ensure all employees know how to use the gift card function in your POS system.

5. Launch your gift card program.

Next, it’s time to announce the availability of gift cards through in-store signage, email newsletters, social media posts and your website. You should also highlight the gift cards’ convenience and benefits for various occasions. 

Here are some tips for a successful gift card launch and robust gift card sales: 

• Create a gift card promotional launch. Consider hosting a special promotion or event to kick off the launch, attract attention and generate excitement around your gift card program.
• Display your cards prominently. Place your gift cards near the checkout so customers can grab one for a last-minute gift. You may also be able to distribute them to larger retailers that sell various gift cards on a rack.
• Suggest gift cards to customers. Train your employees to suggest gift cards to customers. E-commerce sites can also display banners suggesting gift cards during gift-giving seasons or year-round.
• Sell gift cards at other local businesses. Ask local businesses if you can partner with them to sell your gift cards at their location. Consider offering them something in return, such as selling their gift cards or displaying their brochures onsite.

Marketing your program makes customers aware of this new offering so they can start purchasing gift cards immediately. 

Tips for running a successful gift card program 

Consider the following best practices for running a gift card program that boosts sales, encourages repeat business and builds customer loyalty:

1. Allow gift cards to be part of the customer’s mobile wallet.
2. If a physical gift card is ordered online, send it out within 48 hours.
3. Enable the purchase, transfer and redemption of gift cards across all channels (online, in-store and on mobile devices).
4. Allow digital gift cards to be sent via text message. The best text message marketing services make this easy. 
5. Let customers personalize digital gift cards with notes, photos and designs.
6. Set up your website to recognize curated digital gift cards and make appropriate selections. For example, a Mother’s Day template might prompt your e-commerce site to suggest jewelry or other appropriate gifts.
7. Use gift cards as thank-you gifts to loyal or high-volume customers to increase loyalty and encourage them to buy more.

POS systems that support gift cards

Many of the best POS systems support gift cards, including the following top options:

Lightspeed Retail POS

Lightspeed Retail POS allows businesses to accept gift cards, but you’ll need a third-party gift card vendor to create and purchase them. Although you can use any third-party vendor, the cards’ barcodes must be printed using EAN-13 or UPC-A standards to be compatible with the Lightspeed POS system. Lightspeed Retail POS suggests using a Code-128 barcode with nonsequential codes containing six to 16 characters.

Lightspeed POS can accept physical and digital gift cards if you enable Lightspeed’s e-commerce solution. Another perk is that customers can use their gift cards both online and in-store through Lightspeed’s Wrapped integration, regardless of whether the cards are physical or digital. One downside is that there’s limited email customization for sending gift cards. Customers can select an image for the gift card email, but the text can’t be altered.

Read our Lightspeed Retail POS review to learn more about this platform’s features and pricing.

Square POS

Square’s POS system provides everything you need to offer physical and digital gift cards in person and online. You can buy reloadable physical gift cards with your logo and choice of background template starting at 50 cents each, or you can design your own. Square charges 2.9 percent plus 30 cents for each gift card purchased online or 2.6 percent plus 10 cents for each one bought in person. Read our detailed Square POS review to learn if this platform is right for your business. 

Clover POS

Clover’s POS system offers physical gift cards in-house, starting at $1 each. It also supports digital gift cards that customers can keep on their smartphones. Both physical and digital gift cards can be used in the store, but they require a third-party integration, like Clover Online Ordering, to be used for online purchases. Our comprehensive Clover POS review outlines more of this platform’s robust features. 

Benefits of selling gift cards

Launching and running a gift card program is a win-win for customers and businesses. Consider the following ways gift cards can help your business:

• Gift cards help build brand awareness. Physical gift cards are branded with your business’s name, logo and message; they act as an ever-present ad for your company every time recipients open their wallets. Gift cards are among the most cost-effective marketing you can implement because they offer a compelling incentive to visit your store or website. In addition, the person who bought the gift card acts as your brand ambassador. Their purchase represents a positive recommendation to the recipient.
• Gift cards help improve cash flow. When a customer buys a gift card, the business receives money immediately. If the recipient doesn’t use the gift card or uses only a portion of the balance, your business has a lower overall cost of goods.
• Gift cards are popular. According to Capital One Shopping Research, 75 percent of millennials use gift cards, which is more than any other generation.
• Gift cards can expand your customer base. Gift card recipients may not have heard of your business, but receiving a gift card increases the likelihood that they will shop there. If you offer digital gift cards, capturing the recipient’s email address allows you to send them advertising and promotions.
• Gift cards can help you enter the corporate gift market. Business owners frequently give gift cards to employees, customers and vendors. Gift cards have a high perceived value but leave the specific gift choice to the recipient. They’re a particularly good way to show employee appreciation. According to a study by Fiserv, employees appreciate receiving gift cards from their employers, with 80 percent preferring them as a reward compared with other types of gifts.
• Gift cards can boost holiday season sales. Even if your services cannot be easily wrapped or gifted, you can boost your holiday sales by offering gift cards. Gift cards are a boon for all kinds of service businesses, including gyms, salons, car washes and restaurants.

Unlocking revenue and loyalty: The power of gift cards

Integrating a gift card program into your business strategy can significantly enhance your net revenue, bolster your brand recognition and foster customer loyalty. With physical and digital options available, gift cards provide a versatile and convenient purchasing method for customers to gain upfront revenue and potential repeat business. Implementing a gift card system supported by the right POS solutions simplifies the process of selling and redeeming gift cards. Ultimately, a well-executed gift card program can be a powerful tool for boosting sales, especially during peak shopping seasons.

Amanda Clark contributed to this article.