Considerations When Using Gift Cards in an International Incentive Campaign
There are a host of complexities in managing the procurement and fulfilment of gift cards and gift vouchers for an international incentive or motivation campaign – not all are as obvious as may be first thought. Before designing your programme, considerable research and insight should be gathered to first determine if gift cards, or their equivalent, are a suitable incentive mechanism for that market and if their use will help you to reach your goals.
Following are some key points to consider in your planning stage:
Receiving a volume based discount on the face value of retail merchant gift cards is commonplace in some markets. However, in many countries, the use of gift cards in incentive programmes is very limited and so no established B2B market may exist. Many retailers do not have a business services unit that can assist with the buying process and have no standard commercial terms for volume buying. This is particularly problematic outside of Western Europe and North America.
Gift cards are not generic. In any given market, the type and functionality of the prepaid product offered by each merchant are very different, so you need to pay particular attention to the gift card scheme type. For example,
- Is the card loaded in-store prior to distribution or remotely once delivered?
- Is the card reloadable?
- Can the card be spent in-store and online for catalogue shopping – or any mixture of these?
- Can you cancel the card and have it reissued? (in most cases this is not possible)
- Is the card available virtually?
- Can you check the balance online or via IVR?
- Is the initial balance printed on the card?
- Are the cards customisable with bespoke artwork?
The answers to each of these questions may well be different for each merchant gift card any given country. Also, it is safe to assume that in many countries, paper gift vouchers or gift certificates are still the dominant prepaid product in the market.
Taxation is a highly complex area for the international procurement of gift cards. In some countries, a sales tax is included within the face value of the card and needs to be accounted for in the procurement cycle. In other countries, no sales tax is present at the point of purchase, and in others, the sales tax is added on top of the face value and will need to be reclaimed through international treaties. The viability of running a programme in-house may well depend on the tax treatment of gift cards in the countries in which you are wishing to operate.
Denominations and purchasing power parity
In any incentive programme, you will need to pay particular attention to the available denominations that are offered for redemption for each brand you offer. There is a far higher marginal cost to fulfil the equivalent of a $5 gift card as a $100 one. Thus, you will need to ensure that the minimum redemption thresholds in each country are set at an economically viable level.
Added to this is the need to have a clear understanding of the perceived value of the reward that you are distributing in each country. For example, the purchasing power of $10 in the US is far greater than the purchasing power of $10 in the UK. As a result, your budget planning needs to take into account these international variations.
The legislation in each country surrounding the expiry of gift cards is very varied and not at all consistent. Further, where legislation is not in place concerning the expiry of gift cards, each retailer in the market will apply different expiry rules to their prepaid gift cards.
Paying international supplier for gift cards can present certain challenges to your finance operation. In most countries, the settlement of international payments is straightforward. However, where currency controls are in place, the cost, bureaucracy, and time to settle transactions and provide payment can be higher. This may impact on your ability to provide a consistent service level to your clients across all countries in a campaign.
Plan for things to go wrong – and plan a solution for the communication that may be needed to remedy a situation. When buying gift cards across borders invariably you will need to set up some form of native language customer support for your clients’ customers, and internally some form native language support for your supply chain. Telephone-based customer support is commonplace for single country incentive campaigns. However, when managing international programmes this often becomes prohibitively expensive as a 24-7, multi-language resource could be required.
Ensure you have the specific written permission to use the brand logo of any of the retail merchant gift cards that you are using for any of your client’s campaigns. When dealing internationally you may not be aware of competing brands, brand market positioning or ongoing legal disputes between retail merchant brands. As a result, many brands refuse to be positioned next to or near certain other brands in an incentive or reward campaign. This is why visual signoff on copyright and position is so important.
What makes an international campaign truly motivating for clients is a demonstration of local and cultural knowledge when curating your campaign retail gift cards selection. Learn more about our organisation and what we do at Ovation. Get in touch today!