We are joined again today by Katie McMillan, Director of Sales at MPI, the merchant processing partner of First United. Today we're talking about gift cards and loyalty cards. What value do they provide you and your business? Should you be offering a loyalty program or gift cards? Katie discusses each and the value it can provide your business.
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Eric: Hello, and welcome to "What Matters Most," the podcast all about finances, community, savings, and security for you, your family, and your business. This podcast is brought to you by the helpful folks at My Bank, First United Bank & Trust. I'm your host, Eric Nutter, and in today's episode, "What Matters Most" is gift and loyalty cards. And for this helpful discussion, I am so happy to be joined once again today by Katie McMillan, director of sales at MPI, the merchant processing partner for First United. Hey, Katie, how are you doing?
Katie: I'm doing well. Thanks for having me again, Eric.
Eric: Yeah, I really appreciate you joining me. I'm kind of excited to talk about this gift and loyalty topic. I actually just got a gift card and I like set it to the side and I'm excited to, I don't know what I'm going to use it for, you know? So, I know that a lot of people out there have probably experienced it on the consumer side of things, a gift card or a loyalty card, you know, buy 10 coffees and get the 11th coffee free, that kind of thing. So, I appreciate you joining because as our preferred merchant provider for First United, you at MPI offer that kind of service for our business clients, is that correct?
Katie: Yep. That's right. We offer a gift and loyalty program that includes the cards that any of the businesses that we share best can provide to their customers to use at their location.
Eric: That's really cool. So, tell us a little bit about like...let's start with a baseline, like explain the different options and what options do businesses have at their disposal if they were to work with us and MPI?
Katie: Yeah, absolutely. So, I think it's first important to, you know, kind of level set on what's a gift card, right? And we all know that you can go to Rite Aid and you can buy, you know, Amazon gift cards or Visa gift cards and things like that. What we really cater to our local businesses that want to provide their own gift card. So, you know, say Bob's Burgers, right? Bob's Burgers wants to have their own gift cards. And gift cards are literally a card that looks like a credit or debit card where the person who comes into the business can purchase that gift card and put money onto it. And they can either keep that for themselves or they can give it as a gift, which gift cards usually given as a gift. You give that to someone and then they can go in and they can spend money on whatever they want. And it's really become a really popular gift idea because you know, you have these folks that go, every Friday, I go to this place to have dinner and I just absolutely love it. And you want to give them a gift, but you're not sure what to buy to them, but you know that they like that experience. So, you give them, you know, the ability to spend money at an establishment and purchase whatever they want, whether they want to get the lobster or a pair of shoes or whatever it is. You don't have to pick out the present, and the person that gets the gift ultimately gets suspended on what they want.
What's really nice is you have a few different options when you have gift cards. You can have kind of a standard like red bow presenter, where it's very nondescript and says, here's a gift card. You also have the ability to brand it. And a lot of folks really liked this part too, because it's a pretty low-cost way to spend some marketing dollars to put your branding on something that's like a little mini-billboard that walks around with people. You know, I myself have encountered folks that have said, "Hey, look at this new place that opened up on main street. Like I got a gift card from there from one of my friends and this place is really good." It gives them something tangible to keep in their hand to talk about your business and to give your business as a gift to other people.
Eric: Yeah. That's really cool. So, in this scenario, the gift cards that MPI can assist local businesses with, are they universal cards, are they like they can be used anywhere, or is it specific to that business?
Katie: Great question. So, the gift cards that we provide, they typically are to be used at that one location. And that's because it's branded for them. We put the programming on their terminal. We do have customers that might have, you know, a group, maybe they're a strip of businesses in a downtown area that they want to have a downtown gift card, right? We can lay the programming for the gift and loyalty programs on their machines so that they can have a shared gift and loyalty program. Loyalty programs are a little different than gift cards in that you don't really issue money onto them, you, you know, gather rewards. It's like a rewards program for your loyal customers. And that drives them to have repeat business, you know? We all know about punch cards from eons ago, and there's still some folks that have punch cards out there too, where, you know, you get five copies, you get the sixth one free and you have that punch system. Well, the problem is that sometimes you spill your coffee on those or they get lost, and then you have to go in and go, "I swear had four punches, the last time I was in here." A card is trackable. So, if you lose the card, you know, the business can just bring your gift card back up and put the balance on a new card or shift your loyalty points over to a loyalty card. So, what we really focus on is providing a gift and loyalty experience to local businesses where it's all going through that one local business. And if we did have a group of businesses that wanted to band together and offer a group gift and loyalty program, we can service that need too.
Eric: That's cool. And are there any limitations to the types of programs or is it always, you know, basically any number of anything that you sell, you can then offer points or bonuses or discounts or whatever?
Katie: So, for the loyalty programs, really sky is the limit. And the recommendation I always give to folks is, you know, think about the end-user. Think about the person who's using this loyalty program. If they have to have a math degree to figure out how their rewards come out to them, your loyalty program might be a little difficult. The most common ways to reward folks is every X amount of points, you get a cash benefit inside the store. So, if you spend enough to earn 1,000 points, you get 5% off your next purchase or you get a free beer koozie at the growler store. You know, one of my favorite loyalty program stories is we had a customer many moons ago that had a business down in like a pork and marina area, and it was a historic town that this was in and they had a segway touring company. So, they did touring on segways through this historic area. And he's always a shining example of somebody who had a really big idea with their loyalty program where every time you toured, you got points. Every time you did the tour, you earned hours. And it was like a frequent flyer program. And after you earned so many hours, you could go out without having somebody chaperone you on the segway and you could exchange points for merchandise or extra tours. I mean, it was so complex. And so, really, sky's the limit. There's not a limitation on what you want to do. It's just kind of understanding what you wanna do and then making it simple for everybody involved.
Eric: Right. And this is all controlled inside the POS system or whatever the loyalty system is or is it web-based or something like this?
Katie: Yep. So, when you utilize our gift and loyalty programs, if you're a merchant who is using just a regular standalone terminal, say you haven't transitioned or upgraded to a point of sale yet, which you should. If you haven't done that transition yet, you'll run your credit and debit cards on the same machine as the gift and loyalty program. It's just that you'll have an option to issue or redeem on gift cards or, you know, redeem points on the loyalty cards. If you have a point of sale system, that's also very similar in that will either issue a gift card with a mag strip for some of our point of sale options. And others that we have in our suite of POS is that we resell, we actually do a barcode where you just scan it. So, it's a tangible hard that you get, whether you're using a payments device with us or a full-blown point of sale.
Eric: Cool. Cool. So, now this question may seem a bit obvious considering the wording of it, but you know, what are some of the benefits, like why should a merchant offer a loyalty program? I would assume the number one item is to create loyalty, but what are some of the additional benefits and other reasons why a business would want to do this?
Katie: Yeah. It's a great question. And it feels like it would be straightforward, but there's some pretty interesting data behind why merchants should offer gift and loyalty programs. It has been pretty consistent over the last 10 years from what I've seen on the data, but basically, a solid 30% to 40% of the gift cards that are issued are never redeemed for whatever reason. Even if somebody loses it, they got it as a gift. Do they have a lot of investment in tracking it down to get the benefit out of it? Some people just forget that they have it. There's not really an issue with expirations anymore because there was some legislation that was passed that I think the limit, and it could be state by state still, the limit is about 10 years. You can't have something expire before 10 years. So, some people, you know, and I'll admit, I've been those people at a point in my life, you get a gift card and you're like, "Cool. I put it in this wallet." And then you change wallets. And then you just forget it until you're digging through that box, like five years later. And, you know, maybe you go, maybe you went somewhere different. The point that I'm trying to make here is that 30% to 40% of the gift cards that are issued don't get redeemed. So, that's 30% to 40% of that revenue that you took in that you're not rendering products or services for. So, that's the oldest hard-line financial impact of you could be potentially, you know, selling something without ever having to redeem on a product or service.
Now, the other side of it is, you know, if you have someone that is a loyal customer to you and they want to give the gift of your business to someone else, when that person comes in, that's like free money to them. So, say they picked out enough stuff and they had a $50 gift card and they wanted $75 worth of stuff. Well, to them, they're only spending $25. So, you know, it increases the sales opportunities that you have when they redeem things. It gets the name of your business out to folks that maybe you hadn't penetrated before. And loyalty programs are really nice because while you're giving a discount or while you're giving...you know, maybe even give something away for free or half price, it's continuing to drive folks to come in and to show appreciation to loyal customers, but also to continue their spending habits, because they have a reward at the end of it. So, it's actually a great question, and I think folks just say, "Okay, well, it's good because it makes sense and a lot of people do it." But financially, it's very good. And it's a very low-cost investment if you look at it from a marketing spend.
Even if you spend the money to have the logo redone or the design of the card done, you know, it can be pretty minimal with our team. We actually do the creation of the images, unless you have something that's been created by a graphic designer. We have a lot of options that we can do to customize the card for you for a very good price. And we print everything in-house. So, that keeps the cost down too. And the turnaround time goes from, you know, traditional gift card suppliers get your order to you in about two to three weeks where we can get it to you in little as three days if need be. So, it's a low-cost marketing investment.
Eric: That's really cool.
Eric: Yeah. So, yeah, and you brought up a lot of really good points about how beneficial this is. So, not only does it get you out there from a marketing standpoint, once that person then has the card in their hand, they come into your store and potentially usually spend more than whatever's on the gift card, so you're actually making additional sale. Or they don't use it at all, and you got essentially free money. And then statistics, is there anything in regard to reporting or statistics that get shared with the owner of the business so that they can see how those cards are being used and what's outstanding?
Katie: Yeah. You know, the reporting is critical. Any business owner should be looking at reporting as they have access to it through, you know, if it's our gift card program if it's a gift card that we have linked to our point of sale, all of that information gets funneled into the same reporting. And you can use that reporting to go, you know, how many gift cards have I provided? How many have been redeemed? Do I have a liability? How much liability do I have out there in regards to what's out versus what's been redeemed? It lets you capture who your loyal customers are. And it also lets you capture data so that you can market to them either through text message marketing or email marketing. One of the really neat things about the program that we use, there's a back-office system where anybody who has registered their information with that gift card or loyalty card, whether you have your staff person doing it at the time of sale at the register or if they go to the link and register their information later, you've collected data that you can now send out text messages or marketing emails too that says, "Hey, next Tuesday, we've got a doorbuster on scarves." Or, you know, if it's a slow Tuesday afternoon and it's a bar, "Next two hours, half-priced wings and $2 Budweisers." It allows you to reach out and connect to your customers to drive them back into your business. And you can use that with the reporting that comes with this service.
Eric: That's awesome. Yeah, that's really cool. Are there any other thoughts regarding gift cards or loyalty programs, things that we haven't talked about that would be helpful for a business owner that's maybe on the fence or not sure about offering this?
Katie: Yeah. I think the only thing that I can add is, you know, if you're using a paper gift certificate or you're using a punch card system, then you've already got something in place. So, training your staff to have this program is not going to be an obstacle point. It's a better investment for you to, you know, provide actual cards so that it's less work if somebody loses it, it's trackable, it's a way of marketing to your customers at the same time, and it's fairly low cost in the grand scheme of things. It's definitely worth the investment and, you know, you don't have to buy 5,000 gift cards. We sell 50 to 75 gift cards to some newer businesses that say, hey, you know what? I'm starting this business or I've never done this before, but I think that I've gotten enough questions about it. I want to try it. And so, we're going to always recommend, you know, for our customers, what we feel is best for the business. We're not going to sell them on 2,000 to 3,000 cards if it's going to take them 10 years to go through it. You know, we would like to recommend start off with 50 or 75, see if the design works for you. See if you go through them in one month or five months and then make a decision on, do you want to invest into more cards? Because you know, usually, you get a little better cost per card when you buy in bulk. Or is this kind of a good speed for you to start with or does this just not work? And gift and loyalty doesn't work for every business. And that's okay.
Eric: Absolutely. Katie McMillan, director of sales at MPI and the merchant processing partner for First United. Thank you so much for joining me once again today and providing such helpful insights on this really cool program that I think a lot of businesses should take a look into and see how it could potentially help them.
Katie: It's a pleasure. Thanks so much for having me.
Eric: Yeah. If any of our listeners have a question or would like to learn more, the best way they can get the support they need is to visit mybank.com and find a branch near you or an advisor in your area and reach out to them directly and they'll get you in touch with the solutions you need, including the folks at MPI. Well, that brings us to the end of our show. You can always find more episodes by visiting mybank.com/podcast or find us on your favorite podcast app. You can also always leave feedback, ask questions, or request the topic for us to discuss by sending an email to [email protected] We're thankful for you to be listening. We will be back next week with more helpful content. But until then, we wish you the best in focusing on what matters most to you.
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