Gift giving has been the interpersonal glue of human society for thousands of years. From tribal leaders exchanging gifts for peace, protection, and food to our modern-day presents for holidays, anniversaries, and birthdays, gift giving has remained a strong and evolving part of our culture. While the types of gifts and gifting occasions have changed over the years, the remaining constant is how receiving a gift makes a person feel.
When people receive a gift they feel special, because they know the giver specifically selected it for them. Generally a person is able to give a desired gift because they know the receiver personally - their hobbies, interests, and overall what makes them happy.
Gift giving is now catching on with brands as a way to connect with consumers. As Bob Garfield, a prominent commentator and analyst of advertising and marketing, recently wrote, we are now in the "Relationship Era." I believe one of the best ways to form or strengthen a relationship is through gift giving.
The Emotional Side of Gifting
Retailers have known the secret of gift giving for years. As an example, Banana Republic periodically sends my wife $25 gift cards. There are no strings attached. She is free to spend whatever she wants. Best Buy sent me a gift card valued at $16.50 because of my participation in its frequent shopper program. Again, no strings attached. We feel good about these gifts and are highly motivated to visit the stores and spend our found money.
Why do these retailers give away free money? Because it works. At a recent gift card event, we learned about the following statistic: gift cards are 10 times more effective at driving customers in the door than any other promotional activity.
Gift giving - in the form of gift cards and gift incentives - is known to be a superior alternative to coupons and deals. Gifts and gift cards are highly engaging and somewhat irresistible. They are relationship-enhancing. Gift cards allow marketers to invite consumers to enjoy their brands with no strings attached. And they put consumers in the mindset to spend, not save. That might explain why my wife spends on average $150 every time she receives a $25 gift card from Banana Republic.
So Where Are All the Gifts?
So why aren't gifts a core part of every marketing plan? Until very recently, retailers have been unable to use gifts as incentives at the scale necessary to really move the business. The reason is simple. To give out a gift of free money, you have to be able to know with relative certainty that a consumer is likely to spend enough to make the investment pay out. My wife receives a Banana Republic card for $25 because she uses its private label credit card to make purchases. The retailer knows how much she typically spends (> $100) and can make a bet that she will follow that pattern. However, most retailers have spend data on only a small subset of their users and don't have the analytics capability to fully analyze the data. Nor can they make accurate decisions about who to give a gift to, and what the right value should be to maximize effectiveness and return on investment.
Big Data to the Rescue
Two trends are intersecting to make gifting a scalable proposition. The first is the ability of third parties to safely access credit and debit card data in partnership with the largest card issuers. By safely, I mean anonymously, so that no personal information is shared with third parties. The second trend is the development of technologies that allow companies to analyze hundreds of terabytes of data and make powerful predictions on an individual basis, in real time. The intersection of these two trends makes gift giving possible at scale, as new companies bring their expertise to the area, setting the table for a new field - gift marketing.
The Shift to Gift Marketing
Retailers spend upwards of $300 billion a year on coupons and promotions. Consumers are bombarded with more offers and coupons than at any time in history. And the more we send, the less responsive the consumer becomes. To stay competitive, retailers will need to shift funds from couponing and deals to far more efficient and effective gift marketing. Rather than offering shoppers a coupon, merchants can offer them a highly motivating gift based on their actual spending habits, which can be tracked and delivered via their financial institution.
By giving shoppers a gift, retailers get hyper-efficient marketing that can truly change consumer behavior and create profitable new visits at the scale they need. And shoppers feel a special connection to the gift-giving retailer, which carries into their shopping cart and future loyalty to the brand. We are on the verge of a seeing a significant shift in the economics of advertising and the rise of gift marketing.
Shopping Cart Gifts image on home page via Shutterstock.
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Jim Taschetta has 25 years of leadership experience across a name-brand selection of blue-chip companies and start-ups. Jim previously served as the CMO of Bare Escentuals, FRS Healthy Energy, and Yodlee.com. Additionally, he served in various executive positions leading brand management and marketing at Procter & Gamble, Coca-Cola, and Visa. Jim has extensive international experience, having spent seven years living and working in Latin America while at Procter & Gamble.
March 19, 2014