Recognizing the Need to Inspire

Incentive Magazine
Published: October 2010
By William Ng

As the everyday-spend card craze subsides,
a return to aspirational gift cards is gaining
Last year, when Incentive polled leading incentive houses, gift card suppliers, and recognition providers on their top merchant gift card movers and shakers, the outcomes were consistently national chains such as Best Buy, Home Depot, and Macy’s. National casual dining proprietors Applebee’s, Darden Restaurants (Olive Garden), Brinker International (Chili’s), and OSI Restaurant Partners (Outback) also proved to be top commodities.

This year, they once again dominated, solidifying their position as perennial favorites with employers and their employees because of the wide demographic net they cast. The top gift card lists revealed byÂNational Gift Card, Globoforce, Rymax Marketing, Maritz Loyalty and Motivation, Hinda Incentives, and others didn’t change much, if at all. But just beneath that top tier of gift cards, market shifts are occurring.

By many accounts, the heavy focus on so-called practical and everyday-spend cards, such as gas and grocery cards, is abating, and card denominations are trending upward. The heavy range in per-recipient budgets is still $25-$100, but suppliers report greater activity in the triple-digit dollar levels. It has been a robust year for travel gift cards, which employers are finding to be effective reward solutions.

Industry players have noticed a return to more aspirational types of gift card rewards. “When the economy went downhill, people needed things and employers were doing anything they could to help them,” says Jessica Brown, Rymax Marketing’s director of special projects. She says spending cards have leveled off, and programs are back to focusing on “what employees want versus what they need.”

Even atÂNational Gift Card, whose largest business is quick-service dining gift cards (Starbucks Coffee, Burger King, Subway),ÂPresident Adam Van Witzenburg says there has been a pick-up in cards for high-end restaurants such as Ruth’s Chris Steak House. “Last year, we saw a lot of ‘need items’—the Safeways of the world,”ÂVan Witzenburg notes, adding, “Bloomingdale’s is starting to come around again, and we’re not getting as many requests for $5 and $10 cards.”

“I think people are ready for a change after a couple of years of gas cards,” Colleen Kyllonen, gift card manager for Carlson Marketing, put it more directly. Still, she says incentive managers, especially of point-based programs, are keeping practical-type, low-denomination cards to allow participants to “burn off” miscellaneous and leftover points in their accounts.

Yet Kathleen Lombardo, an account executive at Stoner Bunting Gift Card Group, is seeing growth in both practical and luxury-type gift cards. “We know that consumers are interested in value and practicality and also using incentives to treat themselves,” she says.

Another industry house, Hinda Incentives, provides open-loop prepaid debit cards that are good anywhere, as well as gas cards, simply because their customers demand them. “We understand we need to be a single resource for our clients,” notes Stacey Wilson, director of operations.

Critics of everyday-spend cards, like Derek Irvine, chief marketing officer and head of strategy consulting at Globoforce, and Mary Luckey, director of incentive rewards at Maritz Loyalty and Motivation, are encouraged by the renewed emphasis on experiential awards.

“At the end of the day, by giving grocery cards, it essentially becomes compensation,” says Irvine. “Recognition is not about compensation. We’re trying to appeal to employees’ need for esteem and encourage them to [reward themselves] with something special.” Irvine says at Globoforce, corporate clients are still employing a mix of gift cards for electronics, the home, and department-store shopping, like last year. But he notes that since the recession, which has beaten employee morale down, there are lots of companies looking at recognition programs for the first time—and gift cards as their tool.

While Maritz’s top cards list is nearly identical to last year’s, the company has been working with clients on creating multi-merchant reward cards—also known as selective merchant and selective spend cards—which are usually based on shopping themes and restricted to stores chosen by the employer.

Luckey argues that everyday-spend cards essentially amount to cash, and “people don’t really reward themselves with those.” She notes, “You are still going to see Macy’s and Kohl’s, but we push clients to share workforce demographics. If there is a large female workforce, we create a ‘style card’ that’s good at 10 fashion retailers like Sephora, Macy’s, and Bloomingdale’s—where you can’t spend it on gasoline. It pushes employees to reward themselves and retains aspirational value.”

Travel Cards Are Breakout Stars
Nearly every supplier that spoke to Incentive remarks that travel gift cards are gaining in the special-channel market. Keith Fenhaus, president of Hallmark Business Connections, which is focused on employee recognition and wellness programs, says, “Personal travel is a category that continues to move, and clients are moving gift cards toward it.”

Meanwhile,ÂVan Witzenburg of National Gift Card notes his company is increasingly active in travel gift cards: “We’re getting asked a lot more about Marriott, Hyatt, and American Airlines gift cards.” Lombardo at Stoner Bunting cites Omni Hotels and BedandBreakfast.com as “having a strong presence” in its travel card volume.

Maritz’s Luckey and Globoforce’s Irvine chalk up growth to the negative sentiment toward incentives in 2009. “A lot of group incentive travel was canceled because of all the press, and employers began doing individual trips,” Luckey notes. In points programs, she says participants were using their points for travel gift cards to take personal trips.

“There has been more and more individual travel because in a recession, nobody wants to be seen taking an entire team somewhere on taxpayer money,” Irvine notes, “but employers still have goals to achieve.” Globoforce offers individual travel solutions from Travelocity.com and Salem, MA-based incentive travel specialist Journeymasters.

But Joyce Engberg, director of fulfillment for Carlson Marketing, says aside from the perception sensitivity, companies have found travel gift cards to be a new way to inject freshness and luxury into points programs. They also provide a less costly alternative to group travel. “We’ve seen a rise in travel cards in the last 3 to 4 months,” she notes.

Overall, though, many incentive suppliers notice companies are recognizing the importance of practicing gift-card giving in the post-recession era of the American workforce. “After companies did their downsizing, they realized that they need to take care of their best employees, who are doing more. Their budgets are now beginning to open back up,” says Hallmark’s Fenhaus.

Irvine adds, “Every employer is dealing with the reality of the modern workforce, where there is less loyalty."

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