January 31, 2006, 12:00 AM

It`s a Gift

(Page 2 of 3)

A partnership with GiftCertificates.com can translate into increased revenue. For a merchant, having a brand appear on an aggregate site like GiftCertificates.com means more visibility. Partnering with the site is one more way of furthering branding efforts, says Ed Handel in corporate sales at Crutchfield Corp., Charlottesville, Va. “Plain and simple, their site and sales programs get us in front of more businesses and consumers,” Handel says. “Approximately $3 million of our total annual sales comes from gift cards sold by GiftCertificates.com. So it works really well.”

To provide consumers with a more comprehensive gift option and retailers a chance at more sales and customer acquisitions, GiftCertificates.com created the SuperCertificate. Now the site’s core product, it enables consumers to give a gift or incentive that can be redeemed online for any branded gift certificates.

The competition

“This has allowed merchant partners to get more customers than they could on their own,” Barefield contends. “And because of the electronic option, one that many retailers don’t offer and that ships certificates via e-mail within one hour, it makes for a good last-minute gift choice-especially for those who are uncertain what to purchase. Further, the SuperCertificate is an ideal choice for corporate incentive programs because it covers a large demographic footprint.”

Like electronic gift certificates, sales of SuperCertificates have been on the rise, from 39.2% of sales in 2003 to 50.5% last year.

When it comes to online gift certificates, GiftCertificates.com isn’t the only kid on the block. Quasi-competitor GiftCards.com Inc. sells Visa debit cards that can be used anywhere Visa cards are accepted. This model, however, is very different from the sale of paper, card and electronic gift certificates used by GiftCertificates.com.

The business model of rival GiveAnything.com LLC is more similar to that of GiftCertificates.com. GiveAnything.com does not offer merchant-specific gift certificates. Instead, it sells a “universal gift certificate” similar to GiftCertificates.com’s SuperCertificate. A SuperCertificate is redeemed at GiftCertificates.com for the branded gift certificates from any of the company’s 200 merchant partners. The electronic universal gift certificate, which can be printed by a gift giver or recipient if so desired, can be redeemed directly at the online stores of GiveAnything.com’s 300 merchant partners. Consumers check out and pay online just like they’re using a credit card.

“They are not competition,” Barefield insists. “It’s a different experience when you’re giving a credit card-like form of payment vs. a gift certificate.”

Edward Brookshire, president of New York-based GiveAnything.com, which makes its money through merchant commissions and float, begs to differ. “We don’t see it that way-we are not ‘currency,’” he says. “Our universal gift certificate is no different than their SuperCertificate. It’s accepted and spent online at a wide variety of stores; and we have a deeper variety of merchants. I don’t see a difference in the actual product.”

Unsettled market

Industry experts view the two companies competing for the same consumers. As for which online retailer will gain and maintain prominence, it’s too soon to tell. “It’s still too small a market to say one company might trump the other,” says Freeman Evans, the analyst. “Growth opportunities will arise, and there is plenty of awareness-building yet to be done. For GiftCertificates.com, another player is not a bad thing. From a competitive standpoint, it will help the company innovate. Plus, more players build overall awareness of online gift certificates among consumers.”

As for the future, GiftCertificates.com sees increasing sales of its SuperCertificate and adding merchants to its network of partners as keys to growth.

“Three years ago we did not have iTunes or any music download merchants because they didn’t really exist,” Barefield says. As product offerings change and trends arise, the company must stay abreast of change and ensure it has the options and choices consumers want, he adds. “We’re constantly looking at new and relevant merchants. And we’re looking to increase electronic redemption.”

The company markets to consumers via search engines, e-newsletters, HTML e-mails, affiliate marketing, web site advertising and radio ads. But the primary strategy moving forward for GiftCertificates.com will be to increase customer retention.

“We are going to spend much more time and effort on retention,” Ambrose says. “We’ve been gaining the most efficiency in our customer acquisition efforts. But search engine keyword prices are up. The opportunity to boost our financials is in retention. We’re still moving forward with acquisition efforts, but we’re layering in more retention.”

Unique motivations

One of the main retention efforts this year will be gathering more data on existing customers. Based on analysis of current data, company executives have identified the most important customers. The company will leverage these findings to launch a customer loyalty initiative, which subsequently will gather new and different data on these important customers. It then will use the additional information to enhance its database and analyze the data to provide better and more focused product offerings.

“Previously we have communicated to all consumer audiences as if they were homogenous. We have not messaged specifically to segments,” Ambrose says. “A key to retention is treating customer groups in a unique fashion. We have discovered unique motivations and needs of various segments, even for purchasing something that seems as straightforward as a gift certificate. We will be embarking on a phased approach to improve target marketing and provide unique customer experiences.”

Phase one, already completed, involved segmenting customers. Phase two, currently underway, has the company evaluating products and services, positioning, messaging, and communications methods for relevancy. Phase three will see the deployment of evaluation findings in marketing efforts and revised site language. And phase four will be the creation of distinctive online shopping experiences for each segment. GiftCertificates.com is searching for technology vendors to help with phase four efforts.

“Because of the nature of this evolving marketplace, advances in online technologies and progress made in the manipulation and analysis of customer behavior, we’re seeking technology companies that can help us maximize our relationship with customers,” Ambrose says. “Specifically, we’re looking at companies that specialize in retention and conversion efforts. Dynamic messaging and e-mail marketing will be just two methods that will support our phased approach.”

The road ahead

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