Stores give out gift cards and pay a fee only when the cards are used.
Katie Evans , Managing Editor, International Research
Say a consumer gets a gift card worth $10 to a local jewelry boutique from a friend. That card, especially coming from a friend, will likely increase her chances of visiting the store. And there’s also a good chance the shopper will spend more than the 10 bucks on the card when she goes to the store.
Making that happen more often is the goal of Givt, a new app for Apple Inc.’s iPhone. Givt is designed to help local merchants get more traffic and publicity for their stores by offering free gift cards that app users can give to their Facebook friends.
Here’s how it works: The jewelry boutique owner signs up for Givt, logs into her merchant account and sets the number of digital gift cards she would like to offer to Givt app users for free. For example, she might offer 300 gift cards worth $10 each. Givt then allows app users to give those gift cards to their Facebook friends. Merchants pay a small fee to Givt when a shopper comes to the store and makes a purchase using the Givt card.
The fee varies by how much the card is worth, but it is usually comparable to a click on a paid search ad, says Josh Cooper chief operating officer of Givt Inc. The average cost for a click on a Google paid search ad was 45 cents and on a Bing search ad 66 cents in the third quarter of 2012, says search marketing firm Kenshoo Inc. Merchants also have to account for the value of the gift card redeemed.
“The key is that they only pay (Givt) for actual customers. If somebody gives a card to their friend and they never use it, it never costs the business owner anything,” Cooper says. “Rather than clicks, the merchant gets actual people buying things. So the total cost to the merchant is the value of the gift card they gave to the consumer plus our small fee.”
In addition to getting the card recipient to enter a store and buy, there’s also the added bonus of free advertising as all the giving and receiving of virtual Givt cards is posted on Facebook.
“People are more likely to try a brand or believe in a product if they are referred by a friend.” Cooper says. “People are bombarded with advertisements every day. This is different because someone you know and trust is referring you instead.”
For a consumer to use the app, she selects a Facebook friend that she would like to give a gift card to, chooses the gift card she would like to give, adds a message and posts the gift card to her friend’s wall. The recipient then downloads the Givt app. When she is ready to redeem it at a store, she selects the gift card she would like to redeem, presses “Use in Store” and shows the unique gift card ID to the cashier.
So stores can focus on reaching new customers, the app lets merchants track customers who have redeemed cards in the past so the merchants, if they choose, can make gift cards available only to new customers.
“Many businesses already give away free gift cards, but they have to pay for design, printing, and postage, and then hope they target the right groups when they mail out,” Cooper says. “We make all of that free and let consumers pick who to give the cards to. The best advocates for merchants are usually the customers who already love their business, so we make it easy for these customers to share their favorite businesses with friends.”
Cooper says Givt is a good alternative for a small business owner who may not have a big budget for advertising and doesn't want to take a risk on banner ads, pay-per-click campaigns, or TV, radio and newspaper ads. Another benefit, he says, is that merchants hold the cash flow.
Unlike many daily-deal sites where the company sells a deal for a merchant and pays the merchant later, Givt charges businesses the next week for the previous week’s customers, Cooper says.
Givt has been test marketing its business in its headquarters city of Toledo, OH. About 30 local businesses have signed up for the app, Cooper says. It recently put together a national sales team and will be launching in several markets across the U.S. over the next two months.