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Gift Coupons / Gift Vouchers – A Marketing Gimmick

How u feel, when u r being cheated smartly under ur nose? It’s a mixed bag feeling i.e. you feel “Hmmm… I feel i am very smart but someone is smarter than me and I should learn from him” and at the same time you feel being duped…To experience these mixed emotions, all u need to do is just buy GIFT COUPONS / GIFT VOUCHERS offered by various stores and malls.

Whenever u enter any mall or outlet, u can see lot of visibility though Danglers, Posters etc on Gift Coupons especially near the payment counter …In 100% cases, the objective of this communication is to create emotional connect with customer…It makes u feel guilty that if u don’t buy these gift coupons for ur loved ones then it means u don’t love them :)

Gift Coupons are profitable for Retailers and loss for Customers, why let’s understand

From Retailer Perspective:

1. Assured Future Sale: Suppose a Person A walks in at retail outlet named SS for simplicity purpose and purchase Gift Coupons worth 10k Rs. He gifts these coupons to Person B then indirectly Person A is ensuring that Person B makes his purchase only from SS & Secondly it helps SS to book assured future liquidation of SKU’s..Thus Person A is helping SS, registering  assured future sale (Inventory liquidation) of 10k Rs through Person B

2. Customer’s 100% Wallet Share: Now u must be thinking what’s the Big deal, Person A is paying and Person B is buying..Here lies the catch, in Marketing there is a term called Wallet Share of Customer…Lets flip this scenario assume Person A gifts 10k Rs in cash to Person B, then Person B is free to spend this amount at retail store of his/her choice or he might also decided not to spend the amount & deposit in bank account…But by selling Gift Coupons, SS ensured a retail Wallet Share & also made sure that this 100% wallet share will come to them though Sale…Therefore they 1st created and then liquidated the 100% Wallet Share (Monopoly in Wallet Share through Gift Coupons)

3. Increased profit margins through Unused Coupons: According to very rough estimate approx 20% coupons are never presented for encashment, mostly of low denominations like 100 Rs, 200 Rs etc or sometimes coupons are presented after expiry so effectively if SS is selling gift coupons worth 1 Lac in a month then it is assumed that coupons worth 20k will never be presented for encashment or may be after expiry so it’s a flat incremental profit margin of 20%.

4. Higher Sale Value then Coupon Value: Being an Indian I understand  thought process of Indians better…If someone has gifted me coupons worth 1000 Rs then i will not settle even for purchase worth Rs 990 becoz I don’t want to leave even 10 Rs…Retailer will also not return balance amount if purchase is less than coupon value so in this dilemma i end up making purchase of 1150 Rs and will pay 150 Rs from my pocket..From Retailer’s perspective he sold coupons worth 1000 Rs and ended with sale of 1150 Rs so he generated Xtra sale of 150 Rs which would have never happened if he would not have sold Gift Coupons…So clubbing point 3 & point 4…Without doing anything xtra he got incremental sale of 15% and incremental flat margin of 20%

5. Interest Free Credit for Retailers: All Gift coupons come with an expiry of 6 Months and assume SS sold Gift Coupons worth 1 Cr in a month and on average it will take approx 3 months for customer to come & present the coupon…Effectively he got a credit of 1 Cr Rs for 3 months without paying any interest, which is a huge saving for retailer becoz no one in world will give credit of 1 Cr @ 0% interest.

Now u must be wondering if retailer is making profit then why i should bother, my take away so far is that next time i will get some gift coupons…Immediately next day i will visit the retailer and make purchase but there is catch my friend, things are not simple as they look & there is a dark side to it

From Customer’s Perspective:

1.  All Purchases @ MRP: Yes, its shocking but true in 95% cases, The terms and conditions are mentioned on back of Gift Coupon and instead of writing in raw language that you have to purchase all items at MRP…Normally it is mentioned that No offers including Sale can be clubbed with all purchases though Gift Coupons. Normally in any scenario, 10-15% discount is available on any product throughout the year due to cut throat competition so you will lose out on this part.

2. Gift Coupons from employers: Have u wondered why during the festival season  many employers prefer Gift Coupon to employees..Reason is very simple, firstly Employers get heavy discount on Gift Coupons as they buy in bulk & secondly the perceived value is very high for employees say for e.g. if a company has 100 employees and they give coupons worth 5k to each employee so total purchase is of 5 Lac and company might get discount of 20% so employee perceive the benefits worth 5k and company got it for 4k…Also during redemption, the real value of 5k after discounting sale or offer is only 4k plus so at the end only employee is at loss

3. Limited Shopping options: U r planning to buy a dress of Brand A but u received gift coupon of Store B which does not stock Brand A so ur shopping option is restricted and u have to buy only from stock available with Store B irrespective u like it or not. Also may be u don’t require anything from that store but u have to purchase irrespective of ur needs.

4. Applicable only for purchase in certain categories: Lifestyle Gift Voucher cannot be redeemed against purchase of Electronic items  and cannot be used at Planet M, Food Court, Cafe Coffee Day and Polynation.

5. Inconvenience to handle Gift Coupons: My personal opinion Gift Coupons are very inconvenient to handle

Best Solution:

To avoid all these hassles, I am going to suggest u a solution worth million dollars…Whenever u receive Gift Coupons just pass it on to someone who’s B’day or Anniversary is around the corner….You also do what others might have done to u :)

But if u r originator of this vicious cycle or chain i.e. original purchaser of Gift Coupons then my request “Let people should feel happy about ur gift rather start thinking on how to dispose Gift Coupons immediately after opening your gift envelope”…The value of Gift should be judged from feelings attached to it rather value of gift :).

Copyright © 2011-2012 Nitin Bhatia. All Rights Reserved.

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Ravi Bhatia
Ravi Bhatia
12 years ago

It is a good lesson to those who use gift coupons/vouchers for presenting gifts online. Some times tag value of sale items for sale against gift coupons/vouchers is much higher than original cost may be 3 to 4 times because at the time of placing order online order we are not aware with quality of product.We only feel cheated when open the gift pack presented by some one. At this stage we can’t blame that he has befooled us.

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