Nearly every nail salon, spa, and solo nail technician sells gift cards or certificates. Selling a gift card is only half of the story — you need an effective plan for turning those cards into profits.
Changes Salon and Spa owner Carolyn Schwab offers ladies nights, men-only nights, and spa parties to regular customers as well as gift card holders.
Consumers love gift cards. The Retail Gift Card Association estimates the industry generates $200 billion annually. Gift card sales are popular for nail services both purchased online and in person. But what happens after you sell those gift cards? Is it like cash? Are they an asset or a liability? Many nail professionals and owners are confused about how to properly account for gift card sales. Your job is not over once you sell a card. Sitting back and hoping that the recipient remembers to use the card won’t produce results. To capture the cash, you want to make it a priority to have those gift cards redeemed — sooner rather than later.
What’s in a Name?
Gift cards, gift certificates, gift vouchers, electronic gift cards, while they sound similar they are not all created equal. Some states make a distinction between a paper gift “certificate,” a credit card-style card, or an electronic voucher. Regardless of which type you sell in your business, it is important to understand the differences and how that can impact your redemption strategy. To keep things simple, for this article we will use the term “gift card” generically.
Legal Issues and Guidelines
The Federal Gift Card Act of 2009 and individual state guidelines govern the sale and redemption of gift cards. Your state may have guidelines that exceed the federal requirements. These regulations can impact both the sale and redemption of gift cards. For example, did you know that in the state of Minnesota gift cards never expire? In some states gift card balances may revert to the state as unclaimed property if not redeemed by a certain time. Be sure that you are up to date with your state regulations, as they do change from time to time. You can find state-by-state guidelines at www.scripsmart.com/federal_gift_card_law.
Liabilities Versus Income
A gift card is a promise. You are committed to provide services or products with a certain value (the amount of the gift card) in exchange for payment before you deliver the service. That card does not count as income until you fulfill your promise. This is why gift cards are considered liabilities on your monthly balance sheet until they are redeemed.
Please Redeem Me!
Having a plan for gift card redemption is a good business practice. Gift cards help to drive new business to your door. Think about it — the giver has made a personal endorsement of you and your services by purchasing the card. When she gives it to the recipient, it really is more than a gift. It is an invitation. What could be better than this type of referral and new business all bundled into a single transaction?
Do you like “something for nothing”? So do gift card recipients. It’s estimated that 45% of gift cards are redeemed for more than the value of the gift card. Psychologically it’s “free” money and we are comfortable spending more. Use your best upselling skills to turn that gift card’s value into a larger ticket. Your goal should be to have no unredeemed balances on any gift card. You can promote additional services, add-ons, or retail purchases to encourage guests to redeem more than the stated value.
Nail tech Julie Bach, owner of the Jhana Center in Eagle, Colo., and founder of non-profit Spa4thePink, provides gift cards for individuals undergoing cancer treatment or in survivorship.
Following these steps and tips can help you turn paper, plastic, or electronic gift cards into services, product sales, and new guests.
1. Assess your situation. Your software program or accountant should be able to report the exact amount of your unclaimed and partially claimed gift cards. This is your total gift card liability. This report should include the name of the person who purchased the gift card, the date of purchase, the remaining balance, and the recipient if possible. You may not know the name of the recipient unless they have a partially redeemed gift card.
2. How quickly would you like to convert that liability into cash? Set yourself a weekly goal for the dollar amount of gift cards you want to have redeemed every month. Of course you will continue to sell gift certificates, but give yourself a target for redemptions.
3. Contact every individual who has a partial balance on her gift card. You should have the names, e-mail addresses, and phone numbers of these guests. Send a snappy e-mail or text — or call them — to share and snare those who have a balance left to claim.
4. Now, create enticements to get them excited about using those gift cards.
Offering a small incentive for booking during your “off peak” times can fill your appointment book. You can offer a complimentary add-on service, a small discount, or a retail product to woo gift card holders. Filling slower times or days with these new clients allows you extra time for personal attention and a chance to get to know them better. Make that first impression a WOW and you are on your way to great reviews and a loyal guest.
Nail tech Julie Bach, owner of the Jhana Center in Eagle, Colo., and founder of non-profit Spa4thePink, provides gift cards on a regular basis for individuals undergoing cancer treatment or in survivorship. Gift card recipients are enticed to redeem cards by offering a discounted service to the friend, colleague, or driver who may accompany them to an appointment.
Many people think they can only use a gift card for services. Even if your cards are sold for a specific service — such as a manicure — you can easily calculate the value of that service and offer them the option of using it for retail products. This is a great strategy as there is no labor cost when selling retail products.
Turn Gift Cards into Memberships
If your business offers a monthly membership program, allow gift card holders to turn those cards into either the initiation fee or use them for their first monthly membership dues.
Make It a Party!
Use your special events to draw in those gift cards. If you charge for events, let them use the balance to pay for the event. Carolyn Schwab, owner of Changes Salon and Spa in Saskatoon, Saskatchewan, Canada, offers ladies nights, men-only nights, and spa parties to regular customers as well as gift card holders. Special events can serve double duty when both the giver and receiver can enjoy a service together. Remember that all special events are retail sales promotions too. You can book services, sell product, and redeem cards all at one time.
Reel Them In
Use social media to remind guests to use those gift cards. Sprinkle your Facebook postings with ideas for how to use their cards. Create in-salon shelf talkers and have reminder cards at the front desk. Outbound “tickle-grams” (e-mails) are effective to invite both the card purchasers and recipients to book an appointment.
Patti Biro is the owner and founder of Patti Biro and Associates (www.pattibiro.com), a consulting firm specializing in planning and providing innovative coaching and education in the spa and wellness industry.