Gift Card Consumer Spending: An Insight into Spending Behavior

Why Gift Cards Drive More Spending: A Look into Consumer Preferences

Gift cards encourage discretionary spending that would otherwise not occur with cash rewards. Several psychological factors explain why:

1. Perceived Value and Emotional Appeal

For consumers, gift cards often represent luxury or leisure, particularly when the card is from a retailer associated with lifestyle or experiential products. Instead of blending into the routine financial landscape, gift cards feel like a permission slip for a small splurge.

From a business perspective, the perceived value of a gift card can be heightened by branding it as an opportunity to create a special experience. For example, a high-end retail gift card is not just a monetary token but an invitation to indulge in something memorable. 58% of people buy gift cards for self-use. This reflects the indulgent nature of gift cards, where people purchase them not just for gifting but also to enjoy a treat for themselves.

2. Freedom and Choice Within Limits

Gift cards offer flexibility within a specific range, making them ideal for both consumers and businesses. Consumers appreciate the freedom to choose what they want while staying within the boundary set by the retailer. This choice elevates the gift card’s value as it aligns with the consumer’s desires, enhancing satisfaction.

Businesses can benefit from this too: by strategically selecting gift card options that align with customer preferences, they can create a highly personalized reward experience that’s easy to implement but impactful on customer loyalty.

3. Decoupling from Everyday Spending

Unlike cash, which may get absorbed into daily expenses, gift cards are seen as “extra” money, decoupled from regular financial obligations. This decoupling is key for businesses, as it encourages consumers to spend gift cards on “wants” rather than “needs,” often resulting in higher-value purchases.

When a consumer receives a gift card, they are less likely to mentally categorize it as part of their income and more likely to treat it as a special bonus, perfect for purchases they might otherwise hesitate to make..

Key Takeaways for Businesses

Gift cards offer a wealth of benefits to businesses beyond simple convenience. With the right approach, gift card programs can drive higher revenue, increase customer loyalty, and enhance brand perception. Here’s how:

• Maximize Perceived Value: Position gift cards as experiences or indulgent treats, which consumers are likely to appreciate and remember positively. 
• Encourage Higher Spending: Structure gift card programs to align with items or services that encourage consumers to spend beyond the card’s initial value. 
• Drive Engagement with Personalization: Offer different gift card options, so customers can choose based on their relationship with the recipient, increasing the perceived personalization of the gift. 

Gift cards have solidified their place as a preferred gift option for many consumers in the United States. The decision to buy a gift card is influenced by various factors, including the occasion, the relationship with the recipient, and the perceived value of the gift card itself. As the gift card market continues to grow and evolve, understanding consumer behavior will be key for businesses looking to capitalize on this trend.