Solomon Bruce Consulting Blog

Sunday, January 3, 2010

I only have the $15 certificate! Will that work?

I had dinner the other day in a small family owned diner. The food was good, there were lots of people eating and the holidays were coming upon us.

I sat at the counter-- just seemed like the right thing to do! As I was waiting for my sandwich, an elderly lady came in and wanted to buy a $25 gift certificate from the diner to give a friend from church for Christmas. She told the waiter, a young man about 19, what she wanted. He said that he would go get it. As I was at the counter, I could watch this whole process unfold!

He came back several minutes later and informed the lady that they were out of $25 gift certificates, all they had were either $15 or $50 certificates available. Would she like either of those? The lady pondered a while, and decided, out loud, that she could pay another $5 and get 2 of the $15 certificates--- that would be close to the $25 certificate that she originally intended to get. She went ahead and told the waiter that she would take the 2 $15 certificates.

Now, as I was eating my sandwich, I got to thinking about this whole scenario. The lady had many choices from which to get her friend a gift certificate. Most every restaurant in town will offer gift certificates to you. She chose this specific one because the food was good. However, if she did not have the other $5 to make up the balance, the diner could have lost a $25 sale.

I don't know if a manager or owner was on the premises. However, I think that another way to have handled the matter would have been to give the lady the 2 $15 gift certificates for the $25 that she originally wanted to spend. I would have told her that we were out of the $25 gift certificate, however, I would be happy to give her 2 $15 certificates to make up for the hassle.

Here is what I think would have happened:
A. The Lady would have been surprised by the offer of generosity of the waiter.
B. She would have told all of her friends about what a wonderful waiter the young man was and what he did to solve a problem. She probably would encourage others to go and eat at this diner.
C. The "word of mouth" advertising that was probably given was well worth more than the extra $5 of the gift certificate.

Studies have shown that gift certificates are redeemed between 60-82% of the time, depending upon the study. Let's look at the most optimistic redemption rate, 82%.

Assuming that 82% of all of your gift certificates are redeemed, that still leaves an 18% non redemption rate (read REAL PROFIT)--because people paid for the certificate, but did not use it. This is profit in your pocket!!

Most folks will always use the maximum amount of the gift certificate. A friend gave me a gift certificate the other day for Amazon. Although I did not really want anything-- I found some things that I could use-- however, at the end of the transaction, I used the entire gift certificate and then some-- wanted to get full value for the gift certificate. I think that we are all like that!!!! The bottom line is that I spent more money than the gift certificate was for and the store made more profit!

How do you handle gift certificates in your business? Do you have "hard and fast" policies, or like employees at the Ritz Carlton hotel, are your employees empowered to "do what is right" to satisfy the customer?

Ritz Carlton hotel employees are all authorized to solve any problem up to $2000 limit with "no questions asked". If a greater adjustment is needed, management approval is required. Interestingly, it is very rare that any problem ever reaches the $2000 limit.

I suggest that you not have such hard and fast policies that your employees are not empowered with great flexibility to adjust to customer needs. A little flexibility goes a long way into increasing sales, returning happy customers and greater profitability.

During your next staff meeting, I suggest that you review your gift certificate policy, if you have one. If you don't have one, now might be the right time to consider developing one. If you decide that "rules" are needed, put yourself in the place of the customer on the other side of the counter--- if you want to be treated to that rule, I suspect that your customer will accept it as well. However, if you find the rule either onerous or silly, I suspect that your customer will as well.

Don't make the "rules" so tough that your customers don't want to buy a gift certificate from you! Creativity and ingenuity are the factors which will increase your sales through gift certificates!


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