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Flourish in a Flash: Gift Card B2B Basics


Episode Transcript

Please note: Transcripts are computer generated.


Intro 0:04

You're listening to The Flourish in a Flash podcast with the Flourish team Dez, Holly, Kristen and Erika


Kristen Thiry 0:16

Welcome everybody to another episode of Flourish in a Flash. I'm Kristen Thiry, one of the members of the K+H and Flourish team. And I am very excited to welcome our guests today, Hollis Thornton. She is with Velocity B2B, which is part of Blackhawk Network. And she is also one of the board of directors of the Incentive Gift Card Council. So she has lots of fantastic experience about b2b and gift cards. So we are very excited to have her join us here today.


Hollis Thornton 0:42

Kristen, thank you. I'm thrilled to be here.


Kristen Thiry 0:46

Well, b2b is a topic that we talk a lot about and you know, definitely want to dive into a little bit more. You gave a great presentation at the RGCA Summit recently or RGA Forum recently and thought it would be great to kind of have a follow up conversation.And talk a little bit more about the b2b market, both for the veterans and the industry, but as well as for those folks who are maybe just starting out and just getting going. So maybe at a high level, if you could just give us an overview of, you know, what does the b2b opportunity look like in the gift card space?


Hollis Thornton 1:16

Sure, absolutely. Yeah. So right now Mercator, which Mercator is a research firm that's been following the gift card industry for a number of years now. And they do, you know, regular studies on the gift card market, you know, year over year. So we've got some really great data from them over the last few years, and they currently value the total US closed loop gift card market at about $125.4 billion. And of that they're valuing the b2b market or the b2b opportunity to be about 23% of bad at 29.7 billion. So what I like to share with companies is you know, that's really your opportunity, you haven't a chance and opportunity to go after your piece of that $29.7 billion that's tied to, to b2b.


And you know, Kristen, maybe we should just kind of back up a little bit and talk about how we define the to be, you know, for some of the newbies out there.


Kristen Thiry 2:17

That's a great point and then kind of describe, okay, if that 23% is b2b, you know, maybe what is that other 77% or so and kind of what makes that, that qualification? So yeah, if you can maybe describe that, that'd be really great.


Hollis Thornton 2:29

Sure, yeah. So we really define b2b as a merchant or retailer selling their gift cards in bulk to other businesses for use in incentives or, you know, for employees or even for consumer loyalty programs. The other half are the majority of that closed loop gift card market, which is valued at about 95.7 billion, is really what we call consumer and other so sales and a merchant's website sales and merchants actual store or concept and then also sales and a third party store. So you have kind of sales direct to consumer of a of a gift card, and then you have that b2b at 29.7 billion. That is sales to other businesses.


Kristen Thiry 3:15

Great. So yeah, that kind of helps set the stage. And I think one of the important things, you know, to note about the b2b market, too, is that often it does come with, you know, discounts required to participate in some of these programs. So kind of setting that as an expectation for people who are looking to go into that space, right, that they need to kind of assume that they're going to be expected to provide some sort of discount to participate in those programs, right?


Hollis Thornton 3:40

Absolutely. Yes. You know, we find that with, if we kind of just drill down a little bit further into, into what the b2b market looks like, there are kind of three major segments. And then within each of those segments, there are different types of buyers. I know we're going to we're going to kind of get more in depth here. As we move forward. But so if we just take that 29.7 billion and break that break that down further into the three major segments, if we can look at consumer incentives, which is at about 14.2 billion employee and partner rewards, which is at about 13.8 billion, and then kind of the miscellaneous or other which might be defined as you know, script, fundraising programs, other types of programs at 1.7 billion. And what I think is interesting is Mercator actually projects the growth for consumer incentives at a higher rate than the employee and partner rewards. And there, they really know in their study that that's based on that's really due to technology, because of the advances in technology and how consumers can, you know, redeem their points quickly turn that into a gift, you know, they just see the rate of growth at higher at about 5% versus only about 2% for employee partner rewards.


Kristen Thiry 5:04

That's really interesting to note. So when you say consumer incentives, can you give us a little bit of an idea of, you know, what makes up the consumer incentives? I mean, obviously, you talked about different like purchase promotions and that kind of thing, but maybe what are some other sub segments underneath that umbrella?


Hollis Thornton 5:21

Sure. So under consumer incentives, that might be a credit card loyalty program, so you have a credit card, and you go shopping, you earn points, and you can redeem those points for gift card, you know, oftentimes, it's also merchandise and, and travel too. But of course, we're focused today on gift cards, or could be a travel loyalty program where you're earning miles and you don't just redeem those miles for more travel, you can redeem those for gift cards. So anything where a company is trying to incent consumer behavior is really what's tied to consumer incentives.


Kristen Thiry 5:58

Yeah, obviously, I feel passionately about the credit card rewards having managed Discover's program for however many years,


Hollis Thornton 6:04

Right, absolutely one of the biggest programs we have today.


Kristen Thiry 6:08

Yeah, it's fun, you know, I mean, allowing customers to kind of have access to those gift cards is great and as a brand I think it's so important to note that like in order to really get access to this cash into this, this capital you know, you have to participate in this program like the cashback bonus dollars that you know in discovers world that Discover card holders earn is only accessible to you as a brand if you participate in the Discover gift card redemption program, you know, the billion dollars of cash bonus that customers are earning is otherwise not accessible to you as a brand. It's not you know, money people can spend on your gift card if you're not in that program, right


Hollis Thornton 6:48

Right. I mean, right because you're not part of the consideration set so they're going to pick another brand that's may be close to yours in the same category or they might go in a totally different direction. it you know, it's interesting kind of reminds me some of the new programs, actually some of the emerging programs that we're seeing where we maybe have some hesitation from merchants joining reminds me a lot, you know, years ago, I've been in the industry for about 17 years now. But it reminds me early on even in third party where a brand you know, I've heard brands early on saying I don't want to be in a grocery store. Well, now, I mean, if you're not on the on the peg in the grocery store, I mean, we know there's research years and years of data and research behind that now they will pick another brand, they're there to shop for a gift card, and that's very similar in these loyalty and employee incentive rewards programs. They have points, they're ready to shop. They want they want a gift card, and you need to be part of it.


Kristen Thiry 7:42

Absolutely. I think that's so important, I think, you know, and the travel sector is interesting, too, because I know, at least for me, personally, I'm probably a part of three different airlines rewards programs. And you know, it's like at some point, you're just not going to fly enough with a certain airline to earn enough points to earn a flight, you know, but I do have enough points to get a 25, 50, or 100 dollar gift card maybe, you know, so giving people the ability to kind of use those points when they've earned them in ways that are meaningful to them, that don't require them to wait five years to earn enough points, you know, to go on that trip or whatever is also super important. So that's, that's really helpful to understand, you know, the consumer incentive piece, the employee incentive piece, can you talk a little bit about that? Because it's not just you know, employee reward and recognition. There are some other subcategories within that vertical to you if you could kind of explain those differences as well.


Hollis Thornton 8:30

Sure, yeah, we kind of we break that down into what you mentioned employee recognition, but also health and wellness you know, obviously has seen just a huge maybe not obviously if you're new but we've seen just a huge interest in growth over the last few years in the industry. so rewarding and employee for you know, getting certain screenings or, you know, keeping certain appointments, losing weight. You know, walking programs within different, you know, major organizations that have a lot of employees. So health and wellness has really exploded after the lot, you know, over the last few years.


And I think we continue to see it grow every year as more and more opportunities and you know, people come up with so many great ideas to tie in incentives to people's health and wellness. So a lot of opportunities there and, and, you know, again, what's interesting there is you know, we'll see brands that get a lot of direct business from major companies, right where they want to reward their employees and they're going right to a brand buying gift cards involved to reward their employees but there are so many major program managers out there too. And I think even the number of those companies continues to grow as they see what how lucrative it is and, and how more and more companies want to be able to reward their employees and they realized this engagement with their employees is so successful and and maintain productive workforce.


Kristen Thiry 10:02

Absolutely. I think that we've definitely heard a lot about that in recent years of just the upswing in, in those types of programs and the use of gift cards as, you know, carrots for those types of programs. So that's really great to understand. You know, one of the things that sort of surprised me was, you know, the other category containing script in there. And that that really only approximately represents about 3% of the industry, I would have thought for some reason script was bigger than that was a greater percentage, and maybe for some brands, it is versus others. But maybe for those who are new to the space, if you could describe a little bit more about like, what script is, and you know, the two major players in the space. Sure. Yeah. So scrip is really defined as fundraising for nonprofits. And so instead of your kids, you know, coming home with catalogues of popcorn or wrapping paper, there's an opportunity to sell gift cards at full face value and a percentage of this sale will go back to the school or the nonprofit as a fundraiser. And so so many organizations like to take part in this, it's it, you know, because it just feels good, right? I mean you're helping nonprofits, you're helping schools, you're helping parents with, you know, tuition payments. And so, we've just continued to see that explode in the number of merchants that want to participate in script explode over the last few years.


Hollis Thornton

And, you know, I agree with you, Kristen,I think it is interesting to see that, you know, that other category, which includes scrip is only about 3%. Or what was the number it was about 1.7 billion of the 29.7 for b2b. And you also hit the nail on the head that it really depends upon the business too. So for some, you know, their script business that will be one of the top three of the major b2b buyers for a particular brand. Where others you know, credit card loyalty program might be higher. It really depends on the category and the brand kind of you know where that falls. But scrip is definitely an always a major player. For for brands and b2b. There's a couple of major program managers that handle this for the nonprofits and schools out there, including Great Lakes script. They've been around for years, they've actually bought up a couple of other companies over the last few years. There is also Benefit Mobile, which is now owned by National Gift Card, NGC. So another great resource if you're looking to get into the scrip industry, and there's a few other players out there like Dynamic Scrip and Scrip Sense that and even NOSA, Northern Ohio Scrip Association that are still out there as well as United Scrip. Another good one, probably within the top three with Great Lakes and Benefit being your two largest players. out there.


Kristen Thiry

Yeah, and one of the things I find interesting about scrip is you know, I know a lot of my friends who have kids in schools and stuff like you have a certain amount of money to you have to like donate you know, give get or whatever for your school to kind of offset you know, some of those tuition costs and whatnot. And, you know, I think scrip is a great channel for self use, you know, unlike maybe a lot of other channel Well, I guess, you know, the the argument can be made really in any of these channels that there is an element of self use, but I think scrip in particular, seems to be the one where people you know, get those gas and grocery cards and those things to really have like those everyday purchases that they're gonna make anyway, and why not have a percentage of that purchase go towards, you know, their school or their nonprofit of choice to kind of offset some of those expenses and earn the those donation dollars for their their organization. So I think that's an kind of an interesting twist on like what scrip brings to the industry as well.


Hollis Thornton 13:55

Definitely. And you know, it while it is heavy self use, we do see you know, large number of brands that are getting incremental business from it as well, you know, because they know they need a gift or they know, you know, there's something that they need and there may be more willing to try a brand because they know that their school or nonprofits going to benefit from it, where maybe, you know, they wouldn't be as willing to do so otherwise.


Kristen Thiry 14:19

Absolutely. Yeah. It's really interesting from that point of view. All right. So what do you think, you know, as somebody who's maybe evaluating, like, maybe there's a new brand in the marketplace, and they are looking to kind of kick off going into the b2b industry? What are some of the top things that they should be looking at considering, you know, benefits that they might be reaping that they wouldn't have in other channels? Like, what are some of those top considerations for somebody who's just kind of starting out to evaluate moving into b2b?


Hollis Thornton 14:53

Sure, yeah. I think you know, one of the places that you really need to start is kind of understanding what your brand objective is. And, you know, people usually will say like, right off the bat, well, its sales. Well, it's not always sales, it really depends on the type of organization that you are. Just for example, I met with a franchise organization earlier this week, and we talked about the importance of their franchise, franchisees seeing that corporate is really doing everything that they can to, excuse me get exposure for the brand. And so while sales is very important, I think in this case, the brand awareness aspect is is just as important, if not maybe even more important for this particular brand that I was meeting with.


So, again, I think, you know, really understanding your objectives and and just starting right from the top and making sure you have executive buy in I mean, I you know, Kristen, you and I attend a lot of these industry events and you know, I know even at Flourish that that you manage, you all had a session on, on executive buy in, you know, trying to kind of help people, you know, think through what they need for executive buy in. So I know there's some lot of great resources in our industry out there right now on that. So I think that that is so critical and and just in my experience, again, all the years that I've been working with brands on their b2b programs, I've just really found the brands that are engaged, and it doesn't mean that you have to have a full time person, I just mean that you're engaged, you're paying attention to what's happening in the space, and you have interest in it. Those are the brands that are really truly successful in this space every day.


Kristen Thiry 16:33

And we talk a lot about you know, making sure that you define the reason that you're doing something within your b2b program as a brand, you know, and like, don't just go into b2b, you know, because that's what we're telling you to do right now. Make sure it aligns kind of with your goals and objectives, and you kind of have that roadmap, you know, defined and I think one of the things that is interesting, we kind of touched on this a little bit, but there are so many aggregators in this space, right and like, you plug into one of them, and you get into all these different b2b programs and different buyer programs and whatnot. And I think one of the challenges sometimes can be having visibility into, like what programs your brand is in if you go through one of those aggregators. So how do you recommend people ensure, you know, brands ensure that they're maintaining that alignment and that they're maintaining that visibility into some of those other programs as they forge down the path of b2b?


Hollis Thornton 17:26

Well, I think, again, that that speaks to what I just said about being engaged. So whether or not you are deciding to take on b2b management and growth internally, you know, on your own, or if you're outsourcing that to many of the wonderful consultants and management companies out there, that engagement with the buyers directly these large program managers that we kind of talked about is just so critical because the deeper relationship you have with them, the more you will learn and understand where and how your brand is being featured. And that is so critical, especially for a brand that might be a bit more sensitive about, you know, where it's placed.


So brand sensitivities always, you know, something that we talk about when we bring on a new client to kind of understand, you know, there are any categories or any types of businesses that they don't necessarily want to do business with. But, you know, going back to your point that I think that is a major challenge in our industry, is just really understanding everywhere your brand is, I mean, luckily, a lot of its public information. I mean, you can go on and Google, Cap One rewards or Southwest Rapid Rewards, and you can see what's in their catalog. So that's, you know, one way to kind of track it down. It takes time though. But I highly recommend some sort of tracking system. And I think probably a lot of brands out there don't know that the larger program managers or aggregators will share with you where your brand is they may not share sales down to that program level. But they will share a list with you because obviously, you know, hopefully you're also approving those things right, as you know, as they're getting your brand into more and more programs and opportunities.


Hopefully they're sharing that with you and you're getting to approve that but and even if not, you've kind of given them blanket approval, they should be able to share that. And so I highly recommending I know, you know, we, my team, we use Salesforce to track that. So every brand and program opportunity are tied together. I've talked to people in the industry that just use a simple Excel spreadsheet grid, that I think it's really critical because as we have seen a lot of consolidation. I know Holly, on the K+H team and Flourish team recently published a couple of blogs about all the consolidation in our industry. It's really important to follow that business to make sure that you're not missing out and you will have. You will absolutely miss out if you're not kind of following that. And again, staying engaged with those buyers, and asking those types of questions. Just one more thought on that too, again, that I'm not sure that a lot of brands probably know.


But a lot of these larger aggregators to they'll still give you great reports on, you know, where you are in terms of placement within a category. So kind of what's your category ranking? You know, they'll they'll share other information I know, you know, Great Lakes Scrip is actually one that's, that's really great about sharing category information and the number of organizations purchasing your brand and you know, card type, you know, all the specifics around around your brand.


Kristen Thiry 20:51

Yeah, that's great insight. And, you know, I think one of the things that we recommend to to some of our clients, you know, looking to go into b2b as to you know, how maybe differently ranges and stuff for different programs, right? So you can kind of track sales that way to on your own card. And then you can see also from a redemption standpoint, you know, what is that looking like for cards redeemed through XYZ programs and kind of tracking the full lifecycle of, you know, what, what those programs are generating for you, because you want to make sure, obviously, if there are certain programs where some consumers are maybe more profitable than others, when it comes to the blend of goods that they're actually redeeming for, you know, and really tracking both the front end sales but as well as the back end, redemption metrics as well. And you know, having that broken down by been range kind of helps you do that, you know, so understanding that part too.


Hollis Thornton 21:42

Definitely. And if we just kind of go back to when we were you kind of asked me about brand benefits and we talked about sales and brand awareness and you know, definitely, if you are tracking sales on the back end redemptions excuse me on the back end, you know, you should be able to have an idea how many you know new customers you're bringing for these programs as well as reengage customers, which is also very important to to brands.


Kristen Thiry 22:09

Absolutely. So when you're thinking about launching a b2b program, there's obviously several elements of kind of your offering as a brand of what you want to make sure. You're you're talking about with upper management and with the b2b programs that you're going to be launched in, you know, things like discounting, card type, and some of those elements. What are what are some of those other things that you should be considering as a brand when you're looking to launch into b2b?


Hollis Thornton 22:37

Sure, yeah. So discount definitely. And I think there's a number of different ways to tackle that. And, again, I was just at a meeting this week talking with a brand who hasn't been that engaged in b2b and I think one of the things they were even surprised to learn is that not all businesses are looking for discount. And so there's a lot of different ways you can kind of slice and dice how you're going to handle discount, you can do it based on category and I and I've worked with brands over the years, I've done it all different ways, you know, yeah, one flat Flat discount, you know, with a pretty high minimum, but just flat discount accounting didn't want to have to deal with, you know, different tier discount structures and in contract terms, and, you know, one is a contract up and the discount, you know, rollback flat discount discounts by b2b channels.


So scrip or consumer rewards, employee rewards, all get a particular discount or of course, probably the most common is you know, a tiered discount based on sales volume. So when, when a buyer hits a certain threshold of sales, then they can kind of move up to that next tier, and we find that pretty successful and, and driving more sales because they're always incented to kind of do more and more with you as a brand and kind of push to that next level. Card type, so, you know, in today's world we know digital is continuing to grow and popularity, so you need to make sure that you're offering not only physical but but digital. And then even within that, what types of digital Are you going to offer? You know, you're going to offer emails, the ability to have an email with a gift code, you know, sent to the end user and recipient, codes, links. So card type is important, as well as denominations. And I think this ties back to what we were talking about Kristen, with understanding what your brand's objectives are, and having executive you know, executive buy in so, you know, really truly understanding kind of, you know, what is your average basket size and you know, what denomination and sometimes, you know, if you're new you're gonna have to play around with this a bit and in the back end data so important, but what denominations are most profitable for you, right? So that's because that's what we want to go forward with.


You know, if you have a smaller average ticket, then, you know, you may not want to be offering a $50 gift card, you know, because you're looking for that overspend. Mm hmm. And then some of the other things that I really, you know, consider crucial is you really need to think about, you know, how are you going to manage the orders? And, you know, there's the IGCC is done quite a the Incentive Gift Card Council, for those of you who don't know, is done quite a bit of research around, you know, what buyers b2b buyers are looking for in this space, and we know that you know, ease and choice is really important to them. And just to go back to my earlier comment, not always discount. So you really need to think through what you're ordering experience is, you know, if you're going to try to build something internally or use one of the many platforms that exist. You know, like all the Velocity clients that I work with are on the Blackhawk Network platform that Cashstar built. So, you know, just, you know, are you going to manage it internally or outsource that to somebody else to handle for you and I think that also ties into fulfillment as well.


Kristen Thiry 26:20

I remember that being a sort of a big pain point working at discover, right is like, if we couldn't really get like the fulfillment piece, you know, it was a matter of like, Can we get inactive? Can we get, you know, like your your promo or your gift codes and that kind of thing, because we had a kind of a system on the back end that we managed and stuff and I know it's different now that was years ago. You know, but definitely, that's something is like a buyer is very important, that fulfillment piece and you know, just making the ease and convenience, simple for them to offer your card and get the card to the end user when they redeem for that or exchange points for that, you know, I think that's important as well.


Hollis Thornton 27:01

Yeah, absolutely, absolutely. And that's, again, having those relationships with the buyers and understanding kind of what their requirements are, right, especially at discover, you probably help build out some of those that you may change now, but you probably helped build out some of those requirements about how you needed to receive cards and codes.


And you know, another really key aspect of this, too, is, you know, just kind of the legal and compliance and, and fraud aspect of this. We're always talking fraud, fraud, fraud, it's out there. You know, it's happening every day, more and more frequently in our world. And so I think, you know, as part of kind of the order management and fulfillment piece of it, you really need to have a good handle on you know, how are you going to vet b2b buyers to ensure that there are legitimate business. You know, you're going to require them to sign some sort of simple terms and conditions. Because a lot of the buyers obviously are using your marketing assets, you know, logo, copy that kind of thing. So you need to think through that with your legal department. So that's another pretty important piece as well.


Kristen Thiry 28:20

And that's huge. I mean, I would say we're always trying to stay one step ahead of fraud, it is a constantly moving target. And, you know, sometimes we don't and I think that was, again, another interesting session that the RGCA had, where there were a few retailers up on stage like being super vulnerable about fraud instances that they have had, especially in the b2b market. So how are you validating those buyer? How are you ensuring that it is a legitimate company and you know, that they're actually they should be getting your gift cards, you know, in large quantities at a discount, you know, and that they are upstanding and that you have a way to kind of validate that.


Hollis Thornton 28:56

Well and payment you know if you're going to accept credit cards and you know what happens if you find out the orders in place with a fraudulent credit card, right? You know, once your escalation process even even communicating with your with these aggregators or major b2b buyers and having making sure they understand what to do if they experience fraud on their end and what you as a brand are willing to do to help them and partner with them to, to mitigate it to stop it, I think is really important as well.


Kristen Thiry 29:30

Absolutely. So this has been a great conversation. We've covered a lot of ground and I think we could continue going on about this for hours. But any final thoughts on things that you know newbies and veterans alike should really just be paying attention to optimize success of their b2b program?


Hollis Thornton 29:50

Yeah, so I think just to kind of wrap up, probably, you know, one of the things that everybody should be thinking about is, you know, if you're new and you're just setting a program you know you really want to set yourself up for success and make sure that you have kind of the proper reporting and analysis and have checkpoints in place so that when you start or starting your program you can you know take a look at things like redemption and understand you know what this is truly doing for your business and then if you're more of a veteran and have a more mature b2b program I would just say regular program analysis and actually had a few people after the presentation that RGCA who have been in the industry for as long as I have say you know that you're right I don't know the last time I really just sat down and looked at the basics on my program again, you know, just from you know, discount reviews with buyers to you know, what, what is my marketing and what is my how's my brand position out there, my logo, my copy that kind of thing. So, I think I would say you know, regular program analysis is is pretty key.


Kristen Thiry 31:01

That's awesome. Yeah. And marketing is really one aspect we didn't even talk about. So maybe that'll be a good follow up episode for Hollis. So thank you so much for joining us and for having this conversation and we look forward to continuing the conversation on this podcast as well as at flourish. And thank you again, pleasure having you. Thanks so much.


Outro 31:22

Flourish in a Flash is produced by K+H Connection, a branded currency consulting firm,. You can learn more about K+H at khconnection.com. And you can always find out more about Flourish and the Flourish conference at flourishcon. com or follow us on all of our socials on Twitter, Facebook and LinkedIn it's at flourishcon and on Instagram, it's at flourish_con.


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