How shoppers use gift cards
Recipients of store-specific gift cards opt for retailers’ most-typical products
- Gift-card users’ purchasing choices depend on whether the card is specific to a retailer or not, according to Nicholas Reinholtz of the University of Colorado Boulder, Chicago Booth’s Daniel Bartels, and Jeffrey R. Parker of Georgia State University. Recipients of retailer-specific gift cards are more likely to buy a store’s most typical products than those shopping with gift cards that can be used anywhere.
- In a series of experiments, the researchers asked participants to imagine spending a retailer-specific gift card or an open-use, prepaid card, such as one from a mall or American Express. A prior test measured participants’ perceived “typicality” of products at various stores. The pretest yielded pairs of retailers that offered similar products but were each strongly associated with different items, such as Levi’s and J.Crew (see chart).
- Compared with open-use gift cards, recipients of store-specific gift cards showed a strong preference for the retailer’s most-typical products, the researchers find. Jeans were the top choice at Levi’s, for example, as were khakis and sweaters at J.Crew. The effect was stronger the more familiar a shopper was with the brand.
- The research has important implications for retailers. At times of the year when gift cards are in greater use, retailers may want to focus on selling higher-margin products that are typical of their brand.