CBR Briefing #55

How shoppers use gift cards
Recipients of store-specific gift cards opt for retailers’ most-typical products

A line chart ranking two clothing retailers’ most typical products, with a y-axis showing the typicality rating scale, which ranges from one to nine. For Levi’s, jeans have a score of nine, followed by jackets at seven, khakis at six and sweaters at five. For J Crew, those products rank in reverse, with sweaters and khakis at eight, jackets at seven-point-five, and jeans at seven.

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.

  • 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.

Click here to download this briefing as a PDF.

More from Chicago Booth Review

Related Topics

More from Chicago Booth

Related Topics

Your Privacy
We want to demonstrate our commitment to your privacy. Please review Chicago Booth's privacy notice, which provides information explaining how and why we collect particular information when you visit our website.