June 26, 2012

Social Gifting: A Brand Spanking New Cross-Channel Strategy

by Anna Pfeiffer, Marketing Strategist at Bronto

Social Gifting. You may have heard this term lately in the outcropping of articles and blog posts claiming that social gifting is the future of ecommerce. The term recently got even more attention after the Facebook purchase of start-up Karma, which is entirely focused on the concept.

What is social gifting?

Simply put, it’s the act of giving a virtual gift card to someone via social and mobile channels. The most common way of doing this at present is by using an app that connects to Facebook, which makes it easy for you to purchase and share the gift card. Then the recipient can use their mobile device to redeem the balance in a brick and mortar store or can make the purchase online instead. Wrapp is an example of a great app that’s doing this today in a manner that makes it very easy for the user, which is key to a smooth cross-channel strategy. The Swedish-based company just came to market in the U.S. with a roster of very high-profile clients such as The Gap, H&M and Sephora. 

The concept of social gifting is extremely interesting in the sense that it merges a variety of marketing channels and ideas. Obviously retailers have been tirelessly searching for ways to effectively combine their social strategies with direct revenue-generating capabilities. Facebook commerce is a great example of this but results so far have been uncertain at best. The same concept translated to the mobile channel has been more successful but there is still constantly emerging and evolving data that changes the mobile landscape. Then you have the gift card market, which we all know has the potential to really drive sales since most buyers tend to spend at least a little more than the original value. Data reports that typically 4-6 times the original gift card amount is spent and retailers are banking on this when they rely on this new marketing method. Promoting gift cards is also a very powerful tool as retailers near the holiday season. As one of our 12 tips for a successful holiday season, we've seen the success of driving revenue by promoting gift cards when the clock is ticking and shipping deadlines are looming.

Could social gifting really combine all three channels into one marketing powerhouse?

It just might! It all depends on how user-friendly it is for both the gift-giver and the receiver. It also depends on how many people are actually going to spend money on their friends in this manner, which can only be helped by adding incentives and freebies to the mix. If you could send your friend a gift card through Facebook on their birthday and get a $5 gift card for yourself would that entice you? What if you could team up with friends to buy that gift? How about if you could send a FREE gift card to a friend without having to spend any money at all? Of course you would! Apps and retailers that are blending these types of promotions with social gifting will surely see higher success rates. The bottom line may be a little less inflated but I’d be willing to bet that overall adoption would be much higher, with increased revenue all around.

As mentioned, many major retailers, including Starbucks, are already jumping on the social gifting bandwagon. With a low marketing cost (retailers typically don’t have to pay the social gifting conduit until after the purchase is made in most cases), it’s a very appealing opportunity. In addition, according to CEB TowerGroup, only $1 billion dollars of the $100 billion gift card market is made up of online gift card purchases. Retailers are wise to try and harness this sector in a more substantial way to increase revenue. After all, we know that our customers are on Facebook and that’s where we want to be too but the devil has always been in the details. How do we effectively utilize this platform for marketing in a measurable way, specifically that drives incremental revenue? We haven’t mastered that yet. Perhaps the key is taking the power of word of mouth one step further. As WOM becomes increasingly important in today’s world of the social graph, what could have an even greater impact than recommendations and reviews from peers and online communities? Certainly a public gift card conveys an even stronger endorsement. From this perspective, social gifting apps like Wrapp are taking a step in the right direction.

Use with Caution

However, we as marketers need to be intrigued but skeptical of all things shiny and new. Many fads have come before, some successful and others not so much, regardless of their intense initial growth or success. Some of these innovations, such as daily deals, are only now becoming more transparent with regard to their true impact. Everyone remembers the story of the cupcake shop that lost $20K on a Groupon deal turned sour. Others have surely had great success but many retailers are struggling with what to do with this now-inactive group of one-time customers. Will social gifting experience the same rise and subsequent fall or will it emerge as a shining star?

But before you make any decision on how you think social gifting will perform, try it yourself!  Test a one-time social gifting offer through an email marketing campaign. In this dedicated social gifting campaign, include language that conveys the 'new and cool' factor of social gifting to draw in subscribers. Monitor the click-through and adoption rates, before evaluating how actively you want to promote social gifting in the future.

My prediction is that adoption will surge initially, revenue generated will increase and then the market will become saturated, causing a plateau of only slight growth year-over-year. I do not expect social gifting to take a dive after initial success and saturation. But hey, that’s just a guess! What do YOU think? Chime in by commenting below.

Anna Pfeiffer
Marketing Strategist at Bronto

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Anna Pfeiffer, Marketing Strategist at Bronto

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Comments

Great post Anna! I guess Social Gifting is taking off because Regal Cinema's just sent me a coupon on my phone for a free large popcorn for my next visit. Pretty great to be rewarded by my phone, since I hardly carry those coupons or vouchers around.

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