Gift Cards Vs. Comp Cards: Using Both in the Right Contexts

Gift cards and comp cards are powerful tools in your business toolkit, each with a different purpose. Knowing the difference between these two is critical to getting the most out of both. 

Customers buy gift cards as gifts for friends, family, or colleagues. They’re a pre-paid value that customers can use to purchase goods or services at your store. Gift cards are a revenue stream and can bring in new customers. Comp cards are the opposite. Businesses offer them to customers to reward loyalty, fix service issues, or incentivize employees.  

Gift cards generate sales, while comps are a cost of doing business. However, comps are essential for customer satisfaction and staff motivation. Both cards can contribute to customer satisfaction and loyalty, but companies must use them wisely.  

Navigating the landscape of gift card comps and their implications is vital for any savvy business owner. This article will discuss both card types, including their benefits, challenges, and best practices. 

Gift and Comp Cards: What’s the Difference?

Gift and comp cards are both business tools, but they serve different purposes. They can shape the customer experience and influence purchasing behavior. By strategically deploying these cards, your restaurant more effectively manages both short-term transactions and long-term customer relationships. 

Gift Cards: Revenue and Customer Acquisition 

Gift cards are prepaid debit cards loaded with a specific amount of money and used as cash. However, businesses must report and manage gift card sales as taxable revenue. 

• Revenue: Gift cards are prepaid revenue; cash is in the bank immediately. 
• Customer Acquisition: With gift cards, businesses easily acquire new customers, especially during holidays and special occasions like birthdays, anniversaries, and spur-of-the-moment decisions. 
• Spend More: According to Capital One Shopping research, 61% of consumers spend more than the card value, which leads to sales increasing. 
• Customer Retention: Reward dollars, or bonus gift cards offered because of regular gift card purchases, can be offered as part of a promotion to retain customers. 
• Simplify: Gift cards simplify payment; customers can pre-load funds and manage spending with a few taps on their smartphone or other device. 

Comp Cards: Loyalty and Relationship Management 

Comp cards are not sold but are given away for free. They’re a powerful tool for customer relationship management. 

• Customer Satisfaction: Comp cards can fix service issues or exceed customer expectations, increasing loyalty. 
• Employee Incentives: Giving away comp cards as rewards may boost employee morale and productivity. 
• Marketing Tool: Comp cards can be used for marketing campaigns and offer complimentary items to attract new customers. 
• Cost Control: While comp cards can increase customer satisfaction, strict controls to prevent abuse and financial loss are key. 

In a broader business sense, gift card sales generate upfront cash and new customers. Comp cards solidify existing relationships and improve service perception. When used wisely, both cards will improve the customer journey in different ways. 

Benefits of Gift Cards for Your Business 

Understanding how to leverage gift card comps effectively can turn a simple promotional tool into a powerful driver of repeat business. Let’s get into some of its benefits:    

1. Revenue Boost 

Gift cards bring in immediate cash, but they’re considered advanced sales on deferred revenue. This upfront cash debit can be used to grow your business, invest in inventory, or improve your restaurant’s customer experience.  

For instance, you could use this revenue to invest in a new customer service platform. This platform could streamline reservations, manage customer feedback, and personalize dining experiences. Customers could easily book tables online, receive personalized menu recommendations based on past orders, and provide instant feedback. This would improve efficiency and make customers feel valued and heard, leading to higher satisfaction and repeat visits. 

2. Customer Acquisition 

Customers often buy gift cards online as gifts for friends, family, or colleagues. When someone gets a gift card, they are introduced to the brand and future purchases increase. Gift cards can also attract customers during slow periods or promote specific products or services. 

A store that sells clothes and gives out gift cards during the holidays may attract more new customers who return. In fact, 64% of U.S. consumers buy gift cards as holiday gifts. 

3. Increased Customer Loyalty

Gift cards can increase customer loyalty by providing a convenient and thoughtful gifting option. By offering gift cards, businesses show customer appreciation and encourage repeat business. Loyalty programs often include reward dollars or buy-one-get-one-free (BOGO) gift card deals, creating a loop of customer engagement. 

Starbucks is a notable example of the benefits of a gift card program. The coffee giant uses gift cards to drive revenue: its members account for 41% of U.S. sales. By adding gift cards to their mobile app, Starbucks has a 44% customer retention rate, way above the industry average of 25%. 

This has also grown their almost 31 million U.S. active members by 15%, solidifying Starbucks as a leader in restaurant customer loyalty innovation. In general, gift cards are a part of broader business and marketing strategies that can increase customer engagement and profitability.

Comp Cards in Your Business 

While comp cards are an expense for businesses, they can be a powerful tool when used wisely. Here’s how to get the most out of them: 

1. Service Recovery

Comp cards are gold when it comes to turning a bad customer experience into a good one. Offering comp cards that provide discounts on future services can effectively mitigate customer dissatisfaction with service failures. 

For example, a restaurant may give a comp card to guests who had a long wait or a lousy meal and ask them to return when things are better. 

However, clear guidelines for employees on when and how to use comp cards are crucial for fair and consistent use. Tracking the reasons for comp cards can give valuable insights into where service needs to improve. 

2. Employee Incentives

Comp cards can motivate employees. By rewarding reliable performance with complimentary products or services, businesses can boost morale and get employees to go the extra mile. 

A clear and transparent comp card incentive program with performance metrics will ensure fairness and maximum employee engagement. For example, employees with consistently positive customer feedback can be rewarded with comp cards, which creates a culture of excellence and customer-centric service.

3. As a Marketing Tool

Comp cards are also a marketing tool within the restaurant and hospitality industry. They are strategically valuable for introducing new menu items or services, attracting visitors during off-peak periods, and re-engaging with customers who haven’t dined or stayed. 

For instance, a comp card won as a prize in a dining competition can significantly boost customer engagement and participation. Hotels and restaurants can hand out comp cards at local festivals or community events to get attendees to try their food or service and turn occasional visitors into regulars. Partnering with influencers or bloggers for comp card giveaways can create buzz and attract new customers. 

4. Tracking Your Results 

Managing comp card distribution and tracking is critical to get the most out of them. A tracking system will help monitor redemption rates and their impact on sales and customer retention. This data is valuable for adjusting strategies and understanding the business's ROI on comp cards. 

By maintaining detailed reports on comp card usage, your restaurant can pinpoint which promotions or special offers drive the most traffic and customer engagement. These insights help optimize operational decisions, such as adjusting staffing levels during promotions or improving menu offerings based on customer preferences. This strategic use of data ensures that every decision is backed by real-world activity, improving overall business efficiency and customer satisfaction. 

Gift Cards vs. Comp Cards: Use Both 

Gift cards and comp cards are valuable tools that can significantly impact your business when used strategically. Gift cards drive revenue and customer acquisition, while comp cards drive customer retention, employee motivation, and damage control. 

To maximize the benefits of both, it’s essential to understand their strengths and weaknesses. Here are a few recommendations for creating a sound strategy: 

1. Segment Your Audience: Use gift cards to attract new customers and comp cards to reward loyal customers and employees. This targeted approach ensures that each card type serves its purpose effectively. 
2. Incentivize Specific Behaviors: Offer gift cards as incentives for first-time purchases or referrals. Use comp cards to reward employees for exceptional performance or to compensate customers for service issues. 
3. Monitor and Analyze Performance: Track both gift and comp card usage and redemption rates through detailed analysis and reporting. This data-driven approach allows you to identify trends, measure success, and make informed adjustments to your programs. 
4. Compliance and Legal Considerations: Ensure you know and comply with financial regulations related to gift card sales, redemptions, and fees. This will help you avoid legal issues and maintain customer trust. 

By implementing well-managed gift and comp card programs, you can increase customer satisfaction, boost revenue, and improve your brand reputation. 

For more information about these topics, download our Marketer’s Guide to Gift Card Strategy. Get the latest data in our Restaurant Gift Card Sales Report 2023.