December 25, 2008

Gift Cards

Do I have this right?
  • You buy me a $50 gift card from "Big Box Brand".
  • I buy you a $50 gift card from "Big Box Brand".
  • On Christmas Day, the tree is littered with mini-plastic-ads for "Big Box Brand".
  • On the day after Christmas, gift cards are redeemed for merchandise sold at 70% off of full price ... whereas the customer, sans gift card, would have paid 40% off of full price just two weeks ago, 25% off of full price on Black Friday, and 15% off of full price on November 1.
  • "Big Box Brand" gets a much-needed cash infusion, but takes huge inventory risk by not selling merchandise prior to Christmas, then not knowing how much merchandise will move in the days after Christmas --- and cannot record the sale until the customer redeems the gift card.
If we, as business leaders, were to invent commerce from scratch, would we draw it up this way?


Y'all have heard of Customer Lifetime Value (called CLV or LTV), right? Another 10% of you calculate the metric and know what the rig...