The Psychology Behind Gift Card Giving

The following is part one of a four part series examining the different types of behavior patterns associated with purchasing gift cards, one of the more popular gift giving choices in this country.

Irrational consumer behavior has intrigued retailers, financial institutions and marketers for decades. While most consumers have the capacity to think rationally, more than a few turn a blind eye to rationality in their actual behavior. This often makes strategic development a tricky game, as rational analysis can lead us to the “right” conclusions, which may well result in the “wrong” strategic outcome.

This is particularly true when it comes to financial services and products. A study by the University of South Florida, for example, shows that when consumers are looking to reduce their credit card debt, they choose to pay off their cards with the lowest balances and lowest APR first, continuing to pile up more higher-cost debt in their cards with higher balances and higher APR. Even when aware that the math doesn’t play in their favor, these consumers let their emotions get the best of them and trick them into irrational behavior.

When it comes to gift cards, irrational behavior comes into play at different stages of the purchasing process – specifically when deciding whether to get a gift card over another gift, and when deciding on what type of gift card to get. Research and data show that consumers in the category tend to pick the wrong choice. As popular as gift cards have become, many gift givers are still skeptical about delivering a gift card as a gift.

The gift card was introduced in 1994 by the Blockbuster video chain as a way to replace paper gift certificates with a more secure medium, less vulnerable to fraud. Fast forward 20 years, and the gift certificate has gone the way of the video store; giving way to today’s $118 billion gift card market (“Gift Cards State of the Union 2013,” CEB/TowerGroup).

A 2011 National Retail Federation study showed gift cards as the most popular Holiday gift item with 57.7 percent of all Americans wanting one and 80 percent planning to buy one. We find gift cards at virtually every grocery store and drugstore in America, plus a multitude of restaurants, spas, and local merchants.

A First Data 2012 study shows that a whopping 85 percent of consumers prefer to receive a $25 gift card than a $30 gift. Dig in a little deeper, and the story repeats itself. Let’s say a consumer has decided to deliver a gift card; the same study reports that 87 percent of gift card givers delivered a closed loop gift card (a gift card limited to any one specific merchant like Best Buy or Walmart), while or 40 percent have delivered an open loop gift card (a Visa or MasterCard gift card redeemable at virtually any store). Yet a 2011 Holiday survey by TD Bank found that 51 percent of recipients prefer a Visa gift card over a closed loop one, compared with less than a third who prefer a store-specific closed loop gift card.

(Part two will delve into the different personality types and their respective traits.)

Carlos Tribino is the CMO of  the leading portal for gift cards online. During his current tenure, has doubled in traffic and sales over the past two years through a comprehensive digital strategy plan including SEO, PPC, display, social, e-Mail, blogging and PR activities. Previous to, Carlos served as V.P. Marketing & Recreation for Viacom, where he ran marketing and large scale events for the media giant’s top global brands in the south of Europe: MTV, Nickelodeon, and Comedy Central. He was an integral part of the team that launched the 24- hour movie channel Paramount Channel and of the 2010 MTV European Music Awards.

About Shelly Palmer

Shelly Palmer is the Professor of Advanced Media in Residence at Syracuse University’s S.I. Newhouse School of Public Communications and CEO of The Palmer Group, a consulting practice that helps Fortune 500 companies with technology, media and marketing. Named LinkedIn’s “Top Voice in Technology,” he covers tech and business for Good Day New York, is a regular commentator on CNN and writes a popular daily business blog. He's a bestselling author, and the creator of the popular, free online course, Generative AI for Execs. Follow @shellypalmer or visit



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