Retailers target customers with free gift cards

Free gift cards? Yes, please.

Using personal data from social networks or banks, companies including Wrapp and FreeMonee help retailers target desired customers to offer them pre-loaded virtual gift cards, hoping to lift bricks-and-mortar sales, as well as build brand loyalty.

Users who download the Wrapp app authorize it to connect to their Facebook account, which pulls in friends and data associated with Facebook profiles, such as age, gender and location. Wrapp then connects retailers including Gap, H&M and Sephora with consumers they want shopping in their stores. When a user decides to give a Wrapp gift to a friend, most popular on birthdays or holidays, only gift cards for retailers that have identified the demographics of that friend as desirable are made available.

A stream of virtually free friend-to-friend brand marketing ensues as the gift is shared on the recipient's Facebook wall.

Cards are pre-loaded with a few dollars up to about $80, depending on the retailer � Sephora offers $5 gift cards, says Bridget Dolan, the makeup retailer's vice president of interactive media. But gift givers can link Wrapp's app to credit cards to add more money to the gifts, and Facebook friends can do the same. The pre-loaded cards usually expire within 30 days, but if value is added by anyone, state laws apply, Wrapp spokesman Greg Spector says.

Wrapp's concept is popular with retailers as a marketing effort that lets them "(build) their brand and only pay for performance," CEO Hjalmar Winbladh says, referring to the fact that partnering with Wrapp only costs the retailer if someone redeems a card, which they can do online with a savings code or in stores by scanning a bar code from a smartphone. The stores also pay a fee to Wrapp for each completed transaction.

Consumers are redeeming the cards about 20% of the time in the European markets Wrapp is already in, Winbladh says. When they do, they're typically spending four to six times the base amount, he says.

FreeMonee offers a similar service. The company, which has been gradually launching pilot programs with financial institutions since November, delivers gift cards in preset amounts for the 100 merchants it works with to consumers' debit and credit cards. It uses card holders' transaction history to match them with a retailer with whom they're likely to spend.

"We're able to present an irresistible incentive to consumers in a way that's profitable for the merchant," Chief Marketing Officer Jim Taschetta says.

Card holders who have already opted to receive marketing materials from their banks will receive FreeMonee gifts. If they use their card at the designated merchant before the gift expires, typically within a week, their account is credited the dollar amount of the gift card.

Retailers are digging it, Taschetta says. With 10% of cards redeemed, 85% of the traffic is in stores vs. online, and 70% of visitors didn't previously frequent the store. Consumers also spend six to seven times the amount of the gift card.

FreeMonee and Wrapp's redemption rates are nowhere near those of the other popular marketing option of the hour, daily deals, says Nita Rollins, a digital marketing expert at Resource Interactive. But it's offset by low risk for retailers, a hypertargeted approach and the fact that consumers buy more than the gift card is worth.