It sings, it instructs, it's a gift card

The next time you purchase a prepaid gift card, it might be loaded with more than just money. Retailers are starting to recognize the potential of gift cards as promotional vehicles and ways to enhance customer satisfaction and retention with freebies this holiday season.

These high-tech, content-rich gift cards resemble ordinary plastic gift cards. On one side is a magnetic stripe loaded with the card's dollar value. It can be swiped, as usual, at the POS. But on the other side is an encoded CD or DVD designed to slip into a computer or stand-alone player for interactive multimedia content such as movie clips, video games, music downloads, discount coupons, educational information and product catalogs.

In 2006, Circuit City Stores Inc. became the first U.S. retailer to offer a gift card that doubled as a DVD. It featured a music sample from online music store eMusic.com Inc., TV commercials, product information and a video game.

On the bandwagon

Since then, merchants like Best Buy Co. Inc. and The Home Depot U.S.A. Inc. have gotten into the act. Last year Best Buy teamed up with cable channel Nickelodeon to issue a gift card featuring SpongeBob Squarepants. It also had digital content in the form of music videos and interactive games on the back.

And Home Depot has rolled out prepaid cards that feature five to seven minute do-it-yourself videos on such topics as how to hang a ceiling fan and how to install a faucet. The cards can be played on Windows- and Mac-based computer systems and on videogame consoles.

Both the Circuit City and the Best Buy cards were created by New York-based Serious USA Inc., a developer of interactive CD and DVD-based gift, loyalty and trading cards. Using its patented Cardz technology, Serious designs and manufactures the cards, and Atlanta-based card maker and distributor InComm, under an exclusive deal with Serious, distributes them throughout the United States.

But InComm has put its own spin on gift cards. It added a promotional scratch-and-win feature: Consumer's can win a discount or have additional dollars added to their gift cards.

Not to be outdone, American Express Co. now carries three lines of gift cards that feature offers on the back, including free desserts from restaurants or discounts from retailers. After registering the serial numbers on their cards at the AmEx Web site, cardholders can then print out coupons which can be redeemed at merchant locations.

A buying slow-down

Analysis of consumer shopping trends this holiday season predicts overall gift card purchasing will slow down. A study conducted by BIGresearch for the National Retail Federation forecasts $26.25 billion will be spent on gift cards this holiday shopping season, up from $24.81 billion last year, representing 6% growth. But that percentage increase pales in comparison to the leap of $18.48 billion spent on gift cards in 2005 to the 2006 figure, a startling 34% jump.

Merchants are ever eager to keep the gift card revenue stream flowing. Interactive gift cards are seen as a way to do just that.

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