Plastic Power

Paper or Plastic?

A few years ago shoppers were asked this question at the supermarket checkout lane. More recently, retailers have been pondering the same choice when planning prepaid promotions.

Based on the research we've seen, and the experience of two popular restaurant chains, the paper gift certificate is experiencing the same fate as the brown grocery bag -- It hasn't disappeared, but it's clearly taken a backseat to its plastic counterpart.

According to the Nilson Report, the leading newsletter for the electronic payment industry, prepaid cards accounted for 7.5 times more dollar volume than paper certificates ($45 billion vs. $6 billion) in 2003. This is particularly impressive when you consider that at the start of this decade, cards and paper certificates were used for roughly the same amount of purchases.

Cards have become the dominant choice in prepaid promotions, because consumers prefer them. This was evident in the widely-followed 2004 Consumer Insights Survey conducted by ValueLink, which found that more than half (52%) of US adults prefer to give prepaid cards as gifts, compared to cash (38%) or paper certificates (11%).

Hamburger and Steak

What difference will switching from paper certificates to prepaid cards make at your carwash? No one can answer this question with absolute certainty, but a look at the experience of two very different restaurant chains provides insights into the potential cards offer:

• Fatburger is a Dallas-based chain of more than 60 "fast casual" restaurants that bills itself as the "Last Great Hamburger Stand." In 2003, the chain replaced its paper gift certificates, with a "Big Fat Gift Card." The first year after making the switch from paper certificates to plastic cards, the chain reported a big fat juicy 662% increase in prepaid dollar volume. No wonder Fatburger adopted the slogan, "Plastic Never Tasted So Good!"
• At the other end of the dining spectrum from Fatburger is Ruth's Chris. The year before this upscale steakhouse chain introduced prepaid cards at the start of the decade, it sold 65,000 paper gift certificates, or about 5,417 a month. During the first six months after switching from paper to plastic, Ruth's Chris was selling 9,667 cards a month, a 78% increase in prepaid sales. Cards must have sold at an even faster clip during the following six months, because the Atlanta Journal Constitution reported that prepaid volume shot up 300% the first year that cards were used.

The Case For Cards

There are a number of reasons why Fatburger, Ruth's Chris, and other retailers experienced a sharp upturn in prepaid sales when they switched from paper certificates to plastic cards:

1. Cards are more convenient for customers to carry than paper. In the ValueLink survey, 26% of the respondents cited "convenience" as the primary benefit of using prepaid cards.
2. Cards are more durable than paper and are less likely to be damaged or lost.
3. It's easier for retailers to display unsold cards in waiting lounges or at cash register counters to encourage impulse sales.
4. Customers appreciate the fact that their cards can be reloaded at the point of sale for future use.
5. Cards project a more contemporary image to customers and inspire more confidence. Consumers are very accustomed to carrying cards today. According to the ValueLink survey, American adults carried an average of 6.9 cards in their wallets in 2004, compared to 4.1 cards in 2001.

Cards Are More Flexible For Carwash Operators

As a carwash operator, prepaid cards offer you the advantage of flexibility over paper certificates. Since prepaid cards can be loaded with a dollar value as well as washes, you can allow customers to use their cards any way they please. For example, when you load a card with a $100 value, the customer can use it to buy a deluxe wash on one visit, and a basic wash the next. If you have a multi-profit center, the customer can also use the same card at your quick lube or the retail counter in your waiting area. Paper certificates, on the other hand, are typically dedicated to one type of purchase -- for example, a book of basic washes.

When paper certificates are loaded with a cash value, a retailer usually gives the customer cash back for the balance that is not spent on the first visit. This is because paper certificates, which are less durable than cards, are more difficult to save and use again. So in the final analysis, the money actually taken in from a prepaid paper certificate sale is somewhat less than the original amount. The opposite happens with prepaid cards -- over half of the consumers who use a prepaid card typically wind up spending more than its initial value.

SiteWatch® Works With Cards Or Paper

Of course, paper ticket books will continue to play an important role in the marketing plans of many carwash operators. Ticket books offer a great way to reach customers who want to prepay for washes that they can then give to friends, relatives, and business associates.

Regardless if you prefer plastic, paper, or a combination of the two, SiteWatch can help you run effective prepaid promotions while still maintaining tight control. Since prepaid cards and ticket books have no value until they're entered into the SiteWatch System as part of a sale, you don't have to worry about putting them under lock-and-key, and treating them like cash.

Whether you have a single carwash or a chain, SiteWatch® will automatically maintain prepaid files at all of your locations without depending on the discretionary actions of your employees. Our system will even automatically nullify individual prepaid wash tickets once they've been redeemed so they can't be used again.

Plus, SiteWatch makes it easy to process prepaid cards or paper tickets from any point in your carwash:

• At the tunnel entrance -- using our hand-held SiteWatch® Portable Touchscreen Terminal (PTT).
• At the unattended self-pay station -- using the SiteWatch® Xpress Pay Terminal®.
• At the cash register counter -- using our super-fast SiteWatch® Touchscreen Terminal.

SiteWatch gives you the flexibility to run prepaid promotions your own way, by loading your cards with a dollar value or wash units. And, more of the profits you generate with your promotions will go to your bottom line, because there are no transaction fees on prepaid sales with SiteWatch.

So, be a part of the prepaid trend that is reshaping retailing in America. Ask your DRB Systems representative about our prepaid capabilities today.