More tales of consumer woe at The Guardian’s Capital Letters.

AH or Derbyshire writes:

“I was given a WH Smith “Bookcard” by friends while in hospital in 2006 – they bought it with the leftovers from a whipround for my main “cheer-up” gifts. I misplaced it but recently found it. When I checked the value online, it was worthless. What has happened to my gift?”

The Guardian’s Tony Levene replies:

“The simple answer is your £13 card has been cancelled and the money has gone to WH Smith’s coffers, helping its profits to £64m at the last six-monthly count. The retailer says this grab is legal, citing “terms and conditions” which say vouchers expire worthless after 24 months.

Why? “Accounting purposes” is the answer. Why not 12 months or 36 months? Other than, “other retailers do it”, it has no answer. Why can’t it revalidate gift tokens after two years? No response. And the retailer refuses any goodwill gesture. So your gift will boost the dividends.

The answer is to avoid WH Smith and buy National Book Tokens – no expiry date and spendable in thousands of independent bookshops”

What Tony doesn’t mention is that WHSmith’s T&C’s are actually not bad for vouchers – many would expire after 12 months. But it’s also no surpise that WHSmith offer “giftcard malls” in their stores, operated by US company Coinstar.

As this article states, written by Julie Rosehill of the Voucher Shop, plastic cards are more prone to non-redemption than their paper counterparts:

“Due to the plethora of plastic cards that the average person carries it is almost impossible to remember how much credit is available on each one.
Hence the card supplier will win on non-redemption, as people cannot be bothered to check all their plastic cards prior to purchasing items.”

An incentive that relies on non-redemption is a risky strategy.

The Guardian’s Capital Letters is a great place to discover tales of investment scams, corporate greed, shameful customer service, and unsustainable business practices.

From a recent edition comes another tale of woe:

“I am struggling to get my cash back from a contract with The Mobile Outlet. I signed up last September for a £35-a-month deal which will provide my money back if I claim cashbacks according to their rules. I sent off bills in January by recorded delivery, and a second lot in April. But despite phone calls and letters, I have got nowhere. Can you help?”

As Tony Levene replies:

“As with many of the other companies operating “free calls by voucher redemption” promotions, The Mobile Outlet is bust. The cashback model failed to work – it needed more than 70% of customers to forget to redeem (these would be thrown off the scheme) to be successful, but most set their phones to send reminders to themselves so it slipped few minds.”

Trying to operate a business on the basis of non-redemption is a risky strategy, and one that puts your objectives at odds with that of your customers.

We have seen that non-redemption is the dark secret of the voucher industry, with non-redemption rates as high as 30% putting money straight into the pockets of retailers and voucher companies. For many voucher companies much of their profits stems from non-redemption. However, requiring 70% is an insane business model that proved unsustainable, especially if the process of redemption is straightforward.

At IncentiveDirect, using our SweepBack technology, any unspent points are recirculated back to the clients, who can then redistribute them to others, or use it to fund other incentive activity such as surveys or product knowledge tests.

A sorry tale from the pages of The Guardian, of the embarrassment and confusion caused by high street retailer Debenhams, which issued vouchers offering “£10 off your next purchase when you spend £25 or more at Debenhams”, then refused to honour them:

“Lured in by the offer, customers have been turning up at the tills with their £25-plus worth of items, only to be told there has been a “printing error” and that they cannot have the discount unless they spend at least £50. Staff are pointing to the small print on the back of the voucher which states that customers need to spend £50 to get £10 off.”

Shoppers have been embarrassed and angered when unable to redeem their vouchers. However, while this may appear to be a “misleading price indication” – a criminal offence under the Consumer Protection Act 1987 – shoppers cannot demand that the vouchers are honoured.

Vouchers and coupons often create a zone of uncertainty upon redemption – especially the multi-retailer ‘Monopoly’ money vouchers that inexperienced sales staff will not have encountered before. Can you redeem a Book Token for a magazine in Borders, for instance? I would never attempt to spend a voucher without having a credit card handy as backup, just in case. This uncertainty, and the embarrassment of refusal, helps contribute towards a non-redemption rate of vouchers which could be as high as 30%. That’s right – up to 3 in 10 vouchers in the UK never get spent.

It seems Debenhams staff don’t have much clue in regard to to the use of its gift vouchers either. On the consumer review site Dooyou.co.uk, a woman reports her unsuccessful attempt to redeem 4 vouchers, and was told only 3 could be spent per transaction.

“I gave the assistant the 4 vouchers and £5:50 only to be told that I could only spend three vouchers in one transaction. So I had to put £15:50 towards the perfume and take the one of the vouchers home. I was gob smacked.”

If this lady has received these vouchers as part of an incentive scheme, it just lost all of its motivational benefit.

It’s time to face the truth. Vouchers are tired and expired.

In a move which may have big implications for the incentive industry, a couple in Utah are suing Starbucks and Apple for patent infringement for selling giftcards at a bricks-and-mortar retail store, which are then redeemed online.

As described here:

“James and Marguerite Driessen of Lindon, Utah say they developed in 2000 (and successfully patented in February 2006) a utility dubbed RPOS, or retail point of sale, for Internet merchandising. The concept, which forms the heart of the infringement lawsuit, would allow gift cards for pre-defined items that can be sold at a brick-and-mortar store but used online; customers could redeem a card for a dining room set or a DVD, for example.”

When Apple released iTunes Custom Cards, allowing customers to buy a specific artists album or songs, the Driessens asked Apple to license their patent. In response, Apple pulled the cards from the US, but kept them in the UK.

However, in November 2007, Apple launched the Digital Release Album, a gift card again tied to a specific song or album, and designed to be sold in Starbucks for download in store.

“Starbucks is said to be a complicit partner in the infringement as a willing distributor, selling the cards across the US and holding its “Song of the Day” promotion to encourage purchases of the allegedly infringing iTunes cards.”

As well as illustrating the ridiculousness of being able to try and patent a retail model, and the patent trolling which seems to dominate the US technology sector, it may hamper the development of incentive gift cards for specific online purchases.

But in many ways, buying a gift card at a retail store for online redemption is a complete inversion of the logic of retail-online transactions. Surely it would be much better to use an online transaction to gift an item, that the recipient can then choose to have home delivered, go and pick up at a store, if they desired?

This would offer the ease of use and reporting capabilities of an online system with the instant gratification that the retail shopping experience offers.