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Companies Adopt Competing Strategies

1-800-Present and 1-800-Gift Certificate, two companies built around helping consumers choose the right gift certificate for the hard-to-shop-for, are taking divergent strategies on how to offer customers a variety of gift certificates.

As 1-800-Gift Certificate announced the implementation of an interactive voice response unit to handle requests from people who do not need much customer service, 1-800-Present unveiled plans to downplay the telephone side of its business in favor of its new Web site, launched last fall.

For both companies, the announcements reflect the need to continually look for ways to cut costs when selling products with relatively low margins.

“Call centers are expensive for a low-margin business, and its easier to target a market and have revenue-sharing deals over the Internet,” said Jonas Lee, president of 1-800-Present, New York, which is renaming itself Giftcertificates.com to reflect its new emphasis.

For Lee, whose company was formed in 1997 and generated $3 million in sales last year, the Internet also was an easier way to present customers with a wider spectrum of choices.

“It’s hard to offer the same variety over the telephone that you can offer on the Internet,” Lee said. While the company used screen pops and other modern technology, the nature of the questions it would receive were hard to service over the telephone, he added.

“It’s easy if your customers are asking what size shirt should I get. It’s harder when they ask ‘what should I get for grandma?'” Lee said. “Frontgate doesn’t get calls from customers asking what color would look good in their living room, but we get that type of call.”

And while more experienced teleservices representatives can field such questions during most of the year, it is difficult to monitor service quality during holiday periods when call volume jumps sharply and temporary representatives are brought in to handle the rise, Lee said.

“At first we didn’t want to move away from the main business, but then we realized the Internet is the main business,” Lee said. “We used to be 800-Present with an Internet site and now we are Giftcertificates.com with a call center side. We feel that we know gift certificates, we know the advertising marketplace and now we know the Internet, a medium that a lot of retailers are still getting their feet wet in.”

By contrast, at 1-800-GiftCertificate, executives take a different view on how gift certificates can be sold.

“Gift certificates are a product that is perfectly appropriate to offer over the telephone as well as on an Internet site,” said Michael Dermer, president of 1-800-Gift Certificate, Carlstadt, NJ. “They are simple products with easy order processing. It’s not like selling a shirt. People just have to pick Barnes and Noble, and pick a denomination and that’s it.”

The company launched its three divisions – a telephone order-taking division, Internet site and corporate division that concentrates on creating gift-certificate incentive programs with businesses – last October. Dermer would not disclose sales.

1-800-Gift Certificate will offer incentives, such as discounts, to consumers who use the new interactive voice response technology when making their purchase. The incentives will initially be offered only to consumers because of the difficulty arranging the program with corporate clients. Companies that purchase certificates as rewards for their employees generally don’t select which retailer the gift certificate will come from. Instead, they buy blocks of awards in different denominations and their employees call independently to choose the retailer.

The interactive voice technology will be supplied by Intelogistics, a Fort Lauderdale, FL, service agency that will also handle all call center services. Intelogistics has been providing the company with database management services for some time.

The company, whose Web store is located at 800giftcertificates.com, has the back-end functions of all three of its divisions fully integrated.

“We have always had it integrated in the back end, so that if you order something over the phone you can then go online and check the status of the order. When the Internet is integrated with your other systems, you are able to leverage that as a customer service tool,” Dermer said. “We want to provide all channels for customers to shop. Our philosophy is we are the gift certificate company, how do you want to shop?”

Meanwhile, the newly launched Giftcertificates.com expects revenues of $25 million for this year and plans to spend $6 million on Web advertising. Its advertising plan includes a deal with America Online in which Giftcertif-icates.com will be featured in the flowers, cards and candy and the gifts and collectibles sections of AOL’s service.

Giftcertificates.com is initially planning to use e-mail-based customer service to support its Web site, but will experiment with different strategies.

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