New Research on Manufacturer and Retailer Rebate Programs

Posted on by Chief Marketer Staff

Rebate programs are a large part of the marketing mix for both retailers and manufacturers. A new study has found that 50% of retailers and almost half (48%) of manufacturers use the programs as part of their customer loyalty and promotions mix.

The reasons for the use of the programs differ. The top driver for retailers (64%) is to improve top-line revenue, while manufacturers (61%) work to build their competitive advantage, according to the report from Aberdeen Group.

“Retailers see rebates as a place to drive incremental sales, with less emphasis placed on margins. Manufacturers use rebates to push their brand to the forefront of the consumer’s mind,” the report said.

Last year, Schlage Link marked its one-year anniversary for the Schlage Link home-management system with a $50 instant rebate and made the offer exclusive to only two brick-and-mortar stores, Radio Shack and Lowes. It promoted the offer heavily through email to people who had opted in to its website. To ease the burden on consumers, Schlage implemented six rebate form must dos.

The top benefit for both retailers and manufacturers is customer retention (50%), followed by ROI (50%) for retailers, and customer conversion rates (46%) and customer engagement (42%) for manufacturers, the Aberdeen report found.

“As consumers have become less loyal shoppers due to economic constraints, organizations have placed an increased focus on driving lifetime customer value with the use of new marketing campaigns,” Aberdeen said.

Factors that drive the decisions to implement rebate use for both entities include targeting new customer segments (57%); promoting new products or services (49%); partnerships with other companies (42%) and geographic expansion (39%). As for frequency of use, 39% use rebates frequently, 26% moderately and 11% report minimal use. But there are also business pressures driving rebate programs including a lack of promotion effectiveness (32%) that the report attributed to a consumer market oversaturated with poorly targeted marketing campaigns that result in low response rates, poor execution, untimely rollouts in sales channels and inadequate feedback.

As for measuring the success of rebate programs, 32% of respondents said they plan to track channel-level effectiveness this year. “Tracking the effectiveness of rebates across channels is incredibly important for identifying opportunities and gaps in a rebate strategy,” Aberdeen said. Only 57% reported they are able to track rebate reductions and charge-backs, submission rates, issuance rates and redemption rates.

“If these organizations are unable to determine the effectiveness and success of their strategy, they are unable to determine the effectiveness and success of their strategy, and are unable to accurately forecast or measure a return on channel marketing investment,” the report said.

Twenty-five percent plan to develop a strategy to identify rebate-related frequency offers for retaining current customers. (Read these seven ways to make rebates work harder).

Going forward, the ability to centralize rebate data for one view of the customer will be game changing. Just over half (51%) of respondents said they currently have a centralized customer data repository, with another 28% planning to implement one in the next year.

One of the key benefits of a rebate offer is the ability to collect vast amounts of customer data,” Aberdeen said. “This data can be centrally stored and used to optimize future marketing campaigns geared toward specific customer segments or channel audiences.”

The survey was conducted between December 2010 and March 2011 among 75 retail and manufacturing organizations.

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