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Deep Discounts and Prepaid Card Spending Cause Uptick in Rebates

By Apr 21, 2014

Today’s retailers are challenged with remaining price competitive while attempting to build loyalty, two things that can be difficult in an era of showrooming and other deal-seeking behavior. Traditional sales and ‘everyday low price’ strategies have eroded margins and created consumer fickleness. Re-enter rebates: a smarter promotional strategy for retailers looking for new avenues for customer acquisition and loyalty.

In 2013, a number of well-known retailers started using rebates. In fact, more than 2,500 retail locations on our client roster alone now offer rebates on products as diverse as electric toothbrushes, house paint, luggage, computers and large appliances.

This surge in rebate popularity is retailers’ response to the consumer desire for deep discounts. Rebates allow low net-price advertising while preserving margins better than instant discounts, thanks to a natural redemption rate that is less than 100%. Plus, rebates preserve price points and brick and mortar sales.

Savvy marketers are also delivering rebate payments on prepaid debit cards, which can be customized with the retailer’s brand. These cards often look like gift cards and drive shoppers back in store to shop again. Typically, 30% of promotional dollars spent on rebates return to the retailer as spend back and highly optimized programs that leverage additional incentives can bring 60% back.

And in addition to making sense strategically for retailers, consumers understand and embrace rebates, too. According to recent consumer research we conducted, a majority of today’s shoppers think online, mobile and mail-in rebates are easy to claim. For retailers, the rebate redemption process is an ideal time to collect customer data and opt-ins. On average, 70% of customers will opt in to receive further information while submitting a rebate. Therefore, rebates are a natural foundation for building long-term loyalty.

Deal-seeking consumers know to look for rebates in addition to coupons and other offers because rebates offer the deepest discounts. This, in conjunction with the hyper competitive retail environment means more and more retailers are adding rebates to their acquisition and loyalty promotion mix.

Rodney Mason is CMO of Parago.