Rebates are the most effective way to drive sales without resorting to permanent price reductions. They have the added benefit of capturing customer data and opening direct communications with customers. With an on-line submission process and prepaid reward cards, the process has never been easier for customers, retailers and manufacturers.
In lieu of price cuts or radical pricing strategies, many companies are taking a second look at rebates to attract customers and improve brand loyalty. Rebates continue to be the most effective tool for acquiring new customers and driving short-term sales lift while protecting price. Changes in the way rebates are offered and processed can help not only build customer loyalty and confidence, but can also boost bottom-line sales.
Price Cuts are not a Sustainable Strategy
Companies that decide to slash prices will naturally see an immediate, positive response from customers—especially in a struggling economy. While the price is low, many people will purchase the discounted item. However, steep price cuts are a short-term solution with long-term consequences.
Price cuts can also have a lasting, negative affect on how the consumer views a product and result in lower profits over time. Lowering the price (especially on premium items) could leave an impression that the product has actually lost its value. By offering a rebate instead, retailers and manufacturers send the message that the price—and hence, the value—hasn’t changed, but rather they are offering a special, temporary incentive to buy it. Further, consumers tend to become impervious to price reductions as many retailers now promote “everyday low price” with price-match guarantees and eventually need an additional limited-time-only incentive to be motivated to purchase. A study earlier this year found that 50% of retailers and almost half (48%) of manufacturers use the programs as part of their customer loyalty and promotions mix.
Rebates are a Powerful Database Marketing Tool
Rebates are an efficient way to collect valuable customer data, which can be incorporated into a broader CRM or database marketing effort.
With customer data gleaned from the rebate program, it may not be necessary to create a separate loyalty program (which can be cost prohibitive for many retailers and brands). Instead, using database integration technology, companies can use data collected from rebate submissions to direct surveys, samples or promotions to the right customers at the right times.
In addition, with the increased use of prepaid cards (whether an open-loop that can be used anywhere or a closed-loop limited to a specific retailer), companies can track the spending habits of each customer, and can use that information to further target their promotions and increase ROI. Customers who are offered retailer-branded prepaid cards are often more likely to spend their reward back in the store where they made the rebate purchase, especially if the company establishes and maintains a relationship with that customer.
Appealing to a New Generation
Rebates provide a real value when companies use them to immediately engage customers and create ongoing relationships. (Here's 7 Ways to Make Rebates Work Harder). Technological advancements in the rebate process have resulted in significant improvements to the consumer’s overall experience and improved data collection capabilities for retailers and manufacturers.
Rebate submissions are on the rise, especially among the younger demographics because of logistical improvements such as online/electronic submission, mobile status updates and faster rewards. These have improved the interaction with tech-savvy shoppers like Gen-Y and the Millennials, who make up nearly half of the discretionary spending in the U.S.
Embracing Rebates 2.0
Retailers, manufacturers and customers alike are embracing the new rebate landscape. With Rebates 2.0, customers get a great discount and receive their rewards faster. Companies benefit because they can acquire more customers, acquire more data and move more products/services without reducing the perceived value. In the end, a better rebate process helps build customer relationships, and ultimately increases market share. (Check out these Top Six Rebate Must Do's).