A rebate, an evolved form of couponing, provides reimbursement for part of a product’s or service’s purchase price following its sale. By offering your consumers cash back on the purchase price, rebates provide an incentive to buy a particular product. If you are going to offer rebates, however, anticipation of interest is important. You may be aware of the fact that a surprising amount of rebates are never redeemed, about 40 to 60 percent, according to ConsumerAffairs.com, but this isn’t guaranteed and you don’t want to be burdened by the inability to keep up with demand. As recommended by USLegal.com, the size of your rebate should depend on the base retail price, the nature of the product being promoted, as well as number of goods backed up in the production pipeline.
Independent retailers are well advised not to rely on the possibility that only a small percentage of consumers will bother to take advantage of the rebate offer due to the following reasons:
- Consumers find collecting on a rebate takes some trouble and concentration
- Consumers are forgetful and miss the rebate deadline
- Consumers mislay the rebate coupon or the proof of purchase
If you are a retailer relying on such probabilities, you could end up planning rebate processing poorly, producing long delays, as well as run out of money. Simply, prepare for customer follow-through (all rebates are claimed) and expect possible benefits (increase in sales and profit).
What Is the General Feeling Towards Rebate Usage in the Retail Industry?
The Aberdeen Group, a research and analyst firm for information technology companies and products, released a report that, “Roughly half of businesses surveyed (50 percent of retailers and 48 percent of manufacturers) utilize rebate programs.” Possible demand and processing complications appear to be of little concern. The study, titled, “Rebate Optimization in Retail: Driving Customer Responsiveness,” drew from aggregated research of surveys, interviews and data analysis to examine the ability of rebates to drive revenue and customer loyalty. Among some of the reported benefits of offering rebate programs were customer retention, promotional and marketing ROI, and lifetime customer value.
Although Aberdeen Group received positive feedback on behalf of both retailers and manufactures, a debate still exists over the value of rebates. For instance, Sharon Goldman, blogger for Colloquy publication focused on the building of customer value, criticizes the true nature of rebates. Goldman discusses the better opportunities found in implementing a points or loyalty program. Goldman suggests rebates to be more of a band-aid fix, expressing that, “A well-planned, well-executed rewards program can offer a mix of incentives, both hard and soft, that, combined with excellent everyday service, can give consumers a range of reasons to stick with you.”