No matter which socio-economic background your consumers are from, most share at least one trait in common – they are attracted to a good deal. That is why even the luxury brands sometimes have to offer incentives, such as rebates to their most valued customers.
But have you ever thought about the different types of rebates that exist? They’re not just for end consumers, though that is certainly an area where rebates can be very effective.
How can you increase your profitability using rebates?
- Collect information about where the sale actually happened.
For many manufacturers, a key problem they face is that retailers do not provide them detailed consumer level information – even if they have it.With a rebate, you can incentivize a consumer to provide you with very specific information as they complete their rebate form.For example, some Big Box retailers do not even bother to tell T-Shirt manufacturers which specific size shirts sell best or even which ones they actually sold at all.
So it is a completely random mix of sizes that get shipped to the big box retailer by the manufacturer.
With a rebate, you can simply ask them, what size did they buy.
- Create tiered rebates.
This is actually common between wholesalers and manufacturers as well as within the B2C (business-to-consumer) marketplace.In essence, the technique involves creating an incentive to buy more and thus get a larger rebate.
- Create rebates based on quantities bought over time.
Though this approach has been around for a very long time, with the advent of the subscription economy, and the software to manage the complexity this induces in company financial statements now readily available, it is seeing wide spread adoption of just about every business that is attempting to sell using the subscription model.It does require a level of Supply Chain Management expertise that can be challenging to master if you do not have the right systems in place.
- Retail arbitrage.
Much like the tiered rebates mentioned in item 2, retail arbitrage can take many forms.One of the most robust users of this approach was with a client in the Wholesale Food distribution space.They had complex quantity discounts arranged with their supplier (a form of rebates by another name) that provided not just financial rebates but large quantities of ‘FREE’ products if they hit certain quantity volumes.They, in turn, would have mirror deals with their customers and were expert at making sure favored customers were aware of when they would hit a new discount tier.
So if you’re were at the end of the quarter, and you needed to move, say 1000 more items to hit that rebate tier, you might just want to take advantage of it.
The math behind this approach was somewhat complicated but all doable in excel.Interestingly, this activity accounted for substantially all of the profit of the 1 billion USD this firm generated.
- Use physical world actions to generate digital information.
Lets face it, most of life still happens in the physical realm, not the digital.If you are ever walking along a sidewalk, in say, Salou, and get handed one of those free drink cards, see if it has a name or number on it.That’s how they comp the person handing it out.
If it is an offer where you get a chance to get something by entering in your email or phone, you’ve just seen a physical to digital conversion process in action.
But there is a much more advanced way of converting physical world activities into digital world information – event attendance and tweets.
If you’ve ever been to an event and they have asked you to ‘tweet’ this using their Hashtag, you’re literally converting a physical happening into a digital record that is in real time.
For instance, this author was recently at a marketing event put on by ESIC and they had a real time display board of the event that gave the number of twitterers who had checked in, which I believe reached well over 5000, while the number of impressions that people tweeting from the event generated exceeded 50,000,000 (and this number likely kept climbing long past the event).
That is now a trackable item and am sure many, many sales activities have been initiated as a result of this single event.
- Use Rebates to boost product launch success odds.
Did you know that according to Harvard Business Review (https://hbr.org/2011/04/why-most-product-launches-fail) article by Joan Schneider and Julie Hall, that about 75% of new consumer products fail to earn $7.5 million during their first year after launch?Why might that be so and how can rebates help to ensure success?Because rebates can quickly help you boost sales, and simultaneously help you gather actual consumer consumption data, which can be collected in your marketing platform, they can help you zero in on what is working and what needs tweaking by providing you with near real-time data.
- Use rebates to keep sales volumes higher to drive factory utilization rates.
If you ‘re running a product plant, then you know that keeping your plant utilization rate high is a key component of hitting your performance targets.Because rebates can help deliver demand on a predictably reliable basis, they can help plant managers achieve their goal of maximum throughput.
Find co-branding opportunities that work.
Ever wonder why you see 2 seemingly unrelated products wrapped tightly on the shelf, perhaps with a redeemable rebate offer attached to them?
Image courtesy of Google creative commons.
When you do, you are seeing an attempt to determine if there are consumption patterns that can be uncovered through co-branding.
A rebate, when used effectively, can be a key part of uncovering these often poorly understood inter-product relationships.
- Use rebates to create and establish on-going lines of communication with your consumers.
Because a rebate typically involves a consumer providing you with a means to communicate with them, either via email, social media or physical mail, they lend themselves nicely to establishing various mechanisms for communicating with consumers on an on-going basis, and usually with the explicit permission of the end consumer.They do appreciate good deals, just ask any eCommerce site.
- Develop or enhance customer loyalty programs.
One of the most profitable uses of a rebate program is to get and keep consumers into your loyalty program.If they belong to your program and they are accumulating points towards rewards, a little cash back just makes your points so much more valuable.For many people, they belong to numerous rewards program and making yours both stand out and stay top of mind requires an active strategy that can be enhanced with smart rebate programs.
- Increase Customer Lifetime Value or LTV.
This is one of the key metrics of many companies these days, especially those looking to take in outside venture capital or simply as a measurement of how well they are doing.If you have a product that can be sold on a subscription model basis, and for many consumer items, the product can be sold on this type of recurring order basis, then a rebate program should be part of your offer mix.You want to keep them sold and a rebate coupled with a subscription model is one of the stickiest ways you can accomplish this seemingly magical feat!
In this author’s experience, there are so many places and ways to offer incentives to consumers with this model that it is surprising that all consumers are not out there actively looking for goods they can consume this way – oh wait, most of them are!
For brands, this is one of the most powerful ‘lock-ins’ you can achieve.
The switching cost are high in both time and money while the benefits of switching are hard to see by the consumer.
These are just a few of the ways we have seen rebates used effectively to help you achieve your marketing and sales goals. Most of these approaches require both the development of a strategy as well as the support of IT systems. In many cases, there are also legal compliance regulations that must be managed and relationships among and between suppliers, distributors and retailers and as well, consumers. In short, they’re powerful, proven ways to increase sales, but do require deep expertise in a variety of domains.
Combinations Work Best
The real power comes when you combine 2 or more of these ideas and couple it with a strategy of physical to digital marketing. Want to see how much cheaper a rebate program could be for you to generate leads and sales. Try our FREE Promotion Marketing ROI calculator.