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Rebates and Their Impact on the Retail Customer Experience

Published March 30, 2015

The changing role of rebates in the era of the smart customer

Rebates are still a big part of the retail business landscape. In 2014, about 310 billion coupons were distributed in the US, of which about two-thirds were for non-food products – and consumers redeemed enough of them to rack up savings of $3.7 billion in 2012 alone.

Rebates and Their Impact on the Retail Customer ExperienceBut how should rebates work in the era of smart customers? Historically, the process of redemption was painful and slow – a recognized part of the game, wherein manufacturers and retailers created barriers and hoops that made it difficult to access the savings promised - and consumers knew (and accepted) that this was part of the game.

Your customers may still know this is part of the game – but they’ll no longer accept it, because the psychology of rebates is changing. Sure, it’s still about providing justification for the purchase (after all, $3 off a $9 purchase is only $6, right!?), but customer expectations of the retail customer experience – and how they feel about jumping through inane hoops – is changing as well.

This is one reason why smart companies will give their rebate-happy customers exactly what they want, and make it easy for them. The other reason – particularly relevant and potentially more valuable for retailers and manufacturers – is that rebates provide a unique opportunity to truly engage their customers in a meaningful dialogue.

How retailers and manufacturers can better understand and serve consumers

One of the greatest competitive advantages that any company has in the anytime, anywhere always-on world of digitally-enabled smart customers is their knowledge of their customers. Using digital technology and the data that it generates to better understand and serve customers is the golden opportunity that many companies are still struggling to understand, much less leverage.

In those kinds of industries and for those kinds of products where companies have historically not been able to really connect with their actual end-user – like retail and CPG manufacturers – rebate programs offer a unique environment within which to engage in a meaningful dialogue.

It’s unique because it truly is a dialogue rooted in a benefit for the consumer – “Money coming to you soon!” – which means that intelligent companies have several opportunities to gather information, create rapport, and learn a lot more about their customers in the process.

In the old days, you clipped the rebate, filled out the form and mailed it in. Your rebate showed up 8 to 12 weeks later. Today, much of that work is done online. And while it can still take some time to get your rebate back, the process of applying for them is somewhat simpler, and generally more respectful of the customer’s time.

Rebate redemption – a catalyst for customer engagement

This is when companies can begin a conversation with their customers; beyond the basics (“Who are they? What are they buying from us…?”), companies can begin to understand what their customers value, want and need. Provided they are intelligent and respectful, the power of and ROI on rebate programs grows ever stronger as engagement across channels drives customer insights and understanding that add to the historical justifications of top-line revenue and conversion.

We know that rebates are proven to be effective promotions for driving product sales while providing savings to price-conscious consumers. And as consumer’s ability to find the best price on anything has radically increased, the ability of rebates to justify price and trigger purchase behaviors has accelerated as well.

But the real value of rebates is shifting from a marketing and pricing tactic to a customer engagement and understanding strategy. In a world where customer experience is king and customer expectations are increasing, the evolution of rebates from a simple “sales lift” tool to a longer-term consumer loyalty strategy for retail stores will continue to accelerate.

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