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Rebate offers take on many forms, from the delayed gratification mail-in rebate, to the immediate price-reduction of an instant rebate. This sales promotion technique is often launched as a partnership between the product producer/manufacturer and the retailer. The manufacturer provides the retailer an exclusive rebate offer in exchange for a cut of the profits. The profit sharing may be in cash, but more likely it takes the form of a marketing investment by the retailer. Retailer sponsored advertising, point-of-sale, database sharing, direct marketing and other promotional techniques can provide a lucrative return-on-investment in the form of increased sales for the manufacturer.
Instant Rebate Price Reduction
Increased access to technology gives consumers the ability to quickly search out the best deal. The instant rebate provides retailers with an exclusive price advantage to encourage brand switching. It is a beneficial technique when the number of customers, who would not have purchased your brand without the rebate, is sufficiently large. The price reduction will move product and it may have a long-term effect on product demand. Product categories with many competitors or that experience rapid change in technology, manufacturing, social pressure, or other sales cycle effects, benefit from the immediate purchase action of the instant rebate offer.
Apple computers featured an instant rebate, as a Black Friday special, that provided a Target store gift card for $100 with the purchase of an iPad 2. Without reducing the value of their brand, Apple worked with Target to move product using this cooperative approach to the instant rebate. Many retailers are providing branded gift card as the instant rebate offer to increase in-store spending and customer loyalty. As an added retailer benefit, slippage from cash left on the gift card enhances the retailer’s bottom line
Mail-in Rebate Process
The Mail-in Rebate (MIR) closes the deal, without lowering the price at check-out. The cost of processing and handling is a factor to consider when weighing the pros and cons of this technique. MIR requires consumers to mail proof-of-purchase items such as a rebate form, receipt, the UPC from the package and more. Breakage defines the percentage of consumers that do not bother sending in for the rebate or forgot to participate. Slippage is the term defining those that apply for the rebate and never cash the check, or redeem the full value of a gift card. Sprint recently offered a MIR where new customers can receive a $50 American Express gift card. This approach combines the power of two brands to engage the customer and pique their interest level, more than a standard cash back offer. Sprint’s innovative approach refreshes its proposition to customers, while never reducing the value of their product. Gift Cards make great rebate rewards, the manufactures generally purchases in bulk for a discounted rate, and benefits from the combined power of two brands and the breakage factor. The card issuer benefits from the slippage factor, while increasing brand exposure and expanding their customer database.
On Line Rebate Redemption
Many rebate programs have migrated from the complex mail-in redemption process to an online redemption approach. Online rebate offer redemption has a higher level of consumer acceptance as the process is perceived to be more streamlined than the complex MIR. This technique has a degree of breakage and slippage, yet it goes a long way in building the customer relationship . It provides the retailer and manufacturer the opportunity to capture valuable consumer data and feedback. It’s a win/win for consumer and marketer as the process is in alignment with creating customer loyalty through a positive, hassle-free experience, which treats each customer with respect.