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ARE YOU USING REBATES? WATCH OUT FOR THESE

You want to promote yourself and to do so, you want to offer rebates? How should you offer a discount? How often should you do it? Take the time to think about your strategy because a discount can certainly help to make things happen, but the frequency and amount may create a change of behavior in your consumers and also provide information that you may not want to share.

Why should you consider offering a rebate? There are several reasons such as moving overstock, reaching new customers, making room for new seasonal products, getting yourself known, promoting sales in a low period, etc... Another reason that is becoming more and more popular is to increase your customer database. When you use a rebate, you can gather information: names, addresses, telephones and emails. All this information can help with your email marketing or help you target geographic regions that bring in clients. You could become better known in these regions by using leaflets / flyers or by placing ads in local newspapers.

When establishing your rebate strategy, one important factor is the frequency. If you make promotional discounts too often (eg: monthly), your customers or potential customers can see the promotional price as the new regular price and wait for the next discount to buy rather than doing so at the full price. A discount may be seasonal or biannual, but with greater frequency, you might change your consumer’s behavior.

The other factor to be careful about is the amount. Have you noticed the rebates for new cars? Rather than encourage us to buy, these rebates of hundreds or even thousands of dollars make us doubt the accuracy of the regular price. With regular discount of this magnitude, who wants to pay the full price? Combined with a high frequency, a discount can set a new regular price in your customers' eyes and it will certainly not be the highest price. Once this is established, getting back to the regular price might prove to be difficult.  The same can be said for percentage discounts.  Thinking about offering a 50% discount? You just announced your profit margin. It is far better to offer a lower discount or something for free that is accessory to the service/product provided.  For example, a dentist could promote that for every dental cleaning done during a given month, a toothbrush, toothpaste and dental floss will be given. The amount of the treatment is not discounted and there is added value offered to the customers.

Also, when offering a rebate to new clients, do not forget about your current clients.  Internet providers and telephone vendors often use this strategy; offering a promotion to new clients. As a customer, I always feel frustrated when these promotions are going on as I may end up paying more than the new client and I am a loyal customer !!! Think about doing something that would be equivalent for your customer base to eliminate this feeling.  Doing so would stop old clients cancelling their service and registering again as new customers to take advantage of this promotion. Companies often stop customers from leaving by having contracts or having them as a registered client in the system which does not allow them to get this discount.  Complaining becomes the only option.  Not the best way to treat your loyal customers.

Another aspect to consider is making access to rebates easy. You offer your discounts online? What happens to those who have not printed the coupon? You send your rebate in a flyer? What happens to those who did not bring their copies? Grocery stores have found a solution to this problem: a good amount of flyers are found next to cashier / teller, and when they notice that you have forgotten your coupon, they get it out for you.   Also think about the time it takes to get the rebate.  If you are the only one handling the rebate, then this should be easy.  But if you are doing this in conjunction with a manufacturer, a delay might come into play.  It is important to clearly inform you clients of this procedure and be as transparent as possible.

An alternative to using rebates could be to give something away. For example, if you are a dentist, you may do a promotion to get more clients and instead of offering a rebate, you could offer a toothbrush, a tooth past and dental floss to all your clients making appointment for a given month for example. This has the benefit of not playing with your prices and everyone, old and new clients can get that promotion if the appointment is made during a given month.

Finally, do you want to use discounts? Check with your regulating bodies for the rules governing these types of promotions such as price displaying, discount procedure, impact on sales taxes and other aspects that may be involved.

Offering rebate is a great strategy, but as it is often the case for most activities, you have to plan it well.

Do you have any questions, comments or experiences to share? Do not hesitate to contact me. Have a great day.

Stéphane Elmaleh-Riel, B.Ed., MBA
Marketing consultant