Rebates and cash-back offers sound great in theory — the customer purchases something they wanted anyway, and get a small incentive payment to reward them for making the buy. It is unsurprising, therefore, that they are so popular with consumers. One study found that 75.4 percent of consumers said they were more likely to make a purchase if a product offered a rebate, while other research found that 84 percent of consumers view rebates as a savings opportunity, and more than half actively search out products with rebates.
In practice, however, the actual experience of accessing or cashing in a rebate often leaves much to be desired, such that customer enthusiasm for following through and collecting rebates pales in comparison to their enthusiasm for finding them in the first place. According to data from ConsumerAffairs, rebate redemption rates generally range widely — from 5 percent to 80 percent, depending on the value of the rebate. As for why people don’t redeem them, the leading reason is 41 percent forget to submit them, 25 percent lose a paper form necessary for redemption, 20 percent can’t be bothered and 14 percent give up because the process is too complicated.
The problem, Ingo Money CEO Drew Edwards told Karen Webster in this week’s edition of “How To Instant,” is friction — and the fact that if a consumer must work hard to chase a rebate, and receive it via paper check at the end of the process, they are probably going to bail out. That is actually pretty bad news, he said.
“I swear, this kind of stuff really doesn’t change anyone’s buying behavior — or, at least, not a statistically significant number of people,” Edwards told Webster. “There are people who will do it — I have relatives who keep a three-ring binder full of coupons. But most people aren’t extreme couponers, and if you are sending someone a check for the rebate, you are lost in the dark ages.”
Increasingly lost in the dark ages by choice, he pointed out. There are many better options to make rebates work better — for both consumers and those who offer them — that all revolve around fully digitizing the process.
Escaping The Dark Ages
What consumers often face when collecting rebates is a process littered with stutter steps, which tend to push those consumers away. They make an initial purchase, fill out a form, mail in a proof of purchase, maybe scan a barcode or two and wait for their rebate to show up. These days, those rebates more often show up in the form of a prepaid card. However, as it turns out, checks have a lot of staying power in this segment.
Rakuten Rewards (formerly known as eBates), the rebates wing of global eCommerce giant Rakuten, as of the end of 2019, sends roughly three-quarters of its rebate payments to customers via paper check — a fact that Edwards said is actually kind of remarkable, if a bit disturbing.
“I don’t see how sending a check is anything other than a last resort,” Edwards said, because there are so many better choices out there.
There’s the plethora of cash-card offerings that have exploded in the market over the last few years from the likes of Apple, Samsung, Square and Uber — which involve creating an easy-to-access virtual card that can live online or in a consumer’s digital wallet, and pushing funds directly to that. This, he noted, gives the consumer the option of immediately turning those rebated funds toward their next purchase, which is (generally speaking) the end goal of any rebate program.
Even better, Edwards said, some of the clients Ingo Money works with are even skipping the virtual card step, and allowing the customer to choose during account creation where they want their rebate funds to be pushed. When the customer makes a qualifying purchase, an application programming interface (API) pings the originator of the rebate that it has happened, and the rebate automatically pushes to the consumer account.
Those pushes, he noted, can be specifically customized on the back end — the customer’s account must gather some target amount of cash back (for example, $25 is the threshold used by Uber) before the disbursement. What is critical, Edwards said, is the automation and friction-free nature of the experience for the consumer. Instead of going through a five-step process that involves cutting up a cardboard box, finding a stamp and waiting, the consumer is asked to do, well, nothing — at least, as close to nothing as possible. That’s because the rebate just happens on the back end when they make a qualifying purchase, so long as the customer has specified how they want their funds delivered.
The extreme couponers with those three-ring binders, he added, will do the complicated dance, either because their financial situations oblige them to or because they are just really into the game. Everyone else starts opting out the more complicated it gets, unless the reward is unusually great.
Ultimately, he told Webster, it is more efficient to build the rebates for everyone, instead of relying on the knowledge that only a select few will wade through a long process.
Letting Rebates Get Rewarding
In the case of a friction-filled rebate process, Edwards explained, odds are it’s not necessarily a mistake on the part of the entity offering the rebate. In many cases, such firms know exactly what they are doing: offering a rebate that will attract consumers, then making it just hard enough to collect and use that rebate that many customers will never actually claim it.
“I suspect some of these folks like sending people a check because they are hoping there will be breakage here, and they will actually be keeping the money,” he said.
There are many variations of this kind of unnecessarily added-in friction baked into the world of rebates and cash-back offers. The customer has to pick new categories for rewards every few months, then keep track of the merchants by which they are getting rewarded — or they have card-based rebates at many merchants, but must individually select each merchant where they want to receive a reward, one at a time, within their mobile app. Companies could offer a “select all” button, but few do, Edwards said. Even better, they could automatically add offers to a consumer’s card as they come up, without the consumer having to do anything.
Offering a clunky, leaden, friction-filled process is a way to save money, Edwards noted, but, ultimately, it is short-sighted. Any strategy that relies on annoying or frustrating a consumer into resignation is not a process designed for customer retainment.
Simple, smooth processes — particularly those oriented around getting a customer a reward in a faster, better manner — tend to do a lot to boost loyalty and consumer interest, he explained. Ultimately, they often have the added benefit of being cheaper, too. When the payout is instant and easy, it can be much lower. People aren’t excited about a $2 rebate they have to work hard to get, but they can get excited about one that accrues automatically. In fact, he said, customers will likely get more excited about that than a $20 reward that requires them to mail in a box top. If the customer doesn’t have to do any work, and it’s easy, they are going to pick the $2 option, unless they really need that $20.
If those merchants offering rebates want to use them to their fullest advantage to direct and encourage consumer behavior, that means now must be the time to bring them into the digital era.
“I believe you can change consumer behavior with small dollar amounts if you are willing to think more completely about what the customer actually wants, which is speed and ease as much — if not even more — than amount,” he said.
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