Animal health companies and veterinary clinics have historically enjoyed a direct-channel relationship, wherein the manufacturer developed, produced and sold its pharmaceuticals to the clinics, which then sold them to patients.

In the last 10-15 years, though, the rise of ecommerce has necessitated an increasing effort on the part of the pet pharma manufacturers to combat drug diversion—the unauthorized resale of pet pharmaceuticals to third parties, which sell the medications online to consumers at reduced prices (otherwise known as the “gray market”).1

Animal health companies have developed sales and distribution policies to assist in combating the problem, but it hasn’t stopped the practice cold. It can’t. From our own research, we know that the consumer drive to seek out the best deals is at the core of the problem.2  And it’s not necessarily about needing the discount. The drive to seek out the lowest available price for any kind of product is more about the thrill of the hunt and the victory buzz that follows.

To fight this very human drive at its source requires something equally compelling. Based on our most recent research into reward preference, we believe the answer lies in offering the right incentive to the right person in the distribution chain.


Appeal to pet parents with rebates


In February of 2018, research firm Leger conducted an online survey on behalf of Hawk Incentives to measure consumer attitudes with regard to promotional incentives.3 We identified pet owners by asking survey participants if they a) had purchased a pet medication or switched brands/service providers in the previous 12 months, b) planned to purchase a pet medication or switch brands/service providers in the next 12 months, or c) neither.

Participants who selected option a or b were then asked a set of questions about incentives tied to the purchase of pet pharma products. Here’s what we learned:

  • Consumers prefer a $25 rebate—delivered physically or digitally—to offers of a free dose with purchase of five, a $20 instant rebate or a 25% discount on medication for a second pet.
  • When we asked consumers to select from a list all of the promotional offers they found appealing, 60% selected the $25 rebate delivered by mail within three weeks, and 55% selected the digital rebate delivered within one week. The second-most popular option was the free dose with purchase of five.

When looking at participant demographics, those who indicated that they earned $80k per year or more were the most likely to look for a rebate for their pet medications. This finding fell right in line with our earlier research, which showed us that the more affluent the consumer, the more interested they were in deal-seeking. We also saw a preference for rebates on pet medication among both Gen Xers and Boomers.



Is immediacy a culprit?

In a world where people are willing to pay $120 a year for the convenience of two-day delivery, it makes sense that an instant discount or reward would hold appeal. And isn't instant savings the lure that drives the purchase of gray-market pet heartworm prevention medication? A solution: Provide clinics with inactive reward cards that can be funded and activated on the spot to offer an instant rebate. The vet tech offers the rebate to the patient, the patient purchases the medication, and walks out with a live prepaid card, ready to be spent. That's actual money in their pocket, as well, which is better than a discount. Plus it allows you to maintain the price of your medication. You get to offer the patient the savings satisfaction he craves without weakening your brand or launching a race to the bottom.

Rebates and incentives work for vet techs too

If you want vets and technicians to take on the sales role, offer them the incentive. One option is to offer the clinic a rebate for reaching a particular sales volume. Or, tie an incentive to repeat orders, fulfilling rebates from the initial order only after a refill has been purchased.


The bottom line: Rebates are smart.


The benefits to offering rebates over discounts or other types of promotions:

  1. Rebates help you fill out your customer database.
    As part of the rebate process, you can ask for additional customer information or include brief surveys that add detail to your buyer profile. Our research found that people are willing to provide additional information as part of the rebate submission process.
  2. Rebates help you make additional sales.
    Use the data you gather during the rebate submission process to identify your customers' preferred methods of contact, and use it to send them additional marketing offers. The more data you gather, the more you can tailor the offer to make it personal.
  3. Rebates bring repeat business.
    When you fulfill your rebate using a branded prepaid card or gift card, you give that customer a reason to purchase your brand again. Our own data tells us that customers using a gift or prepaid card typically spend up to 50% above the card's value.
  4. Rebates build customer loyalty.
    One of our own clients, a national retailer, analyzed their customer data and determined that a customer acquired via a rebate has a greater lifetime value than one acquired through an instant discount.


Find out what rebates can do for you.


If you're interested in learning more about the practical application of rebates to the pet pharma industry, get in touch with us here, or give us a call. We can walk you through use cases, provide more details from our research, and give you a clearer picture of how a rebate-based promotion can help you keep your sales within the direct channel, and out of the gray market.


 

Download our guide, 5 Veterinarian Insights Into Incentives and Rebates to discover what vets have to say about incentives.

References

1. Vaughan, Don, "Fighting the Good Fight: Thwarting Gray-market Suppliers Is a Challenge for Manufacturers." Today's Veterinary Business, April 2018.

2. An online survey of 2,001 Americans was completed between February 28 and March 12, 2017, using Leger's online panel, LegerWeb. The margin of error for this study was +/-2.0%, 19 times out of 20. Download the report.

3. An online survey of 1,515 Americans was completed between January 25 and February 5, 2018, using Leger's online panel, LegerWeb. The margin of error for this study was +/-2.5%, 19 times out of 20.