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Today’s Consumers, Today’s Promotions:
How Do You Keep Up?

Once upon a time, people decided what they needed and went to a store to buy it.

Then marketing was invented, and smartphones were invented, and people still decided what they needed and then bought it.

Just in a completely different, nonstop, head-spinning way. 

Today’s shopping experience isn’t just about a path to purchase; it’s about a path to promotion. Almost literally every shopper—make that 97 percent—is looking for deals, before, during and after shopping.1  Accordingly, today’s consumer rewards and promotions play an increasingly critical role for both marketers and shoppers.

What to make of such an environment? It can certainly be hard to stay on top of things. Not only is it very different from 20 years ago; it may even be different from five years ago. Technology has more or less wiped the slate clean, creating instant, extravagant consumer expectations. How can a well-intentioned marketer keep up?

Like this: by recognizing what appear as challenges to be golden opportunities. Using rebates as an example, this article will explain that today’s whirlwind is actually a perfect storm for customer incentives.


A nation of deal-seekers

Two key points characterize shoppers today: They have access to an immense amount of information, and everybody wants the best, the very best, deal. And they’re willing to work for it.

In a case of careful what you wish for, marketers get a share of the credit (or blame) for this. The whole function of marketing is to make consumers pay attention, to calculate the best values, and make the right choice of your product. Today’s technology allows them to do that in spades, and boy, are they doing it.

We’ve trained a nation of voracious deal-seekers.

Thanks to the smartphone, everyone is now a professional shopper. Consumers research their purchases at home, in the store, even after the store. They read reviews and listen to recommendations. They seek out deals and promotions like bloodhounds. According to our recent research study referenced above, 92 percent are always looking for the best deal, 80 percent are willing to go out of their way for it, and 56 percent are more likely to look for deals this year over last year.1

We may have even reached the point where paying full price for something represents a failure, or some sort of insult. That’s quite a bit of pressure for a retailer. If you’re a consumer, it’s a great time to be alive. If you’re a marketer, it’s either thrilling or terrifying.


A smarter consumer promotion and reward strategy

How can you make these factors work for you, rather than against you? How can you attract the deal-seekers, deliver a while-you-wait reward, and still maintain margins? Let’s talk rebates as a case in point.

What comes to mind when you hear “rebates”? If you’re a marketer, you may take them for granted. Tried and true; been around since grandma and her green stamps. You may be giving more attention to other customer incentive ideas, like deal apps, loyalty programs and coupons. If you’re a consumer, you may think—not without reason—that it’s easier to get a passport than that $10 rebate check in the mail. 

But if all that was then, this is now: Today’s rebate processing and fulfillment can be fast, simple and provide plenty of value for deal-seekers and marketers alike.

And here’s the thing. Despite how hard some retailers have made them, people still love rebates. Recent research by our parent company Blackhawk Network shows that 95 percent believe rebates save them money, 83 would be more likely to shop at a store offering rebates, and 82 would likely recommend a retailer that offers rebates.2

The trick is doing rebates right. Right for your customers, and right for you.


Want to learn more? Download our guide, A Rebate Renaissance, to learn why today’s rebates are so versatile and effective.


From rebate to retention

Easy to say. How do you do rebates right these days?

1.    Give people the right reward offer
2.    Which will send them to redeem (online or mobile)
3.    Which will cause them to provide data
4.    Give them their reward quickly
5.    Which sends them on the road from rebate to retention

And a bonus: Redemption provides the opportunity to take additional action, which, according to our recent research, quite a few will do:

  • 56 percent would complete a short survey
  • 46 percent would review the rebate-eligible product or service
  • 33 percent would enroll in a loyalty program
  • 22 percent would refer a friend to buy the same product or service
  • 14 percent would share their purchase with their social network1

 

But it all starts with the reward. Clients frequently ask us, “What’s the right reward?” Well, what rewards are consumers purchasing for themselves? One big answer, and getting bigger by the year, is gift and prepaid cards.

According to Mercator, in 2009 the total amount loaded on closed-loop (gift) cards in the U.S. was $225 billion. By 2016, that number had grown to $353 billion, with $372 billion projected for 2018. Open-loop cards show similar growth, with $133 billion in 2009, projected to $343 billion in 2018; an obvious sign of consumer acceptance and adoption.

We also get questions about egifts, or virtual prepaid cards. Overall, consumers still prefer plastic cards by a large margin—there’s just something comforting about holding a tangible reward in your hand—but egift spending is expected to triple over a five-year period to a projected $18 billion in 2018. 

eGifts and virtual cards, of course, provide the additional critical benefit of “right now.”


Win, win, win

Fortunately, retailers have reason to love gift and prepaid cards as much as consumers. The profitability, ROI and long-tail customer value can be tremendous. And here’s that reason: Look at the overspend. Consumers tend to see these cards as play money, so spending more than the face value “doesn’t really count.”

And overspend consumers do, a lot. Research by CEB TowerGroup indicates that not only do 65 percent of card users overspend, but they do so at a rate of 38 percent over face value. 

Which brings us back to the perfect promotional storm. It’s a pairing of consumer love of gift and prepaid cards with the deal-seeking mentality, and adding in benefits for the retailer. We call that a win-win-win scenario.

Here’s an example. Your new promotion is “buy $100 worth of pots and pans and get a $10 prepaid reward card.” You can structure the retail customer experience for the most promotional impact like this:

  • Consumer buys advertised item
  • Consumer visits promotion website to redeem offer (online or mobile)
  • Consumer receives reward card 
  • Consumer returns to store and shops

 

This process presents an opportunity for “incremental loyalty.” You’ve brought a customer in, you’ve collected their data, you’ve sent them a prepaid reward card, and they’re going to come back in the store to spend and overspend. It didn’t take six weeks and a background check. As a result, you now know:

  • That they bought pots and pans
  • That they responded to a reward card promotion
  • Who they are
  • What else they purchased

 

This is a robust data set for remarketing to this shopper, all thanks to a $10 prepaid reward card.


The economics of rebates

Now let’s examine why prepaid reward cards in a rebate scenario provide inherently better promotional economics than, for example, instant discounts. 

When you run the same promotion with a $10 discount, you’re giving that discount to 100 percent of the consumers who buy the product. That includes everyone who would have purchased it at $100, as well as those who only wanted it for $90. There’s no separation of the price-sensitive from the price-insensitive; either way, they get the discount. That’s not ideal.

When you drive people to redeem, you’ll always have some non-redemption, so you extend your promotional budget. But when they do, you can collect any enhanced information you want (reviews, likes, etc.) and then connect to your other digital initiatives. Plus, that $10 is coming back to you, likely along with at least $3.80 in overspend. Conversely, the instant discount represents customers you may never see again, and compared to prepaid reward cards, $10 you definitely will never see again. 


Creating extremely profitable promotions

All promotions have to come down to numbers in the end. Fortunately, doing the math is easy when it comes to rebates.

A similar example. Let’s suppose the promotion is a $100 purchase with a $25 prepaid reward card. The breakdown:

  • $100 purchase
  • $25 reward card for those who redeem (well under 100%)
  • $25 spendback
  • $9.50 overspend (38%)
  • CRM data

 

The cost of acquiring CRM data will vary, but for the purposes of this illustration let’s use $90 per customer as a general rule. Add it all up and you arrive at an approximate $200 total value per customer for those who redeem. 

Again, that’s a lot of heavy lifting done by a prepaid reward card.

Far from business as usual, rebates done right can extend your promotional budget, deliver valuable CRM data, attract deal-seeking customers into your store to spend and overspend, and can happen in less time than it takes to read this sentence. That is ideal.


Where do you go from here? 

As we’ve seen, today’s promotional strategies need to match omnichannel expectations, meeting all your customers where they want to be met. At Hawk Incentives, we can help you with that, with easy-to-use platforms, a broad reward portfolio, efficient rebate processing, and full-service program management, leading to better promotions, engaging experiences, brand differentiation and measureable retention.


1 Hawk Incentives Rebate Experience Study: online survey of 2,001 Americans completed between Feb. 28 and Mar. 12, 2017. A probability sample of the same size would yield a margin of error of +/-2.0%, 19 times out of 20. 

2 Blackhawk Network, Branded Value study, 2016.
 

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