Rebate Strategy Design: The Basics & Best Practices

Karli Quesinberry
Karli Quesinberry

sales person explaining rebate to customer

A successful rebate strategy takes focus. Done right, it can drive increased buyer interest, stronger consumer loyalty, higher revenue and greater profitability.

But before we dive into some of the specifics of rebate strategy, let’s first define what we mean when we say rebate, look at when rebates are most effective and identify what parts of the consumer journey this approach can influence.

What is a rebate?

A rebate, also known as a premium with purchase, is a reward offered at the time of purchase to incent a consumer to purchase your brand over another brand. According to the Promotion Marketing Association, consumers are 75.4% more likely to buy your product if there is a rebate present.

Compare that with promotions like contests or sweepstakes, which only increase the likelihood to buy by 42.5% and by 39%, respectively. Rebates, where a consumer gets a free gift with purchase, have shown to increase their purchase likelihood as much as 82.8%.

When are rebates most effective for brands?

Instead of offering savings with a reduced price at point-of-sale, rebates ask shoppers to complete additional steps to get cash back. As a sales tactic to drive primary purchases, rebates work best when the direct selling audience (often a sales rep at a store) can use the rebate as a selling tool.

While rebates entice shoppers to buy a particular product with the hope of getting cash back, many shoppers actually fail to complete the process. Rebates often succeed when they are perceived as easy (and valuable) enough in the consumer’s eyes to get them to purchase your brand, but not so great that they ultimately redeem.

What part of the buyer’s journey does the rebate impact?

While rebate programs can act as a touchpoint within each of the phases below, they have the most impact within the consideration and purchase phases. This is when price is most likely to be a factor. If most other features are comparable, then a rebate can help negate price in the favor of your brand.

graphic illustrating customer buying process

6 Considerations When Designing a Rebate Offer

Now that we’ve established a basic understanding of rebates, let’s look at what should be taken into consideration when you are designing a rebate offer.

There are six considerations to keep in mind when considering a rebate offer. Adjusting any of the following during a promotion will influence activation rates, consumer satisfaction, confidence and brand sentiment. They are:

  1. Advertising: How will consumers find out about the offer? How do you want them to find out? How are you prepping the direct sales team about the upcoming offer?
  2. Rebate Value: The dollar or percent off of a product or service, or the perceived value of the reward
  3. Strike Price: The final price of the product or service after the rebate
  4. Effort: How hard is it to redeem? I the effort worth the reward?
  5. Consumer Confidence: The consumer’s belief they can submit it easily and will receive the payout without complications
  6. Utility Margin to Income: Individuals spend their incomes first on what they value most highly, regardless if its’s a fully conscious determination. This form of satisfaction is called “utility” and argues human beings seek to maximize their own utility.

Related: Above is a simplified overview, but I highly encourage you to read Dr. Timothy Silk’s paper, Examining Purchase & Non-Redemption of Mail-In Rebates: The Impact of Offer Variables On Consumers’ Subjective & Objective Probability of Redeeming, regarding the topic for a deeper dive.

Consider the following example, which helps bring these six ideas working together to life:

The consumer walks into a store. She is deciding between two products and sees that Brand A has a rebate offer (Advertising) for 20% off (Rebate Value). Quick math shows her the rebate will be for about $10, and she can submit her rebate on her phone (Effort). The fine print states some might not get the rebate for up to 12 weeks (Consumer Confidence). But, it’s a product she buys regularly, and she’s always wanted a reason to try this brand (Utility Margin to Income). She purchases the product and—then totally forgets about the rebate.

Even though it was easy, she either didn’t want to wait or couldn’t be bothered to remember to redeem it because it was too small of value. This results in a winning scenario for the brand. The offer enticed the consumer to buy and left the consumer’s reward in their own hands.

Best Practices When Implementing a Rebate Strategy

Rebates have proven to be effective consumer promotions designed to generate long-term consumer loyalty and brand affiliation that drive product sales while providing savings to price-conscious shoppers.

The following best practices will help you get more out of your rebate:

  • Establish clear goals and an effective method to measure success  
  • Train the sales audience on how to leverage the rebate as a tool to help close the sale leading up to the rebate
  • Eliminate antiquated payment options to avoid ongoing negative exposure for your brand
  • Integrate survey questions into your rebate and leverage the data collected for re-targeting efforts
  • If you have SPIFFs available for the direct sales audience, ensure there is alignment around the products funded and the products on rebate

Create an Easy Rebate Experience for the Consumer

The reason a consumer doesn’t redeem should not be because they had to go through Fort Knox just to find out they are ineligible to receive the reward for some unclear reason noted in the fine print. It is all about finding the right balance.

At the end of the day, rebate design and the technology that supports it should work together to create an easy experience for the consumer. Learn more about the value robust rebate technology plays in program design.

Karli Quesinberry

Karli Quesinberry

Karli oversees the overall program design and strategic recommendations, in support of client business objectives, for new, cross-sell and renewal presale opportunities. In her role at ITA Group, she collaborates across multiple business units, including Sales, Account Management, Analytics, Communications and Client Technology to bring our solutions to life.