Lessons to be learned for rebate issuers?

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By: Wise Marketer Staff |

Posted on January 27, 2006

Consumer confusion, retailer issues, pressure from the US Federal Trade Commission (FTC), and pressure from state legislators have combined to cause a spike in interest in why some rebate programmes succeed and some fail, according to a report from Promotional Marketing Insights.

According to Hal Stinchfield, founder of Promotional Marketing Insights, angry consumers want to know why it is sometimes so difficult to get the rebates they're entitled to, and so does the FTC. Demand for accurate and objective information on managing rebate programmes more effectively has quadrupled in recent months, according to Stinchfield.

Myths busted
Two of the most common misconceptions highlighted are that "marketers are making rebates intentionally difficult", and that "50% of rebates go unredeemed". Neither of these statements is accurate, and the company's own research attributes this recent increase in media attention to a unique confluence of circumstances:

  • Rebate spending is at its highest level in the history of sales promotion - about US$6 billion is spent and 400 million rebate cheques are issued every year.
  • Marketers are concerned about complaint levels but have not yet been effective at decreasing them.
  • Poor communication and execution (rather than intentional deception) has caused unprecedented levels of consumer complaints, especially on higher value rebates.
  • When rebate requests are either denied, or come later than promised, some consumers believe they've been "ripped off".
  • The extraordinary quantity of recent complaints has attracted the attention of the FTC, legislators, and state Attorneys General, and the FTC has vowed to watch rebates very closely in 2006.
  • This in turn has attracted the attention of the general media, which want to understand if rebates are generally legitimate.

Not fraud, just poor planning
"Rebates are a legitimate marketing tool when communicated and executed properly. Some legislators have incorrectly laid blame for the consumer backlash on intentional marketer deception. But the fact is that consumer complaints are a by-product of improper offer design and execution, not fraud," said Stinchfield. "There is a big difference between a marketing tool and a marketing scam. Marketers don't need regulation - they need education."

Consumer complaints were so high in 2005 that at least one electronics retailer was cited by the FTC for not delivering rebate cheques on time, and another vowed to stop rebating altogether.

The way ahead
But discontinuing rebates or regulating them is not the answer, Stinchfield says. The answer is simply to fix whatever is wrong with each programme. Complaints on rebates can be reduced by at least 90% with a simple combination of a root cause analysis and a corrective action plan for the programme's offer structure, communication, and execution.

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