Is a Rebate Program Right for Your Business?

Done right, offering a rebate can mean a boost to your bottom line. Done wrong, and it can mean unhappy customers and lost profits.

By Devlin Smith

Opinions expressed by Entrepreneur contributors are their own.

Stu Sjouwerman couldn't be happier with the rebate programhe's established with to offer his company's iHateSpamsoftware. "They sell a couple hundred units per day, and weship shed-loads of product over there," says Sjouwerman,founder and CEO of Clearwater, Florida-based Sunbelt SoftwareInc., a provider of Windows tools. "Amazon [benefitsbecause they get] a whole bunch of customers that buy other stuff,so it makes everybody happy."

While Sunbelt is benefiting from this rebate offer, in whichcustomers get iHateSpam for free through a $20 mail-in rebate butSunbelt still earns money from, Sjouwerman and his teamunderstand rebate programs can have drawbacks. "The reason [tooffer] rebates is that they produce volume," says AlexEckelberry, Sunbelt's president. "But there should bestrategic reasons considered, things like being able to monetizethe customer base in the future. This is hard cash you'regiving out, not a price reduction, so tread carefully withrebates."

Indeed, rebates can take a toll on your bottom line, so"treading carefully" is a must. "Amazon...can affordthis kind of thing because they get their customer to buy otherstuff," Sjouwerman says. "For us, a rebate program likethis would be simply impossible."

If handled improperly, rebate programs can also be customerrelations nightmares, say, if a customer receives a rebate late ornot at all. Ensure that customers get their rebates easily and in atimely manner, and maintain positive feelings for your company orbrand. "Identify a contact person to be responsible for fullyunderstanding the rebate program. This person can serve as both thecontact for implementing the program and the customercontact," says Susan Carter, a Minneapolis small-businessconsultant. "When a customer complains, this person can helpto get questions answered and becomes an advocate for the customerrather than a participant in the problem."

When setting up a rebate program, set up specific goals."It is important for a company to set very clear objectives inorder to decide whether to use rebates to motivate consumers toexperience their brands," says Claire Rosenzweig, president ofPromotionMarketing Association Inc., a New York City trade associationrepresenting the promotion marketing industry. "If the goalsare continuity, which builds brand loyalty; usage, which encouragesnew or frequent usage; or image, which reinforces brand images andenhances any advertising, rebates can be chosen as the mosteffective means to get the job done."

Throughout the setup and implementation of the rebate program,keep your customers in mind. "Make it as easy as possible forcustomers to correctly submit their requests for rebates,"Carter says. "If the rebate is for a fairly large sum, you mayeven want to make it a policy for the paperwork to be filled outwith the customer [present]."

If you've had trouble with rebate programs in the past,there are other options. Carter suggests value-added rewards suchas free products or upgrades and loyalty rewards clubs wherecertain customers are invited to take advantage of promotions notavailable to the general public. "If you use this kind ofprogram, you must offer member-only specials so customers feelrewarded for their loyalty," Carter says.

Whether you offer rebates or other promotions, if something goeswrong and your customers aren't satisfied, do what you can towin back their loyalty and trust. "If a rebate program is anabsolute disaster, acknowledge it to your customers and state whatyou are willing to do to restore goodwill," Carter says."However, I caution against simply offering a discount on afuture purchase. That's not restitution--it's just anotherpromotion."

Contact Sources

Susan Carter
Minneapolis, Minnesota
(952) 890-5717

Claire Rosenzweig
Promotion Marketing Association Inc.
New York, New York
(212) 420-1100

Stu Sjouwerman
Alex Eckelberry
Sunbelt Software
Clearwater, Florida
(727) 562-0101, ext. 220

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