Rebate Ruckus

Consumer rebate programs are under siege. Complicated redemption rules, high resubmission and rejection rates and long waits for checks have triggered a flood of consumer complaints.

Best Buy, OfficeMax and Staples are dumping their mail-in programs. Several states have acted to regulate rebate providers.

The culprit behind most of the grievances is an archaic set of fulfillment procedures that have been used ever since brand manufacturers like Procter & Gamble hatched the first rebate plans in the 1970s.

This outmoded way of handling fulfillment leads to illegible paperwork submitted by consumers, missing UPC bar codes, clerical errors by rebate processors, 10- to 12-week fulfillment cycles and rejections that cause further delays while materials are resubmitted and the cases are reviewed.

In response to consumer and regulatory backlash over these and other issues, some retailers have instituted online or instant in-store programs that eliminate the mail-in process altogether. The problem is that both approaches raise redemption rates substantially, taking a bigger bite out of the sponsoring manufacturer’s profits. Eventually, this could undermine the product makers’ ability to offer rebates and rob the industry of a valuable marketing tool.

Alternatively, the industry has been developing new technologies and best practices that can soothe ruffled consumer feathers without significantly changing the overall economics for sponsoring manufacturers.

These new tools simplify consumer redemptions and make it easy to comply with various rules and conditions. They also have the ability to slash processing time by 50% or more, enabling consumers to receive checks in as little as 27 days. These include:

1. Using an online template to guide consumers in assembling rebate information and materials. Users are given a Web address directing them to an online form with boxes indicating where they should paste their rebate coupon, UPC code, cash register receipt and other rebate documentation. This virtually eliminates the problem of consumers forgetting to include all of the required materials.

2. A coupon design that replaces blank lines for user name and address information with boxes that consumers fill in one letter or number at a time. This combats penmanship problems that slow data input and increase the risk of inaccuracies.

3. A strategy by newer fulfillment houses that eliminates the use of multiple subcontractors in favor of bringing all operations in-house. This includes strategic planning, graphic design, scanning, data entry, data reporting, rebate processing, help line call centers, fulfillment and data management and mining. All of these functions have traditionally been outsourced, causing delays in handing off each step to the next provider.

4. New forecasting tools that reduce payment delays caused by the inability of a sponsor to accurately forecast the cash flow required to support a given program. This often leaves the sponsor unable to pay the fulfillment house in a timely manner, causing checks to be held until the service provider has the money in the bank. A few providers are now beginning to offer advanced analytical tools that are able to predict redemption rates and cash-on-hand needs.

5. Longer redemption periods that eliminate consumer wrath triggered by rebate timelines that are as short as two to five days. Ironically, these truncated timelines have failed to reduce redemption and acceptance rates as expected (and thereby save the sponsor money), but actually accelerate redemptions by eliminating the opportunity for procrastination.

Returning to longer redemption periods of 120 to 150 days is a simple fix that will not only foster consumer goodwill but also work in the sponsor’s favor economically.

Despite the controversy over execution, enthusiasm for rebates remains relatively high. In 2005, consumers redeemed 5 billion worth $3 billion, according to one estimate. And for marketers, rebates remain an effective method of stimulating product sales, driving in-store traffic, creating new retail points and collecting consumer data that can be used for bounceback offers as well analyzing consumer buying habits and patterns.

Sponsors therefore need to leverage all of the new tools and technologies at their disposal to ensure that rebates remain a core part of the marketing toolkit. Making a few simple changes can restore consumer confidence.

Jerry Weiss is sales and marketing director at DataMatrix Promotions.