Diorex

As internet marketers we don’t often think about the offline marketing gimmicks that have worked for decades. One of my favorite gimmicks has a new wrinkle which has me thinking about ways to take advantage of it - namely rebates.

I recently upgraded a phone and had to pay $50 with a $50 mail in rebate. We are all aware of how this works. A decent percentage of people dont redeem the refund or dont follow the directions or miss the mail in date and thus dont qualify for the rebate.

I went to wikipedia (everones source for useless stats) and found this:

Some redemption estimates

• BusinessWeek recently estimated a return rate of 60 percent. Some estimates have been as low as 2%. For example, nearly half of the 100,000 new TiVo subscribers in 2005 did not redeem their $100 rebates, allowing the company to keep $5,000,000 in additional profit. [3]
• PC Data in the Reston, VA estimates between “10 and 30 percent”. ^[19]
• PlusNetMarketing in Wilmington, DE quotes 80% [20]
• A representative in 2005 from The Marco Corporation stated“In some cases, we do have redemption programs that go as high as forty to fifty per cent, but generally it’s about one to five per cent”. In the same article, John Challinor, advertising manager for Sony Canada remarks that “The industry average is less than ten percent….and it can be as low as one percent. [21]
• NPD Group, a marketing firm, estimates 50% to 70%

My take on this data is that marketing groups with no insight into the data are estimating high, but companies that actually pay out the rebates know the real numbers, which is in the very low end of the range.

My experience is this - we had a retention problem on a particular marketing channel for Satellite leads - they converted to sales, got installed, but cancelled the service within the chargeback period costing me a lot of money. So I put in a $100 rebate for customers who mailed a photocopy of their 6th bill to me (what got me past chargeback stage). We only offerred this to customers from one marketing channel, but here is what happened:

• My Conversion rate went up as people thought they were getting a free triple rebate (at the time there was a $50 rebate from Dish) - so I got more sales each cheaper than before from the channel
• My retention rate went way up - chargebacks on these customers went from 12% to 5%! so this solved the problem I had.
• Out of about 700 customers on this program - I set aside $30,000 for claims (roughly 40%) and only paid out about $2000 in claims. So 20 out of 700 (under 3%)claimed a $100 rebate.

Any one of these 3 things would have been a huge win for me, but altogether this was much more than I expected. I dont exactly remember why we stopped doing it, and by the time I knew it was a huge winner I had left the dish business.

So fast forward to today’s mail… I get my ‘rebate check’ in the mail and it is actually a bright orange prepaid ATT gift card. No idea how long they have been doing this, but this is an awesome idea. You see a lot of gift cards end up expiring before the balance is used, or someone spends $44 on the card and then forgets about the balance or throws the card away or just loses the card. Mine is good for 90 days and then the balance belongs to ATT.

So take the fact that say maybe only half (maybe considerably less) of people redeem the cards, then say 10% of the money rebated is never redeemed - source is old newspaper article. So now ATT only has to pay out $25 in gift cards per sale, and then only $22.50 of that is actually spent! - what if the real numbers are like 10% redeemed and 20% unspent - that works out to $4 in cost for a $50 rebate!!!

My thought is how can i use this in my marketing? If I am already charging, maybe charge more and offer a rebate on the difference. What about a get this product (a $XX value) for free? or a buy 2 get 1 free special? or advertise a ridiculously overpriced product for a ridiculously low price - say a $5 gizmo with advertised price of $1.00 and charge $19.95. Lots and lots of choices.

To do this you will need to have the point of sale relationship - affiliate probably wont work. I suspect there are also different laws in different states you might need to research, but the long and short of it is that thinking outside the box on this is a way to make an otherwise moneylosing program a winner.

What other old school offline marketing can/should be used online? Still trying to figure out how to put a “free prize inside” into an online campaign.

This entry was posted on Saturday, March 28th, 2009 at 1:38 pm and is filed under Uncategorized, Yahoo. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.