Can we agree that willfully building breakage into your rebate programs is no longer a best business practice?
Maybe it once served a function in your business, but the tactic of intentionally sabotaging your consumer's rebate redemption is now outdated, useless and can even publicly discredit you and your company.
Let's look at the new facts of life with some current data and sample budget numbers:
If you're running an incentive program that pays out anything above $25, the average breakage is currently in the single digits. Redemption rates have actually been trending up for a few years now – remember though that this is a good thing.
Assume now that you are running a million dollar promotion; if you drive breakage by building it in to your program processes, figuring on an average rate of breakage, you may save yourself around $60K. Building in breakage means using any of the following tactics:
- Terms and conditions that are intentionally tough to read or understand.
- Relying on 100% postal mail for claim entry and payment.
- Mailing out rebate checks that appear to be junk mail so the consumer mistakenly throws them away.
- Offering only a P.O. box as the consumer's point of contact.
- Offering a toll-free number with attendants who are un-empowered and or unhelpful.
- Offering claimants no visibility into the status of their claims.
In the old world, this would always work out fine. It could be argued that maybe it was even worthwhile; you're breaking a few eggs here and there, but overall the campaigns savings you realized were worth having to put out a few fires. But let's look at it in a more modern context. We've all heard a particularly nasty story about social media blowback on a brand (Domino's Pizza YouTube video scandalof 2009, anyone?). Here's a scaled-up scenario of the potential reach of a single person.
The Tim Ferriss Effect
My buddy Tim Ferriss is, among many other things, a best-selling author and podcaster with a very large social media following. As I write this, he has over 1.3 million followers on Twitter and likely about the same or more on Facebook. His blog gets traffic from over 1.5 million unique visitors per month. He has massive reach; it could be said that he is his own brand.
Two years ago, Tim and I went for a survival weekend course run by our friend Cliff Hodges, who Tim mentions in his book The 4 Hour Chef. Cliff is an incredible outdoorsman and I highly recommend his courses in wilderness survival, but his website really needed some help. When I got back from the trip, I worked with my marketing team and we built Cliff a new website. As the site was nearing completion, I sent a link to Tim to check it out where it was running on our development server. Tim liked the new site so much, that he tweeted about it to his followers and the resulting traffic overload immediately crashed our server! (Luckily it was just our development server!)
Imagine if Tim had tweeted a negative experience that he had had with one of your products?
A Voice For All The People
Prior to the ubiquity of Internet usage, dissatisfied consumers really had nowhere to turn for relief after a negative experience with a brand. Even if they expended vast energy and personal resources, their voice was effectively the sound of one hand clapping and had little to no ability to alter public perception of the brand.
Brands have always been extremely adept at handling complaints and other PR challenges, mainly because of the consumer's inability to make their voice heard. The brand was the party who controlled the advertising and PR budget and whoever controlled the budget, controlled the message and so the public perception of the brand remained whatever the brand wanted it to be. Essentially, the consumer could not possibly “fight city hall.”
As is the case with Tim though, each person with an Internet connection now has the ability to become their own media brand, publishing content online in forms such as blogs, review sites, video sharing, podcasts and, of course, social networks. There is no barrier to anyone growing their reach – high quality, interesting and novel content is reward by engagement much the way traditional media always worked. This means that brands can quickly lose control of the public's perception of their brand and, if handled incorrectly, the downward spiral of perception can even lead to a downturn in the company's stock price as happened in the Domino's story referenced above.
Building A Golden Lever
Having said all that, I'm not suggesting that you live in fear that your brand may some day face the Twitter wrath of a Kardashian. Let's take a more proactive look:
When you create an unbelievable experience for your rebate claimants, you build trust. When you surprise and delight your clients with a rebate program that is just as great as your product, you build affinity and loyalty for your brand. You have won the right to ask them for little favors: Maybe there's an online review site where you'd like them to rate your product if they're willing? Perhaps you could get them to answer a few quick survey questions during the rebate redemption workflow – questions that help you do even better work on your next campaign. Perhaps they would leave an online review for your partner who sold them the product – talk about everybody wins!
These are things that you cannot manufacture by budget or by will and yet these points of social proof are the predominant driving factors of the customer's buying journey in the connected economy.
To wrap it up – if you have a million dollar promotional campaign and you really want or need to hold that $60K you may net from breakage, then I would challenge you to just set your budget for $940,000. In your planning, focus instead on how you can deliver the best possible customer/user experience at every touch of the campaign. How can you make the rebate redemption process an exciting extension of your brand experience, instead of a necessary evil? Believe me – those who have come before you have set the bar low.
Focus on delivering the best possible experience to all those people who have trusted you by buying your products and are counting on you to deliver on the promise of your rebate offer. Drive true advocacy with your promotions.
Building in breakage used to be an informed business risk – experienced professionals knew how to account for it in their planning. It's not like that anymore – building in breakage is now like gambling with your brand equity.
A lifelong technology entrepreneur, Jason Atkins is the founder and CEO of 360insights. 360insights is the world's first Channel Success Platform, allowing brands to run spiffs, rebates, co-op/MDF, and sell-through allowances all processed and paid with 100% audit and powerful analytics to predict what to do next. For more information, visit: http://www.360insights.com.