Free Money
In this issue:
- How electronics manufacturers and software developers discount without discounting …
- How to buy money for pennies on the dollar and pay your customers the face value to buy your products …
- How info-marketers can create powerful sales incentives and reward their best customers with FREE MONEY …
- And more!
Dear Web Business Builder,
Electronics manufacturers and software developers have been offering mail-in rebates for years. It’s great marketing, because it allows you to offer a price incentive for pennies on the dollar. How so?
Picture The Family Guy walking into a Best Buy store and getting all misty-eyed over a brand new home theatre system. He sees the “after mail in rebate” price, and it gives him a reason to buy right away. Before he even leaves the store he’s thinking about how much furniture he can rent with his rebate check.
Meanwhile, the manufacturer is laughing all the way to the bank. Why? Because somewhere between obtaining the rebate form … cutting out the UPC code … finding an envelope … photocopying the receipt … and mailing the whole thing away … plenty of people just say “oh screw it”, and never bother to redeem their rebate … or they just forget.
Only about 20% of these babies on average get redeemed …
Let’s look at the numbers. Manufacturer A offers its home theatre system at $599. Manufacturer B offers its at $499 after $100 mail-in rebate.
Manufacturer B ends up selling 50% more units, but since only 20% of the people who bought during the promotion bothered to claim their rebate, manufacturer B sold its home theatre system for an average of around $579 per unit, only $20 less than manufacturer A.
It’s like free money!
The impact on a company’s bottom line can be startling. Wall Street was stunned recently when digital video recorder maker TIVO reported quarterly losses of $5 million less than expected, the result of 50,000 new subscribers failing to redeem their mail-in rebates.
How to buy money
for pennies on the dollar
and pay your customers the face value
to buy your products …
I got to thinking. Could rebates be applied profitably in other industries were they’re not already prevalent?
After all, most entrepreneurial fortunes are made without brand new ideas. Instead, entrepreneurs tend to twist, combine and alter proven winners, often transplanting them from one industry to the next.
Well it turns out the electronics industry’s dirty little secret is already out of the bag. There are now companies out there that underwrite rebates and sell them to other companies. If you sell a high-ticket item, these companies will sell you cash rebates for pennies on the dollar, which you can then offer your prospective clients as incentives to purchase.
Suppose you’re a realtor. Clinch the deal by offering a seller a cash reward for listing with you when the deal closes. Running a marina? Ace the competition by offering a cash reward when someone buys a big expensive boat from you. Selling mortgages? Have borrowers tripping over each other to sign on your dotted line by offering a huge cash incentive.
And these aren’t chintzy $50 or $100 rewards either. You can buy big monster size cash rewards of up to $10,000, for as little as $1,750. How does it work?
The companies that manage and market these reward programs have redemption down to an actuarial science. They know exactly how many people on average are going to redeem their rewards in any given market.
One company I spoke to sells cash rewards for 17.5% of their face value. They say redemption is even lower. Of course, just like in consumer electronics and software, there are hurdles for the consumer to jump over, in this case, a deferral period.
Still, these glorified rebates positioned as cash rewards are helping high ticket sellers attract substantial traffic and close more deals, while effectively discriminating against price insensitive shoppers who can’t be bothered to redeem their reward.
And of course the whole “rewards” game played by the credit card companies is HUGE! Consumers are routinely roped into high interest cards on the promise of “points” and various rewards they can redeem at participating retailers. People go nuts over these things, my wife included.
Me, I just want to buy something and use it. I hate points, rebates and cash rewards. I even hate it when my wife asks me to help her with the math to see who is giving her the best deal. It makes me crazy.
But when it comes to marketing, I learned long ago that what I think as a consumer doesn’t amount to a row of beans.
So I got to thinking: Could rebates be dressed up creatively to sell information products? Now that would be different. Let’s look at the possibilities …
"How info-marketers can create
powerful sales incentives
and reward their best customers
with FREE MONEY!"
Selling information is a lot different than selling electronics, or high-ticket consumer goods, or financial services, I’ll give you that. The purchasing decision is far less about price, because it’s usually quite difficult to compare one product against another. And if you’re marketing information correctly, most of your sales will be impulse sales anyway. People don’t generally shop for information, let alone price shop. They come upon it, and they buy it.
But the psychology of the purchase is the same. An incentive is an incentive. The lure of something for nothing is universal across all markets, and buyers of information are just as disorganized and forgetful as anyone else. These programs work because they build perceived value, and project the realization of that value into the future – the further the better.
I know from my own testing that service bonuses bundled with information products boost sales substantially. But they’re only redeemed by about 10% of purchasers, because the buyer anticipates enjoying the benefit of those services at a future point in time. If that wasn’t the case, I would never be able to offer them. Those that do consume, reap a tremendous reward.
I’ve also proven that a long refund period increases sales. Yet fewer people refund.
Clearly, by putting the onus on the customer to make a claim against a purchase at a future date, considerable leverage can be achieved.
Here are a few ideas I’ve been kicking around …
Since many information products are designed to offer some kind of training, why not offer a cash reward to a purchaser who completes the training? Wouldn’t that be a great sales incentive?
How about as a retention strategy? Maybe you’re selling a monthly subscription. When someone signs up for your program, why not include a special gift – a certificate redeemable for cash reward on renewal.
How about as an incentive for submitting product feedback, or even better, success stories? You know, use the product for 3 months, and then send us your story, good or bad, for cash reward.
How about as an incentive to buy a follow-up product? Buy product A, and receive a cash reward when you purchase product B.
Bundling these neat little magic tricks into your offers could be pretty cool.
We know that offering a believable reason why a discount exists, or even a condition on that discount, can increase sales. Could a cash reward actually yield a better response than a point of sale discount?
Maybe, maybe not, and maybe it doesn’t have to. If only a small portion of people are going to claim their cash reward anyway, maybe you’re better off offering a cash reward that’s much larger than an equivalent point of sale discount. Or why not combine the two?
The mammoth popularity of cash rebate schemes in other industries means they’re definitely worth testing in the information-marketing field. I’ll let you know how I make out.
Until next time, Good Selling!
Daniel Levis
Editor, The Web Marketing Advisor
THE TOTAL PACKAGE
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Daniel Levis is a top marketing consultant & direct response copywriter based in Toronto, Canada and publisher of the world famous copywriting anthology Masters of Copywriting featuring the selling wisdom of 44 of the "Top Money" marketing minds of all time, including Clayton Makepeace, Dan Kennedy, Joe Sugarman, John Carlton, Joe Vitale, Michel Fortin, Richard Armstrong and dozens more! For a FREE excerpt visit Sellingtohumannature.com
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Comment by john bogdanski — June 27, 2007 @ 7:23 am
Can you tell me the companies that you researched that actually offer these rebate programs? I\’m especially interested in the one offering the 17% deal.
thanks
Comment by Niall — June 27, 2007 @ 11:58 am
Yes, it would have been nice if you included the name of the company you mentioned, so we could research it.
Niall.
Comment by Daniel Levis — June 27, 2007 @ 6:41 pm
Hi Guys, The name of the company is http://www.cashrewardsinc.com/
Comment by Greg Thompson — June 27, 2007 @ 11:20 pm
This is the first bit of truly new information to me I\’ve read in this newsletter for quite some time. Thank you!
Comment by Niall — June 28, 2007 @ 5:37 am
[B]Thanks for the company name! [/B]
To say that this is the only truly new information is harsh. If the stuff is so old news to you, why don\’t you unsubscribe? For me, yes, I\’ve heard it before, but I haven\’t always acted on it, so hearing it again is a good reminder. Hearing new applications also sparks new ideas.
Comment by Harun — June 28, 2007 @ 8:06 am
Daniel, this is a brilliant idea!
Wowee wow! I just can\’t wait to figure out how to use this in my info business.
Thanks.
Comment by Jody Jones — January 9, 2008 @ 12:39 pm
only 20% of rebates are ever redeemed.