A new catchphrase has entered the payments lexicon - rebate chic. It defines how the current economy is shaping consumer behavior; to save money, consumers are seeking the best deals and discounts.
A Parago Inc. survey puts the shift in consumer behavior into concrete terms. Eighty percent of over 400 respondents acknowledged that the recession has affected their spending habits. Of those consumers, 55 percent said they are now more likely to look for products that include rebates. But with that increased demand comes the need for rebates to be efficiently managed.
"Convenience is critical," said Juli Spottiswood, Chief Executive Officer at Parago. "Rebates are still a very valuable promotional tool and even more so in today's economy."
She estimates that 50 to 60 percent of rebates are already issued via prepaid cards. "For the retailers, they get to brand a piece of plastic that stays in a customer's wallet for six, 12, 18 months," she said. "And that's hugely valuable." Rebate cards also allow merchants to deliver follow-up discounts and savings, as well as tailored, one-to-one marketing, she added.
Spottiswood said the old-fashioned rebate check has been around for 30 years. While she believes rebate checks will never completely vanish, modern consumers are not keen on trudging down to banks to deposit checks. They like having the ability to quickly and easily redeem rebates on cards, in-store or online.
Ten years ago, when Parago was established, the rebate industry was rife with fraud and consumer dissatisfaction, Spottiswood noted. "Customers would mail in their rebate claims to get validated," she said. "They'd have to jump through hoops and be subject to a lot of business rules. They had no idea - kind of like a black hole - where they send it, when they would get their rebate. They would wait three, four, five months."
But that has changed. Now, Parago customers can go online 24/7 to see real-time balances and purchases, or get that information sent them via text message, Spottiswood said.
At Parago, rebates make up only part of the company's overall promotions, incentives and loyalty services for Fortune 500 companies. The Dallas/Forth Worth-based business entered the prepaid card world five years ago. Spottiswood sees rebate cards as a significant growth area. It is already a $4 billion to $5 billion market and she expects a considerable jump in 2010.
The challenge is to get "retailers and service providers to think differently about how they reward their customers for rebates," she said. "It's taken time and I will say that there has been a recent explosion in the adoption rate for prepaid within rebates."
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