1. How Marketing Research
Protects Consumers:
The Case of Rebates
Professor Tim Silk
Sauder School of Business
University of British Columbia
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2. The Issues
Controversies:
1. Low redemption rates
2. Not getting paid
3. Onerous effort
Policy issues:
1. Laws inconsistent
2.Make rebates easier?
3. Longer deadlines?
4. Ban rebates entirely?
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3. What Role Can Research Play?
Psychology Economics
Consumer Behavior
How Do Our Biases Affect
Consumer Decision Making?
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4. Biases in Decision Making
We all fall victim to natural human biases
We are mostly unaware of our biases
We think we make good decisions
But we often make lousy decisions
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5. Consider this offer
Offer A: Offer B:
Rebate must be postmarked Rebate must be postmarked
by March 15, 2011 by March 31, 2011
1. Which offer looks more attractive?
2. Which offer will have the higher redemption rate?
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6. What’s the Conventional Wisdom?
Giving people more time to redeem will:
Increase the redemption rate: 57%
Have no effect: 40%
Decrease the redemption rate: 3%
Reasoning:
• “If you give people enough time, they’ll eventually
get around to it.”
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7. We Ran A Study…
How will people really respond?
Experiment:
Offered 1233 consumers
a rebate on movie tickets.
Manipulated:
1. Size of rebate
2. Length of deadline
3. Effort required to redeem
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8. Rebate Purchase Opportunity Return
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9. What Drives Purchase?
Larger rebates and longer deadlines increase purchase.
30%
Proportion that Purchased
25%
24%
20%
16% 17% 16%
15%
10% 10%
8%
5%
0%
1-Day 7-Day 21-Day
Deadline
$9 rebate $6 rebate
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10. What Drives Redemption?
But longer deadlines decrease redemption rates.
90%
81%
80% 77%
Redemption Rate
70%
70% 64%
60% 63%
50%
50%
40%
30%
1-day 7-days 21-days
Deadline
Low Effort High Effort
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11. Reasons for Redeeming
And effort is not the only reason…
Over half of non-redeemers never start the process…
So it can’t just be about the effort…
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12. What Drives Redemption?
In fact, increasing effort increased redemption rates.
90%
81%
80% 77%
Redemption Rate
70%
70% 64%
60% 63%
50%
50%
40%
30%
1-day 7-days 21-days
Deadline
Low Effort High Effort
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13. Bias #1: Overconfidence
Buyers are highly confident, but confidence ≠ redemption.
100 93.5 100 93.2 94.1
90 90
80 80
70 70
60 53.7 60 54.0 53.1
49.6 51.0
50 50
40 40
30 30
Confidence Rating Redemption Rate Confidence Redemption Rate
Estimate Rating
Redeemers
Estimate
Rebate Buyers
Non-Buyers Non-Redeemers
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14. Bias #2: Procrastination Histogram
Longer deadlines encourage procrastination
Days between purchase and Days between starting and
starting application: submitting application:
14
14
12 12.4
12
10
10
8
8
Days
Days
6 6 5.2
4.3
4 0.7 4
2 1.2 1.3 2.8
2
2.3
0 0
1-Day 7-Day 21-Day 1-Day 7-Day 21-Day
Application Deadline Application Deadline
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15. What Drives Purchase?
Data: 3336 promotions, CPG & light durables $1 - $20 Rebates
200%
Rebate
$20
150%
$10
% change
$5
in Sales
100% $1
(“Lift”)
50%
1-25% 26-50% 51-75% 76%+
Percentage Discount
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16. Key Findings:
1. Discount percentage has stronger effect on
lift than the dollar value of the rebate.
2. Lift is increasingly sensitive to changes in
the discount percentage as the % increases.
3. Suggests consumers frame rebates as a
percentage discount off the list price.
Implication:
• $5 rebate on $10 item (50% discount) can appear more
attractive and generate more lift than a $10 rebate on $40
item (25% discount).
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17. What Drives Redemption Rates?
a) Increasing the rebate dollar value.
• Effect of dollar value is greater than discount percentage.
Rebate
$20
$10
Redemption 60% $5
Rate $1
40%
20%
1-25% 26-50% 51-75% 76%+
Percentage Discount
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18. What Did We Lean?
1. At time of purchase, people tend to be overconfident
about their likelihood of redeeming.
2. Longer deadlines make the offer look more attractive, but
make us less likely to redeem by fostering procrastination.
3. Many people never start the process.
4. Increasing effort angers people and increases the
motivation to redeem. I’ll show you, I’ll get my $!!!
• Implication: Do it now!
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19. How Did This Research Influence Policy?
1. Research presented to Federal Trade Commission,
Competition Bureau of Canada, other policy officials.
2. Advised on new rebate guidelines issued by Competition
Bureau of Canada.
3. Policy analysis identifying rebate legislation as helpful or
harmful to consumers.
1. Deadlines should be disclosed.
2. Longer deadlines not necessarily helpful.
3. Effort requirements should be disclosed.
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20. Research and the Public Interest
Some perceptions I’d like to change:
• Academic research doesn’t relate to the real world.
• Research in marketing benefits firms, not consumers.
• Marketing is evil.
How you can support research:
• Voice you support for federally funded research like
SSHRC.
• Attend talks and generate dialogue in the community.
• Support your local universities.
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21. Thank you
Questions / Comments?
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