It is a practice that American retailers of all types have come to disdain. Shoppers walk into a store, examine products, ask store employees questions about the products and then leave to search for the same products at lower prices online. The trend has become so ubiquitous that it has even earned a moniker: showrooming.
Although frustrating, the practice of showrooming should not surprise retailers. Despite a slowly recovering economy, consumers have not abandoned their frugal ways that developed during the recession. In fact, 70% of shoppers have grown more sensitive to price in the past 12 months and price has steadily risen as the primary driver of consumers’ purchasing decisions, from 60% in 2010 to 66% in 2012, according to consumer research from global incentives provider Parago.
So at a time when retailers are desperate to win consumer loyalty and spending dollars, how can they effectively respond to consumers’ demand for lowest price to combat showrooming? Many businesses have reacted with a race to the bottom with their competitors, doling out sales, coupons and deals indiscriminately. At one time this promotional strategy was fine. The problem is, today companies have to do it all over again day after day, month after month. Inevitably, businesses and their competitors will complete the race to zero, and although sales will remain strong, profits will nosedive.
Instead, retailers should consider a tried and true marketing tactic that responds to the low price demands that have spawned showrooming while also driving incremental value for the business: rebates. These promotional tools can effectively lessen showrooming by appealing to shoppers’ desire for the best deal, and allowing retailers to advertise a lower net price than online retailers.
Plus, consumers’ appetites for rebates are high. While complete economic recovery remains elusive and bargain hunting is still a priority among shoppers, Parago consumer research shows that 95% of consumers are interested in products that come with rebates and 80% of consumers look for rebates. Plus, even though online shopping is sometimes thought of as more convenient than heading to the mall, 87% of shoppers are willing to go out of their way for a $15 rebate on $50 product.
Price perception is king, and consumers are indifferent to how that price point is achieved, whether through rebate, coupon, club or sale. However, because consumers understand that rebates offer deeper discounts than other sales, there is a strong interest in the promotions and shoppers are actively looking for rebates before and during the shopping experience. As such, marketers are able to leverage rebates to drive lower price perception.
Additionally, while rebates give consumers the value that they look for in showrooming, they also deliver retailers with reciprocal value from their customers in the form of useful data, opt-in and email capture in ways that coupons, clearances and sales cannot. Because of this, rebates can be an effective tactic for retailers to use as a component of a long-term engagement strategy. Smart, given the fact that showrooming is not likely to lessen anytime soon with the ever-expanding prevalence, convenience and value of online shopping.
Retailers that are weary of rebates or have not used them for a while may be surprised to see how they have improved over the last handful of years. Rebating is now more consumer friendly than ever with features including online submission, payout in as little as two weeks, online customer service and tracking and choice in payment methods such as a paper check, prepaid cards that can be spent immediately without a trip to the bank and even PayPal payout.
They key to combating the shopper trend of showrooming is finding creative approaches that serve the consumer and benefit the business, not hurt it. If all consumers care about is lower price, retailers must figure out how to deliver the milk without giving away the cow for free, so to speak. Rebate strategies can respond to these low price demands while also generating loyalty and ongoing relationships with consumers. It is possible to give in to the value-seeking shopper that is here to stay while also growing value for the business.
Theresa Wabler is Director of Marketing at Parago, a provider of end-to-end engagement management programs for consumers, sales channels and employees.