103: Rebates, rebates… get your foodservice rebates over here. NOT!

EPISODE 103

By DSR Dave Miesse and Bill Hornung
Co-hosts, DSR Live

Foodservice product rebates are our 2010 nominee for the most worn-out foodservice marketing tactic that should be banished to the Flowbee Hall of Silly Marketing Fame. 

We think the laws of physics apply here (OK, we both failed that class)... but we're sure we studied the Law of Rebate Relativity which states:  "If everybody rebates, then nobody rebates!"

In other words... one rebate from Brand X this week is overshadowed by the rebate from Brand Y next week. 

Prediction:  We expect to see bumper stickers on DSR cars that say... "My $3-per-case rebate can beat up your $2-per-case rebate."

Fortunately, most operators simply ignore rebates. And the 2-3% of the rebate coupons that actually get returned are often the result of DSRs filling out the forms on behalf of the operators so they win an order.  Little or no brand loyalty is involved.

Rebates are one of the wonders in the world where failure is so easily accepted. Imagine going to your dentist and she says "well, the root canal you're going to painfully endure fails to help patients 97% of the time!"

Sure, redemptions have gone up slightly in the last few years... thanks to the economy.  But is it a good thing to make less... during bad times... from customers who are price shopping?  Even when business is slow, most well-run operators won't switch brands for a few bucks... it's simply not worth the risk of messing up their recipes and processes.

But the BIG DOWNSIDE is that rebates often have the opposite effect on loyal customers of a brand. Recently, we've seen rebates of up to $10 a case.  Guess what brand-loyal operators tell us when they see these?  "Geez, they are willing to pass along $10 with no assurances I'll stay loyal... how much are they screwing me during all the other times I buy this stuff?"

Offering double-digit rebates confirms many operators' perceptions that branded goods are over-priced.  Or worse yet... it sends a message of desperation that the brand is willing to give product away because apparently sales are slowing to a trickle!

In this week's DSR Insights show, DSR Live's Dave Miesse and Bill Hornung yak about the unvarnished truth about rebates... and some powerful alternatives that can make a sustainable difference:

• How to create a sustainable and profitable advantage without discounting your life away.
• Two instances when rebates DO make sense.
• Taking a novel approach with price-oriented incentives that don't cheapen your brand (it involves the scary idea of telling the truth!).
• Download our show summary checklist on how to pilot test a non-rebate incentive program.