Mar. 10, 2008 – A rebate resurgence?

By Steve Bauer
Managing Editor
With nearly $150 billion worth of rebate checks on their way May 1 and with additional millions of Americans expecting tax refunds in the coming months, both dealers and manufacturers are scrambling to capitalize on what they’re hoping to be a wave of consumer spending.
From dealers offering creative discounts and service plans that focus on the expected financial windfall to manufacturers rolling out marketing plans to encourage consumers to use their rebate money for new unit purchases, the powersports industry is positioning itself to cater to consumers who, at least for the short term, will once again have discretionary income to spend.

Window of opportunity
With tax refunds now starting to trickle in and rebate checks expected to be mailed soon, dealers and manufacturers realize the opportunity to convince consumers to spend money on a big ticket item is a short-lived one.
“There are going to be people out there who will have upwards of $5,000 in rebate/refund money,” said Mason Page, owner of Copper Yamaha/Kawasaki/Suzuki in Memphis, Tenn. “Tax refund time is always a focus for us, but with the economy the way it is, the rebate checks are like lightning in a bottle. The combo couldn’t come at a better time.”
To drive customers to his store, Page has created several discounts on new units for people who bring in their rebate and/or refund checks to purchase a vehicle. In addition, he has partnered with several local tax preparation businesses in the area to promote both their services and his business. For every sale Page makes based off a referral from the tax preparation service, he sends them a check ranging from $50-$500. In return, the companies place posters for his dealership in their windows, and hand out brochures for his dealership to every customer who will be receiving a refund. Page says he’s seen his sales from his refund check program alone increase 20 percent.
“Dealers need to understand that this money will most likely be spent quickly, so the more you can do to let people know they can get a great deal on a new bike, ATV, whatever, the more traffic you’ll drive,” Page said. “Take advantage of the businesses in your community that can benefit your business.”
Manufacturers also know the time to act is short and are brainstorming to create programs that can help dealers maximize profits. Eric Bondy, president/CEO of KYMCO USA, says the timing of the rebate checks presents a unique opportunity.
“We’re certainly thinking about it, although we haven’t pinpointed anything at this point,” he said. “It really is great timing for dealers, however, and of course the point of the checks is to spend them, so this certainly presents an opportunity in terms of increased sales.”

In the buying mood
With consumers extra cautious when it comes to spending any cash reserves, dealers are stepping up their efforts beyond discounts to get potential buyers in the door. One dealership in particular, Walton Powersports in Tuscon, Ariz., is holding a special event to celebrate the U.S. Treasury checks. The dealership is planning a “Celebrate the Rebate” event, which will run the first weekend in May. Although most customers won’t have received their checks by then, owner Kyle Walton says the event is intended to get people excited about purchasing a vehicle, and they can reserve, and in some cases even take home, a new motorcycle or ATV depending on the expected size of their rebate.
“We decided to take it a step further and not only give customers a chance to use their checks to take a new vehicle home that day, but we’ll sweeten it by discounting certain units,” he said. “We also have several F&I options available for them to choose from to fill the monetary gap if necessary, and offer an extended service plan to customers who reserve a vehicle that weekend.”
Walton says the dealership also will hold a party with a live band and raffles one night, along with a special VIP event another night for anyone who has reserved a vehicle, which will include the giveaway of a motorcycle to one customer, along with autograph sessions with members of some of Phoenix’s professional sports teams. Walton is adamant that if dealers want to find success, they need to be creative in advertising their product, regardless of their budgets.
“We’re a bigger dealership, so our event is obviously on a larger scale,” he said, “but regardless of your size or budget, it simply lets your customers know that ‘Hey, we’re all in this together,’ then maybe you can snag a sale that would have otherwise gone to a big-ticket item at Best Buy or WalMart.”
Chris Kalan, owner of Journey Powersports in Bloomington, Ind., adds the tax rebate season has always been a traditionally busy time for his dealership anyway, so creating a double promotion using the rebate checks was a natural fit. He runs a yearly promotion called “Uncle Sam’s Surplus,” which has focused on creating deals for customers who use their tax refunds to purchase vehicles or PG&A. This year, one of Kalan’s manufacturers — which he wouldn’t name — has sweetened the deal for him, allowing him to offer a $500 discount to anyone who brings in their treasury check to pay for a new unit, and the company will reimburse him the money back on any units sold the next time he makes an order.
“I’m basically in a no-lose situation,” he said. “I’m running a tax refund promotion anyway, and then to throw this manufacturer’s rebate check program along with it I think is going to be a big hit.”
Kalan says the program has only been announced to dealers so far, but will be marketed to consumers both locally and nationally by the manufacturer starting in early April.

How much impact?
Even with the extra income consumers will have this spring, some dealers are wary of how much of an effect the rebates will have on business.
“I know the government’s reason behind these checks is for people to spend them, but I know my check will be going into the bank instead,” said Bruce Scott, owner of Shade Tree Cycle in Peoria, Ill. “People are more cautious than ever with their money, and I don’t anticipate them running out and blowing it on something frivolous.”
Randy Tesch, head of external relations for Ameriprise Financial, a national investment and banking firm, says most analysts believe the money will be spent, it’s just a matter of whether it will go toward necessities or want items.
“If you take away the impact this will have on the economy for a second and focus on what people are going to spend this money on, you’ll get a lot of shrugs from economists across the board,” he said.
Tesch says the upcoming rebate checks must be looked at differently than the ones the Bush Administration pushed through Congress in 2003, both because of the size of the checks (smaller), and the fact that areas such as the housing market, for example, weren’t anywhere near the record-low levels they are now.
“I think it’s a wait-and-see moment for everyone on the retail side to see exactly what consumers are going to do with this money,” he said. “People know they can’t tap into their home equity, and maybe they’ll see this money as their one chance to go get that boat or motorcycle they’ve wanted.”

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