Case Study Cashback – TechProtect GmbH

International price wars are becoming more and more frequent. Many companies from a wide range of industries are following this trend completely unintentionally and without any awareness of the long-term consequences. The following case study reflects the situation of numerous companies, but at the same time offers you a targeted way out to secure competitive advantages and seize new opportunities.

Case study of TV-AG

The TV-AG has been established on the market for many years. The main component of the product portfolio are televisions. In this area, the company is known for its high quality and is considered a premium manufacturer.

The marketing department of TV-AG is, as every year at this time, in the planning stage for the coming financial year. In the course of reflecting on the current financial year, those responsible have noticed one development in particular which is negative. The last big discount campaign has seriously damaged the price level of the products. The case that should have been avoided occurred as a premium manufacturer. But why? One has been influenced by the broad masses and has been carried away to several price battles. Blinded by conviction at events such as Black Friday, the company was forced to lower its prices in order to remain competitive and lost sight of its own corporate and marketing strategy. After all, the TV-AG has no need to deviate from the right price of the products, because this is justified by the high quality. This development, which was wrongly followed, led to existing customers having doubts and beginning to question the quality of the products they bought. Among new customers, an increasing hesitation in buying behaviour could be observed. The waiting for the next discount campaign had begun.

This year, TV-AG has involuntarily deviated from its strategy. The definition about the price was never the intention. According to this insight, the marketing managers want to find more suitable measures for the coming year to correspond to the strategic orientation. In a constructive discussion many questions arose.

– How do we manage to increase our sales in targeted phases of the year without damaging our price level?

– Which customer incentives will enable us to sell more products?

– What measures will enable us to stand out from the crowd and secure competitive advantages?

– How do we find the way back to our image as a premium manufacturer?

After numerous meetings and unsuitable opportunities, the topic of cashback was discussed. What does it mean to carry out a cashback campaign and does it involve? A cashback campaign enables TV-AG to visually maintain the price level for the customer. Nevertheless, the customer receives a price reduction through the cashback amount afterwards. The customer receives this cashback amount through registration and compliance with the conditions of participation after the purchase. TV-AG is gradually taking a greater liking to this option, which only brings advantages for the customer and the company.

However, not everyone in the group is yet fully convinced and rather sceptical whether such an action would not be significantly more expensive than taking the red pencil in hand. Since every constructive and critical thought is welcome, this thesis is to be tested mathematically using a numbered example.

The T-1001-V will serve as the action device. The regular purchase price of this television is 1,200€. The Cashback amount should be 100€ and based on the past, 10.000 units are expected to be sold during the planned promotion period.

Calculation of the discount campaign

– With a normal discount campaign the selling price is 1.100€

– Due to the €100 discount, the costs of the TV-AG are 1,000,000€

Calculation of the cashback campaign

– The number of registrations expected is 2500

– The number of eligible registrations is 2125

– The total amount of cash back paid out is 212,500€

– The total cost of the cashback campaign is 212,500€

The total saving is 787,500€

Customers buy the T-1001-V at the regular price, register and receive the cashback amount. The process of an eligible registration is very simple for the customer. However, there is a lot of operational work behind a cashback campaign, for which the TV-AG doesn’t have the capacity and know-how. On the basis of the numerical example, it can be determined that the commissioning of an external service provider is profitable. With years of expertise and a high level of competence in the handling of cashback campaigns, the TV-AG gains a strong business partner and can focus on its own core competencies. Each company has its own individual framework conditions to which the cashback campaign must be adapted. Due to the expertise from different industries, the service provider can offer targeted and individually tailored solutions for TV-AG.

Do you have any questions about this case study or would you like to receive non-binding advice on your company context? Please feel free to contact us!

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