Tax season is upon us, and the fallout of COVID-19 has changed the rules. As a result of pandemic-related legislation that took effect in late December, the IRS pushed filing season back from January to mid-February. While it wasn’t a tremendous change, it did make a difference for the more than 50% of consumers who usually file early. In fact, 9% of early filers had submitted their taxes by January last year — another 58% had completed the task in February.
This could mean that some consumers will push back filing into March, potentially delaying their refunds until April or May. According to the NRF’s 2021 Tax Season Survey, 62% of consumers anticipate a tax return this year — last year’s average tax return was $2,535, says Bankrate. That represents a lot of money that won’t be available to spend until later in the year. Thirty-two percent of filers expect to use their returns to pay down debt, and 54% are likely to put some portion into their savings.
These new filing realities will impact consumers — and how marketers should prepare for tax return spending with their consumer engagement strategy. After all, tax season is more than just a financial services event; it’s an opportunity for brands to connect with consumers and earn a chunk of that refund windfall.
As such, we’d like to discuss some of the ways different advertising verticals can capitalize on this shift and tap into renewed consumer intent:
Consumers Are on the Hunt for New Technology
Tax refunds allow some consumers to make big-ticket purchases. A popular area of spending is consumer electronics — namely mobile and wireless services.
The Valassis in-market tracking signals identified more than 46 million devices searching for information on this particular topic just before the holidays. And a 2020 Valassis consumer study revealed that electronics consumers are sensitive to promotions, over-indexing versus total U.S. adults.
For instance, 56% of consumers who buy electronics are influenced to make a purchase because of a direct mail ad. This may be a great time to use mail ads to influence consumers regarding the new prepaid wireless options. An increasingly competitive landscape is causing consumers to rethink existing plans in favor of more affordable ones.
Consumers Will Invest in Their Physical Well-Being
In April 2020, a large gap grew between overall consumer spending and consumer spending on healthcare. Part of this can be traced back to restrictions, as many doctors and dentists postponed appointments due to the pandemic. As lockdown orders have eased, this spending gap is quickly closing — suggesting that the public is once again ready to invest in physical well-being.
For many consumers, the extra funds from tax season may help them pay for elective procedures, such as cosmetic dentistry or dental implants. That said, only 27% of consumers surveyed by PricewaterhouseCoopers said their physicians had informed them it was safe to return. Even more troubling? About 53% of people are hesitant to visit the doctor.
Healthcare providers have an opportunity to communicate what’s possible and available to their patient base. With stimulus checks and tax refunds on the way, now is an ideal time to reach out to potential patients. Contactless outreach is still prominent, but direct mail campaigns enable brands to engage consumers directly in a personalized and efficient manner. In fact, 39% of consumers surveyed by Valassis last year who visited doctors and clinics say they have tried a new business due to an offer in a direct mail ad.
Consumers Want to Update Their Homes
Of all the services impacted by tax return spending, home improvement could see the most business. Historically, the best times to buy a house are in June and September; in many markets, the pandemic caused a significant surge earlier in the year. As refunds hit bank accounts, we could see homeowners applying their refunds to help with home renovation projects or outfitting new living spaces. In fact, the NRF found 22% of consumers will spend that refund on home improvements or other major purchases.
The ready-to-buy moment is just that: a moment. Retailers in every category must think about how they can reach consumers at that critical time of decision. In our experience, direct mail can hold a lot of sway over whether consumers will make a purchase when supported by digital marketing channels.
Now is the time to build or strengthen that relationship. It will pay dividends once tax returns start hitting consumers’ bank accounts.
Susan Maurer is client strategy director for Valassis, partnering with clients to drive revenue. She has over 20 years of experience working in verticals such as CPG, Telecom, Healthcare and Finance, with a focus on using insights and strategy to help clients realize their consumer engagement objectives.