By Rieva Lesonsky, CEO of GrowBiz Media & SmallBizDaily.com
Spring is in the air—and for savvy small business owners, that means it’s time to market to taxpayers eager to spend their tax refunds. Tax refund spending is an annual ritual, as many Americans count on the money they get back from taxes to finance big-ticket purchases, vacations, or other expenditures. What’s in store for this year? Keep reading.
The 2017 Tax Cuts and Jobs Act takes effect
65% of consumers expect to get a refund this year, according to the NRF and Prosper Insights & Analytics’ annual tax return survey. What’s more, 77% expect their refund to be the same as or more than last year.
Whether that expectation becomes a reality remains to be seen, as the effects of the Tax Cuts and Jobs Act shake out. As of February, the Internal Revenue Service said the average refund was $2,640, down from $3,169 in 2018.
Refunds have also been slower than usual coming in this year, as more taxpayers are filing later due to the complexities of the new tax law. That’s good news for small business owners, as it gives you more time to plan your marketing strategy and tempt consumers with tax-refund offers.
The IRS says it expects to issue refunds on e-filed returns within three weeks (paper returns will take longer). That means plenty of filers who wait until the last minute won’t get their refunds until May or later.
How consumers will spend their tax refunds
What will Americans do with their “windfalls”? Half plan to put it into savings and 34% will use it to pay down debt, the NRF says. (These have long been the most popular uses for a refund). However, 22% will spend their refund on “everyday expenses,” 12% will use it for a vacation, 10% will spend on home improvement, and 9% will use it to “splurge” on a purchase.
A separate Valassis survey reported by Chain Store Age says 20% of shoppers are unsure of how they’ll use their refund—making them ripe targets for businesses who can tempt them to spend. Lower-income and younger consumers are more likely to spend their refunds, says a Morgan Stanley Research analysis of the NRF data. Older, wealthier consumers are more likely to save.
5 industries that can benefit from tax refund season
Providers of luxury goods or services: From high-end handbags to spa treatments and designer clothing, many consumers just need a little “nudge” to put their tax refund toward a treat. Focus on the stress of tax season and the reward customers deserve—and how your product or service can offer it.
Electronics: Electronics such as TV sets, major appliances, and new computers, tablets, or phones are purchases that straddle the gap between “splurge” and “sensible.” Promote both aspects of the purchase, tempting shoppers with the idea they can use their refund to get a “splurge-worthy” yet essential item.
Financial services: After tax season, many Americans have investments on the brain, and others want to get their finances in better shape for next year. Financial services businesses can target consumers by suggesting consumers start a college savings plan, open an IRA, invest in life insurance, or purchase the services of a financial planner.
Home repairs or improvements: Consumers can spend and still feel virtuous when they use their tax refund to improve their biggest assets—their homes. Encourage shoppers to put their refunds toward a long-dreamed-of home improvement project such as remodeling a bathroom or refreshing the kitchen cabinets.
You can also promote projects offering tax breaks or savings in the future, such as installing energy-efficient heating and cooling systems or getting solar panels. Finally, remind homeowners that now’s the perfect time to repair roofs or siding damaged during the winter and prepare the house and yard for summer.
Vacation and travel planners: For many consumers, spending the tax refund on a summer vacation is an annual ritual. Encourage people to spend their refund on an unforgettable experience, emphasizing the value of travel in bringing families together and making lifetime memories. Offer tax refund travel packages or offer to pay the sales tax on travel arrangements.
3 marketing tactics to motivate tax refund spending
The following marketing ideas can help you persuade consumers to part with their tax refund dollars:
- Use social media to ask followers what they plan to do with their tax refunds. Then promote special offers for your most popular products or services.
- Hold a sale with a tax theme such as “Your tax dollars at work,” or offer a “no sales tax” promotion where you pay the sales tax on customers’ purchases.
- Set up layaway or down payment programs so customers who haven’t gotten their refunds yet can ensure they don’t miss out on a special product or service they have their eye on.
Whatever your industry, if you want to take advantage of tax refund season, make sure you schedule plenty of employees to handle additional business like processing orders or assisting customers. Employee scheduling software can help simplify the process, ensuring you always have enough team members on hand to benefit from tax refund spending.
Rieva Lesonsky is the CEO of GrowBiz Media, a media and custom content company focusing on small business and entrepreneurship. Email Rieva at firstname.lastname@example.org, follow her on Google+ and Twitter, and visit her website, SmallBizDaily.com, to get the scoop on business trends and sign up for free TrendCast reports.