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  • Consumers use tax refunds to save, pay down debt and spend on necessities and non-discretionary expenses.
  • Telecom companies should find ways to capture some of this cash influx with consistent, strong advertising delivered at the right time.

It’s tax season! According to the National Retail Federation (NRF) and Prosper Insights & Analytics, 59% of consumers expected a refund last year. Most see this as a bonus or extra cash they can save or spend.

Manufacturers and retailers also anticipate tax season, hoping to capture some of the extra money that ends up in consumers’ pockets. For telecom companies, this represents an opportunity to drive sales of wireless and internet plans.

Timing of filing tax returns and receiving refunds

While the deadline to file tax returns is typically April 15, the Internal Revenue Service (IRS) has moved the due date to Tuesday, April 18 for 2023, after the weekend and the Emancipation Day holiday. However, most consumers expect to file early. Data from the NRF show a sharp increase in the percentage of consumers filing returns in February, up from one-third in 2020 and closer to half (46%) in 2022. An additional 32% will file in March.

There are many advantages to filing returns early. For families who rely on refunds for extra cash, getting their refunds ahead of time will ease some strains on their household budget. Research from JPMorgan Chase & Co. shows a sharp uptick in cash outflows, credit card payments and spending on durable goods among families one week after receiving their tax refund.

How consumers will spend their refunds 

More than half of the 2022 NRF survey respondents said they would save their tax refunds, while 43% allocated last year’s refund to savings and one-third planned to pay down debt. Meanwhile, only 26% of consumers intended to spend their refund on everyday expenses (down from 29% in 2021), 8% on significant purchases (compared to 10% in 2021) and 8% on splurges (versus 9% in 2021). However, slightly more planned to use their refund on home improvement (11% from 10%) and vacations (11% from 8%).

While most consumers save or spend their refunds on things they need, some will also spend theirs on things they want. And while inflation is easing, prices remain high, affecting the desire to splurge on items as people expect to be more pragmatic about their purchases this year.

So, how do telecom companies win a portion of these incremental dollars from tax refunds?

The telecom opportunity 

Aside from the holidays and the back-to-school period, tax season is historically a peak time for the telecom industry. In 2022, Wireless providers significantly increased ad spending in March to anticipate refunds (Vivvix Ad Insights, formerly Kantar Ad Insights) while internet service providers and cable providers delivered a steady stream of ad support through February and March.

There is little doubt that tax refund messaging will continue to be a strategy for acquiring new subscribers and customers as March rolls around again.  

Marketing recommendations for telecom brands

Telecom brands should take advantage of this opportunity of extra consumer dollars from refunds. Even as most consumers prioritize saving and paying down debt, many still historically plan to allocate a portion to discretionary expenses, and this includes buying or switching to new wireless or internet plans.

These are some things to consider for telecom advertising:

  • Stay top of mind. Ad spending for the telecom industry is projected to grow and consumer confidence will allow for more discretionary spending. However, with most funds still being allocated to saving and paying down debt, there will be a smaller pot for discretionary spending. This may set the stage for some stiff advertising competition beginning in February. Making sure your brand stands out from the heightened advertising noise is critical to winning share of mind and wallet.
  • Time it right. Consumers who are expecting a refund are already planning how to spend it. Almost half of the survey respondents plan to file their tax returns in February and March, with the IRS expected to send refunds within three weeks. Telecom companies should promote aggressively around the same time. Also keep in mind that there are some weeks in the first half where more paychecks are delivered, which aligns with the influx of tax refund dollars and may incentivize people to spend more. Advertise before these weeks as an ideal way to maximize your message. (Source: IHS Payroll Cycle Tracking 2023)
  • Personalize messaging. One size does not fit all. Consumers expect personalized marketing. Telecom brands should personalize their messages through digital marketing or direct mail.

Learn more about this year’s top consumer trends in Vericast’s 2023 Consumer Outlook.