Computer Rebates Not As Sinister As You Think

Lam1969 writes "Robert Mitchell dug up some details about rebates after getting up at 5 a.m. to get a free (with rebates) computer bundle at Circuit City. He had to deal with five separate mail-in rebates to get his money back, and decided to ask an expert about whether rebate come-ons are some sort of attempt to trick consumers. The reply: 'The big lie that the media and attorneys general want you to believe is that all the retailers and manufacturers are crooked and the reason [they] do rebates is breakage, which is people not turning them in.' Furthermore, Mitchell reports that retailers are making the process easier, by printing rebate forms and receipt copies at the register, and letting people track rebates online. His conclusion: The trade-off of having to do a few hours of copying and envelope-stuffing is worth the price of a new computer, so stop whining -- 'suck it up and accept your rebate check like a man.'"

Comments

Easier still?

[jarich]

Furthermore, Mitchell reports that retailers are making the process easier, by printing rebate forms and receipt copies at the register,

Why don't they take it one step further and file it for us as well? Then we can just take the rebate off at the register? I don't mind paying sales tax on the full price.

Re:Easier still?

[taustin]

Or better yet, just reduce the price at the cash register. It's called "putting the item on sale," and it works really well.

Re:Easier still?

[beakerMeep]

Exactly. This guy is a coupon cutting ninny trying to explain away something he knows to be wrong.

Companies are in business to make money and are doing this to *drumroll* make money. There are two ways this can make them money:

1) "Breakage" as they call it. People dont send in the rebates. But this often goes further than comsumer's mistakes. Sometimes companies take way longer than they should in sending back your rebate or will send you a letter claiming that your paperwork is incorrect and that you must resubmit that receipt from that product you bought 3 months ago. And we'll get you that $50 rebate in just a couple more months.

2) they can upsell you while you are in the store or upsell you through advertising (if your are looking at that super cheap computer maybe you will look at the product on the next page)

In his indignance he is saying we should be ok with a very anoying practice that distorts advertised prices and, by it's nature, has at least SOME occurance of fraud -- what level, i don't claim to know.

he can go jump in a lake as far as im concerned :)

Re:Easier still?

[fish waffle]

There are two ways this can make them money:

You missed one:

3) it's effectively a forced registration. Customer lists are an important asset for both internal uses and for sale to other companies.

Re:Easier still?

[jsrober]

Adding a rebate is a way for manufacturers to discount goods already in the supply chain (they already sold them to distributors and retailers). It's the ONLY way that the manufacturer can VERY QUICKLY stimulate buyers to buy their products.

Re:Easier still?

[beakerMeep]

Ah yes that's very true. And with those lists they can claim a prior business relationship with you getting around most spam and marketing laws (such as the do not call list).

Re:Easier still?

[dgatwood]

Put another way (and this is how they are generally used), a rebate is a mechanism for a manufacturer to quickly clear out old stock in the supply chain prior to the introduction of a new model. These have a tendency to fall nearly prior to product release cycles for many companies. If you don't mind buying a product that you know is about to be replaced by a newer model, it gives you a way to get a product at a cheaper price than you otherwise would.

It is also often used as a way to avoid lowering a price on an item that is currently being sold at above market rates, allowing the business to pretend that they weren't screwing the customer originally. Perfect example would be hard drives at Fry's. As a general rule, if there's no rebate, you're paying way too much. This allows them to raise the price back up to the pre-sale value without the public perception that they are raising the price. They aren't; they're ending a rebate. It's just one of the dirty little tricks that many retailers do when they aren't able to move products due to overpricing.

Re:Easier still?

[buck_wild]

Aside from trying to cheat the customer (who may forget to send the rebate in, or simply not fill it out correctly) there is still no reason to not have the STORE file the rebate and collect the money back. Wouldn't reputable stores WANT to do that, in order to garner customer good will?

When sales are back up to par, and the items are considered 'moved' then end 'sale' on the item, returning it to full price.

I guess I just don't see how the store would lose by filing the rebate itself and giving the customer the discount at the register.

Why? Tell us WHY?

[Chmarr]

If the manufacturers REALLY wanted us ALL to send in the rebate forms, and were NOT expecting this 'breakage'... then why? Tell us WHY you have this convoluted rebate system in place, rather than offering us a lower price WITHOUT the rebate system?

The ONLY reason I can think of is that they want to collect the interest on my $40 cheque between the time I've bought the product, and cashed the rebate check. Surely they could not be earning enough interest on that to warrant the expense of maintaining the rebate system.

The only OTHER reason I can think of is so the manufacturer can advertise the 'after rebate' price, but exclude bunches of people from being able to obtain that price (ie, multiple orders, businesses, etc).

Well, okay, I think I just answered my own question :)

Re:Why? Tell us WHY?

[iabervon]

Wouldn't stores do better to get the manufacturer to give them the rebate instead of offering it to the customer, and then having a sale? It seems like it would reduce the dollar loss to shrinkage and unsold stock if they saved the rebate amount on these items. (Of course, the manufacturer loses out in these cases, but that's not a reason for retailers to prefer rebates.) I believe that it improves retailers' gross income, but that doesn't seem like something worth improving at the expense of the bottom line.

Valid rebates

[BushCheney08]

Something the article seems to miss is that many rebate processing houses like to invalidate rebates for no reason whatsoever. They often claim that you didn't include all of the materials, or that they weren't mailed in time. I've had this happen to me several times. Thankfully I've kept copies of everything, which I was able to fax to them to "prove" that I did send everything that was required. If rebate houses behaved a little more honestly, they wouldn't have such a bad reputation.

Rebates as a way to get your personal info

[wired_parrot]

What about rebates as a way to get around privacy laws by making you fork over all your personal data in exchange for the rebate? For me, this one of the things I disliked the most about rebates - I shouldn't have to pay an extra premium on my purchases because I refuse to give out my contact information the company.

I hate rebates

[Omnifarious]

If you want to give me a lower price, give me a lower price. It should be illegal to advertise the price after rebate more prominently than the price before. I've sent those in once or twice, and each time I do it, I get a complaint that I've made some minor error and I get no rebate check. Largely, I just don't send them in.

I've walked out of a few stores after learning that the advertised price is a rebate price and gone somewhere else and paid more than the before-rebate price simply because that store was at least honest.

Re:I hate rebates

[pappy97]

"If you want to give me a lower price, give me a lower price."

Exactly. Is it SO revolutionary of a concept TO JUST GIVE US THE LOWER PRICE???

Rebates only exist as a way to jack up the price and make money off the 70% of people who won't correctly send in the rebate.

For example, let's say an item should cost $49.99.

Best Buy will come up with a brilliant idea. Sell it for $69.99, but offer a rebate that supposedly makes the effective price of the item say $19.99.

BB advertises the price to be $19.99, but with tiny lettering about rebates. Now idiot consumer goes into the store, lured in by the ad, buys the item for $69.99, and forgets to mail in the rebate.

What's the problem here? THE ORIGINAL PRICE OF THE ITEM WAS $49.99. Best Buy not only got people to come in and make purchases with the alluring ad, they were able to use the rebate system as a way to JACK UP the original price of the item.

It's scam written all over it.

If you want to people to come in and ACTUALLY take a loss on a item, then just slash the price for that item to get people in the store. Some of these places do it on Black Friday, but why not for other days?

In Wal*Mart's with a grocery department, Wal*Mart takes a loss on its entire grocery dept (yes, the ENTIRE dept operates at a loss) to get people in the store to buy the stuff they have 300% mark-ups (From their paid price) on. Best Buy can do the same thing, without trying to be greedy in a SCAM sort of way.

Re:I hate rebates

[Tired_Blood]

Seeing as how your comment is moderated +5 insightful... I'll bite.

First you say, "just give us the lower price". Then you say BestBuy should follow WalMart's example of selling other items at 300% markup. In either case, one sale is subsidizing another sale and, in your example, BestBuy subsidizes the rebate with the same item being marked up.

All of this is a no brainer: just don't buy any random thing and understand that entering a store doesn't require purchasing a product. We're not talking about essentials (food, shelter) when discussing these rebates - if a store wants to sell Bic pens for $100 each, and offer $99.99 rebates: what's to stop them? Caveat emptor, and all that.

Your scam concept falls apart when you account for more than one store available to consumers. If the item really costs the retailer only $49.99, it would be easy to find some other store that sells it for only slightly more than cost. Such competition does still exist.

As for the case that people don't bother submitting rebate forms, how is that the store's fault?

Is this just a US phenomenon?

[tosspot1]

Are there other countries doing this? I must admit I haven't been everywhere, but I've been to a quite a few countries, and usually when something is advertised at a price, that's the price it is. You don't have to "earn" your discount by performing some sort of (irritating) action after the purchase.

So is this done anywhere outside of the US? If I suggested this idea to my friends and neighbours they'd probably look at my like I was crazy.

I mean, let's think about the process. The consumer fills in a form, and mails it to the company. The company then has to fill in another form (known as a cheque, or since it is the US I suppose we'd better call it a check), and post it back to the consumer. The consumer then takes the check and posts it to their bank. Their bank then processes, creates additional paperwork and posts it to the company's bank to verify the signature. Presumably at that point the money transfer is done electronically.

Is there something wrong with this? Are not a lot of resources being consumed unnecessarily? Why do they persist with this stupidity? Why don't governments simply pass laws to encourage retailers and manufacturers to deal in a more straightforward way with consumers?

Or am I missing something here?

Re:Is this just a US phenomenon?

[Scarblac]

Why don't governments simply pass laws to encourage retailers and manufacturers to deal in a more straightforward way with consumers?

Because that's not how the free market economy works.

Actually, that is how a free market works - buyer and seller know the product and the price, money changes hands, buyer owns the product. Among the reasons it works well is that the buyer has full information and can make a well informed choice. This is a case of the retailer trying to make the market less free by making it less transparent (buyer isn't 100% sure which store is more reliable giving rebates) and introducing friction (buyer isn't sure if all the work is going to be worth it), in the hopes of getting an advantage.

If government is supposed to protect freedom of markets, they should make rules against this practice - like making it illegal to make a price after rebate look like the normal store price in ads.

Wow

[bill_kress]

It's not like the "media and attorneys general" told me to think any way. I learned exactly how rebates work first hand:

1) You send it in
2) They don't reply
3) You call
4) They fix it and send you the rebate.

They make step 3 so simple you don't even notice that you are doing it, and there is always some reasonable excuse (they don't have enough info, or "But we were gunna send it, give us time!"), but if you don't call you get:

1) You send it in
2) They don't reply
5) Profit!

Now, to hear that the media and attorneys general have come to the same conclusion??? Only evidence that this is not some atypical experience but real.

Thanks for confirming my suspicions.

Bloody corporations

The Office Supply Depot...

[Lord Pillage]

I work at a major office supply retailer as an electronics department associate. Every week we get new rebates on computers and have bundles (PC, monitor and printer) advertised in the flyer. Much of the time, the instant rebates are very significant, saving the buyer upwards of $300, basically paying for the monitor that's included with it (I believe the store is actually the ones providing the rebate in this case). That's not even counting the mail-in rebates.

I know that we've also been moving toward an online system where rebates can be redeemed directly from our website, so that the customer doesn't even need to send anything in (took long enough though). From what I can tell, it is a pain sending them in but you almost ALWAYS get your check back in the mail. People love telling people about how they got jipped because they charged them money that they promised back and it never got returned to them. This is why you always here these stories about rebates never coming back. However, people don't usually say, "Hey I got my rebate check, it was really fast and everything."

From my experience rebates are made for the customers, and the sellers. It gets people into the store, they save money they'd normally have to spend, and usually the store picks up the lost money on items added on (ie. Extended Warranty, mice, keyboards, cables, mouse pads, webcams, the list goes on and on). But this move to an online system makes me think that the mail-in will soon be on the way out.

$0.02

Boo Rebates!

[ImaNihilist]

I HATE rebates with a passion. The principles behind them piss me off.

1) You have to pay out more upfront, and pay tax on that amount. You don't get back that tax.
2) You might make an error on the form, and not get your money back at all.
3) Since sometimes it takes up to 90 days to get your money back, that's 3 months that you could have been earning intrest on that money.
4) The time spent trying to get your money is annoying.
5) The forms are often SO TINY it's hard to write legibly on them.

Think of all the money those companies get to keep in intrest alone that they make on the rebate money. ARG!

I'd much rather pay a little extra, and not have to deal with rebates. Stupid pricing games.

Re:Who is this, Joe Isuzu?

[timeOday]

1) Breakage. But this reason has been in steady decline and is increasingly unjustifiable. While it used to be that only 40% of rebates were turned in, that number has been steadily climbing for the past ten years

Says who? Do you have a link? The rebate fulfillment rate is the one hard piece of information this article could have provided that would have been really interesting to me, and speaks volumes more than some ad-guy spin. But no, he couldn't or didn't report it.

Re:Duh

[BigZaphod]

Best Buy is far worse than Walmart. FAR worse... *shudder*

BS or as the french say leBullshit

[bogie]

"The big lie that the media and attorneys"

You just know he wanted to say

"The big lie that the LIBERAL media and TRIAL attorneys..." I'm a

Rebates are the tool of the devil. The put them out full well knowing that something like only 40% of rebates are returned. If they actully gave a shit about their customers they would give the break at the register and not put us through this dance.

Oh and interesting how one of the two times I've done rebates in that past Bestbuy screwed me saying I hadn't included something. I can't tell you how many times I've heard of people having the same thing happen to them. I avoid them at all costs.

IMHO they should be 100% illegal. Give us the price at the register or don't advertise it. Or how about this? Say its $100 with a $50 rebate. I'll pay $25 and promise to send you that extra $25 within 4 to 8 weeks.

I call shenanigans!

[binarybum]

this article is in fact sinister in and of itself. For those who have not already, I would not recommened RTFA - it's a load of faulty logic that doesn't add up and finally culminates with the uninsightful revelation that rebates are the corporate world's gift to mankind and we should show some gratitude to our marketing overlords. WTF?

    Rebates work because of breakage and interest made on the delay - they are generally a pain in the ass and are a perversion of the common free market practice of purchasing goods. Sure, if the deal is sweet enough I will succumb, but I (once more) feel like the kid who has to do a little dance to get his stolen lunch back from the bully.

Re:The other thing to consider..

[symbolic]

If you make a purchase where you have to deal with five separate vendors for rebates (as did the person in the article), aside from potentially not getting your refund, you now have FIVE MORE commercial vendors with your name, phone number, and address.

For me peronally, I don't care how much the rebate is...it's just not worth it to prostitute myself like that.

Differential pricing

[PsiPsiStar]

I'm surprised noone's mentioned differential pricing yet.

Companies want to make as much money as possible. (duh)

Lets say person A is willing to buy a particular hard drive for $20.
Person B is willing to spend $25.

If you set the price at $20, you don't make as much money as you could.
If you set the price at $25, you lose a customer.

Ideally, you get each person to pay the most that they're willing to pay.
Rebates help accomplish this. A person who makes a high salary will be willing to pay more for an item, and they'll value their time more. They won't send in the rebate.

A person who values their time less and makes less money will take the time to fill in the rebate.

To put it another way;

When I lived in China, you had to haggle over the price of most goods. If you sat there and haggled for half an hour, you could get the price down. A person who made more money wouldn't see the value in haggling for half an hour for a few quarters of a price reduction, and would pay a higher price just to get the sale done. Rebates accomplish the same thing, without requiring any inefficiency on the part of the seller.

I'm sure there are other reasons as well, but this would seem to be one use for a (deliberately inconvenient) rebate.

Information gathering?

[Cutterex]

Hopefully this hasn't been mentioned to death and I didn't notice it. Has the topic of gathering and/or selling customer information been breached? I would think the possession of all the intrusive rebate form responses, not to mention the address where the rebate will sent, would be valuable to the companies who receive them.

I have a guess on this.

[tkrotchko]

I think there are companies that essentially assume the debt of rebate and then make money on not paying them.

What I mean is, if you are "SuperComputerManufacturer" and offer a rebate of $10 on 1 million items, you now have a liability of $10M dollars.

I think that companies will then bid on the debt to pay the rebate. In otherwords, they'll bid an asking price of $9M. Therefore the manfacturer gets out of $10M of debt for $9M, and the rebate company makes $???? money by assuing they'll only get x% of the rebates properly cashed. So every rebate they deny is essentially their money.

It really makes perfect sense (although this is pure supposition).

And if this turns out to be viable business model, I own the patent.

Don't like rebates? Here's what you do...

[Macdude]

So you don't like rebates? Here's what you should do.

Go to the store and take the flyer showing the rebated price in big letters (and the real price in teeny letters) with you, pick the item up off the shelf and take it to the counter. When the sales-droid rings up your purchase and tells you the price tell them they're wrong and show them the ad. When they point out the fine print, point out the big print and tell them that's what you're going to pay. Argue with them for a bit. When they won't give you the advertised price call the manager over. Argue with him for a bit. When he won't give you the advertised price leave the item on the counter and walk out.

The retailer will hate this, you've caused a scene in their store, delayed the cashier from ringing through purchases, annoyed other customers and they've lost a sale. If just a couple of people did this per store per day rebates would end in no time.

If you're really keen, after this file a complaint with the consumer protection department of your local government (don't bother with the BBB) claiming "bait and switch", unethical business practices and deceptive advertising.

Re:They work

[arkanes]

I don't buy the articles premise. Firstly, offering a rebate instead of an actual sale price or discount of the same amount is *more expensive* to the store - they have to either manage the rebate handling or (more likely) pay a rebate processor to do it for them. So the only reason a store would do it is because the amount of people not filing the rebate makes up for the extra cost. My father in law has worked processing rebates and according to him the actual fulfillment rate is tiny. He does not believe that his company could have made money if the fulfillment rate was high.

Secondly, nobody involved in the rebate process has any interest in ensuring you get your money - they already have yours. You are basically at your mercy. There is only the market pressure of bad customer experience, which is a relatively weak force - and it means that you need to go out of your way to ensure that you get what is owed to you. If you tried the same tricks on your Best Buy Financing payments that they use on your rebate checks, you'd watch as they destroyed your credit rating.

Rebates are absolutely a scam - the fact that you can, with not inconsiderable effort, reduce the effect of the scam does not change that fact.