October 11th, 2006
Rebates to become more of a scam
I've never hidden the fact that I consider rebates to be nothing more than a legalized scam. The customer pays full price for a product and is then faced with all the fun of filling out paperwork and jumping through a series of hoops (a bit like completing a tax return while running an assault course). If the customer completes all the challenges, there's a chance that they'll see their rebate check. If they stumble at any stage in the game, it's tough luck. Things are about to get worse - just in time for the holiday season.
Yep, people jump through all the hoops and then don't cash their rebate checks! Why do stores and vendors choose rebate schemes over simply cutting the price? After all, wouldn't it just be cheaper to drop the price than bother having to administer the rebate scheme? Nope. The reason is that the price drop would apply to everyone who bought the product. A rebate puts a number of obstacles between the customer and their rebate. The idea is that the customer stumbles at some stage (maybe they forget about the rebate, or they make a mistake when filling out the form, or maybe they lose the sales receipt) and the store of vendor wins. When a customer fails to claim their rebate, this is known in the trade as a breakage. When a breakage occurs, the customer loses out and the store or vendor wins (because they get to keep the money!).
Now, you'd be right if you guessed that companies behind the rebates work hard to "encourage" breakage. There are countless tricks that companies use to try to boost the breakage numbers. Now Parago, the company behind Circuit City rebates, has been granted a patent (U.S. Patent No. 7,120,591) for an online redemption system for product rebates. Sounds innocent enough to begin with.
"… stem and method for computer-aided rebate processing … which substantially eliminates or reduces disadvantages and problems associated with previous systems and methods."
Keep reading …
"The present invention satisfies a need for a more consumer friendly method for processing rebates that maintains a breakage rate …" (emphasis added)
There are some other eye-opening sections. Take this for example:
"By requiring post-purchase activities, the rebate offerer attempts to reduce the number of successful rebate claimants. Breakage occurs when a product bearing a rebate is sold, but the rebate is not successfully claimed. Because rebate programs offer the potential for breakage, manufacturers can offer a more valuable rebate compared to a straight reduction in product price." (emphasis added)
It goes on:
"… promotion sponsors can offer promotions with multiple disbursement options designed to recapture a rebate by allowing a consumer to apply rebate credits to the sale of additional goods and services. Furthermore, the rebate processing system provides a user friendly interface, yet retains hurdles sufficient to maintain breakage."
What are the ways that breakage occurs? The patent sheds light on this:
"Breakage refers to any event that prevents a rebate transaction from being completed, for example, denying based on bad verification materials such as receipts or UPC symbols, denying based on improper purchase dates or purchase price, or slippage from checks issued but not cashed."
Yep, people jump through all the hoops and then don't cash their rebate checks!
If you do buy something that offers a rebate, then remember to stick it to the man and do your best to make sure you get what's coming to you! Oh, and remember to cash any checks you get!
What are your thoughts on rebates? Do you like them and have you saved money by taking advantage of them or do you think that they are a scam? Do you let rebates influence your purchasing or do you ignore them?
Adrian is a technology journalist and author who has devoted over a decade to helping users get the most from technology. He also runs a popular blog called The PC Doctor. See his full profile and disclosure of his industry affiliations
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| 10/12/06
