Mail In Rebates

I'm going to be up front about this: As a consumer, I hate mail-in rebates (MIRs). When I make a buying decision, I base it on the price before rebate, as I can't ever count on the rebate coming through.

I almost didn't get one substantial rebate once. It was one I could track online. I had to buy two products to get two rebates, and then submit the one receipt with both UPC codes to one place. The reason they gave for not giving me one of the rebates was that the receipt wasn't submitted! Well it was there for the other rebate. I spent a half-hour on the phone before someone who supposedly was smart enough to become a supervisor in a rebate house could understand that the receipt couldn't be there for one, but not the other rebate.

Yes, I know that there are people who always get their rebates because they make photo copies of everything they submit, keep logs on when they submitted them, and follow-up when they don't get a rebate. But why should I have to work that hard? I'm the customer. If the seller really wants my business, they won't require me to do all that work to get a reasonable price. Plus, I would rather have my money in a savings account or an investment. Having a few hundred bucks of my money always floating around in pending rebates is a waste, as are all the stamps, trips to the post office, and trips to the bank.

I know I'm not alone in hating rebates. Enough consumers have rebelled against rebates that some companies like Best Buy have pledged to eliminate MIRs. The problem is, they keep saying they'll eliminate them, but they keep pushing the date back, and they keep adding exceptions. So far it's been an empty promise.

The bastard step-child of the MIR is the instant rebate (IR). The instant rebate is one that they give you at the check-out counter. When IRs started to become popular, I wondered what the point was. If the price is reduced at the check-out, why not just lower the sale price?

In Oregon there is no sales tax, so taxes don't matter. But in other states, you're usually going to pay sales tax on the full price, not the price after rebate. The question is why does the retailer want to collect extra taxes? And a related question is whether their accounting system accurately reports revenue before those IRs, or are they reporting revenue after the IRs, and pocketing the extra sales tax they collected.

So if customers hate MIRs so much that retailers are making (empty) promises to eliminate them, why do they still exist?

Well, there are two obvious, and some not so obvious answer. First, not everyone will collect their MIR. If they simply lowered the sales price, everyone would get the discount. Second, when you send in for a MIR, you have to give them your name, address, and often your phone number and/or e-mail address. The rebate houses can build some really accurate mailing lists that are very targeted. Those lists are worth a lot of money!

Before I tell you the not-so-obvious reasons for rebates, let's note that those two obvious reasons don't apply to most IRs. Occasionally you'll have to give your name and address to get an IR, but even if they ask you, you can still refuse, and usually get the IR.

Generally, even if it's a "store" rebate instead of a "manufacturer" rebate, the money is coming from someplace other than the store itself. It is usually coming from some point higher in the distribution chain. Items with rebates are useally things that were either already in the store inventory when the rebate started, or they were sitting in some distributor's warehouse. Usually, but not always, rebates are a way to reduce inventory after someone in the distribution chain has paid for the items.

For example, a manufacturer notices that retailers have stopped ordering product A. But product A isn't making it to the consumers. The manufacturer can't really retroactively lower the wholesale price of product A, but they can offer a rebate for product As bought during a certain period. This is especially important if product A consumes product B to work (like a printer that consumes ink). They really need to get product A moving off the shelves in order to sell product B. (If product B is made by a different manufacturer, they may be the ones to offer a rebate on product A.)

There's still one other issue to consider: commissioned sales people, and store managers. Almost always their commissions are based on the price of the item before the rebate, whether it's a MIR or an IR. If the items were simply on sale, they wouldn't make as much in commission. This makes sense because if the purpose of a rebate is to reduce inventory, then you don't want to give the salesperson an incentive to sell a competing product that has no rebate so they can earn more commission. You want to give them an incentive to sell your product.

Now knowing and understanding why rebates exist doesn't help me feel any better about them. I still hate them. But knowing this helps me understand that the consumer backlash to rebates needs to be bigger, and persistent if we ever expect rebates to become the exception rather than the rule.

I don't want to help some company build a salable mailing list. I don't want to wait six months to get my $50 back. I don't want to have to spend more time tracking rebates than I do on balancing my checkbook. And I know there are other ways, such as spiffs, to give salespeople and retail managers the incentive to move the product. So as a consumer, knowing why rebates exist doesn't help me one bit to accept them. I still hate them. And I still won't make a buying decision based on the after rebate price. My buying decisions will continue to be based on the price before any rebates.

That's how I see things.