The RRC Editor’s Blog

As the publisher of this website, I am very well aware of the many pitfalls of main-in rebates. But, let me play the “devil’s advocate” today and pose some thoughts on the up-side of mail-in rebates. These won’t be new ideas. I’ve come across this line of thinking on various message boards and blogs. This is just my concise summary.

The companies offering rebates expect only a fraction of consumers to complete the rebate submission process and get their money. Let’s say that’s 40 percent. Now, if they sell a computer with a $100 rebate, they can make a $900 computer feel like an $800 computer, because the consumer says “Hey, I’ll just get that rebate money and it’ll only cost me $800.”

Of course, 60 percent of the people who buy the computer will never get through the whole rebate process to collect their money. So, of course, the company takes in more than $800 per computer, on average. In our simplified example, they’d get $860 per computer sold. So, they’re able to sell computers to the frugal people who will only pay $800, while still keeping profits at a level that an $860 computer would produce.

Now, the losers in this scenario are the people who forget to fill out the rebate forms, those who fill them out but don’t get around to mailing them, those who mail them but find out they made some trivial mistake on the forms, those who do everything right and are told they didn’t, those who get their money only after waiting six months, and those who never get their money at all.

The winners are the people who got their rebates in a reasonable amount of time and have an $860 computer, which was technically a $900 computer, for the price of $800.

So, is it good for the whole community to have lower prices for 40% of the people at the expense of the other 60%? I suppose it depends on how much of the non-rebating you blame on the company and how much on the consumer. If you think the consumer was just lazy or irresponsible or just didn’t want the money all that much, then the mail-in rebates are great. On the other hand, if you think the whole process is based on a deception, then you’re probably saying mail-in rebates should be eliminated.

If companies make the rebate process easier, then maybe 80 or 90 percent of buyers will get their rebates. As that number goes up, logical people have to ask themselves, what’s the point of the rebate? Why not just lower the asking price? Well, as we saw in our example, the asking price will never be as low as the after-rebate price, because of the built in assumption that many rebates are not fulfilled. The price might come down to $890 or $880 for our fictional computer. But, without rebates, it likely won’t hit $800 (until the value of the computer goes down, of course).

That’s the story of the numbers. What about the human aspect? Is there some value to having a system that treats people with respect and “feels” sane and reasonable? The corporate bean counter might say “Yes, but how much is that worth in dollars?” Do we really need to figure that out? Or, are we just so tired of the hassle of mail-in rebates that we don’t care. Maybe that computer will cost everyone a little more cash and we’ll all get more time to live our lives and a bit less stress in the bargain. Do we have a deal?