For retailers and manufacturers, rebates succeed on two fronts: 1) The appearance of a deal convinces many consumers to pull the trigger and buy when they otherwise probably would have waited for a standard point-of-purchase sale; and 2) In many cases, only half of consumers eligible for rebates will actually redeem them, meaning they bought what amounts to phantom deals—something that’s a discount in appearance only.
Quite clearly, companies that issue rebates bank on the fact that consumers are easily prodded into making purchases, and that consumers are apt to turn off their brains after the purchase has been made. If these facts weren’t so true, they might be insulting. But based on the success of rebates, it seems like a large number of consumers are eager to jump at any justification to buy, and they’re also too lazy or simply can’t be bothered to take the few steps necessary to get the $1 or $15 or whatever rebate is available. The result is that they’ve been duped into buying a “deal” in name only.
AP personal finance writer Candice Choi, who recently conducted an experiment living without banks for a month (paying $93 in fees in the process), recently investigated the curious world of rebates, stating the big point right up front:
It’s only a rebate if you get the money back.
Can’t get much simpler than that. But, human nature being what it is, the individual consumer is often to blame for why rebates don’t work out as they seem. In the retailer-consumer match-up, rebates amount to psychological warfare, and based on the numbers—only half of those eligible redeem rebates—and the faulty logic employed by consumers, shoppers typically come out on the losing end. Choi writes that few consumers would bother mailing in a form to get $1 back on a $100 purchase. But tons more would send in the form if it was a $1 rebate on a less expensive purchase of $2.
But think about it: In either scenario, the same effort yields the same $1. The overall percentage discount shouldn’t matter, but obviously it’s factored in when consumers decided to fill out the form or not.
Choi describes some other curious, irrational behavior when it comes to rebates:
Customers are also more likely to mail in rebate forms if they’re handed the necessary materials at the register. If shoppers have to tear off a slip on a drug store shelf, redemptions go down dramatically. That’s despite the negligible difference in the effort required to get the rebate.
Ultimately, keep in mind that a rebate is a psychological pricing strategy to increase sales. The discount doesn’t reflect demand for the product; rebates are often offered as soon as a new item hits shelves.
Of course, retailers and manufacturers don’t always make it easy to get money back with rebates. The forms can be confusing, and the fine print can be confounding—by design, I’d say. Choi reports of the increased usage of rebates arriving in the form of prepaid cards, which consumers simply don’t view in the same light as a check that must be deposited. These cards can be lost, or forgotten about until after they’ve expired—just more ways that the consumer might never truly realize the “discount” that enticed him or her to purchase in the first place.
My gut says that most people don’t follow through with rebates because they just turn their brains off after making the purchase. They have their shiny new item, they think they’ve gotten a good deal, and that’s enough. Getting money back with a rebate requires delayed gratification, and if you were good at that, you probably wouldn’t have made the purchase in the first place. Once you’ve got your goods and you’re enjoying your short-lived post-purchase high, who wants to jump through hoops and get the magnifying glass to read fine print and find a pen with a tip tiny enough to fill out those miniscule forms? I’m sure retailers and manufacturers who play the rebate game have a very good idea concerning what kinds of consumers are likely to follow through on rebates, and in what numbers.
Just because the companies marketing with rebates inevitably win the larger psychological war with consumers, it doesn’t mean they have to win every individual battle. Think hard about any purchase involving a rebate and read the fine print. If it really is a better deal than comparable traditional sales elsewhere, make the purchase, but then follow through and take a few seconds to fill out the damn forms. Be vigilant and patient, and you’ll come out ahead—or at least alive—on the consumer battlefield.
Read more:
Coupons, Zero-Percent Financing, and Other Money-Saving Strategies That Don’t Save Money
