Retail Strategy Secret #20: Rebates

Rebate Breakage

Welcome to the twentieth post in our series of “Retail Strategy Secrets”!  Here you will learn the angles, approaches, and tactics retailers are using every day to try and separate you from your hard-earned cash.  Understanding these unlocks the door to spotting great deals, and you never want to pass up a Dealicacy…

Rebates

Rebates are a marketing tool that offers consumers a discount after they purchase a product at a higher price. Although instant rebates (those credited at time of purchase) are available at some retailers, perhaps the most familiar are mail-in rebates. These require the consumer to provide proof of purchase and then be patient for a length of time prior to receiving return of the rebated funds.

Proving a purchase requires the buyer to provide any, all, or in addition to the following: a upc/bar code, serial number of the product (if available), and the original register receipt provided at the time of purchase – none of which is returnable. Customer contact information is also requested.

So why is so much information necessary to complete a rebate? Isn’t it your money? Yes, it is but you’re not going to get it without going through all of the formalities. There are a few factors at work here… consumer fraud, running the business, and “breakage”.

Stating the obvious, a retailer is in business to make money. Consumer fraud is a big issue, and retailers need to make sure that they don’t get taken advantage of – especially in ways that end with them paying out more than budgeted for a discount or promotion of any type. Rebate requests are thus checked for uniqueness by phone number, physical address, name, email, and transaction IDs from the receipt.

Any of information provided is also fair game for future interests of the retailer and/or manufacturer issuing the rebate. Customer demographic information can be retained for future data mining and receipt details (such as other products purchased and time of day) can be analyzed for patterns useful in basket pricing strategies. Manufacturers can also use the information to “police” retailers, and ensuring they are adhering to MAP policies. As you may have guessed by the amount of junk mail, many direct mail, email, or telemarketing stem directly from information acquired from rebate forms.

The delay is also an important part of the process to the retailer. The processing time not only allows for transport to and from the entity handling the rebates (a “clearing house” is frequently involved), but also allows the returned funds to be accounted for at a later time. This is often why you see rebates requiring 6+ weeks. And you thought they were just padding the time frame for mailing delays and their own bureaucracy! This is interesting too: many rebates are offered in the latter half of a business quarter. The “loss” is then able to be taken on the next accounting period, helping – perhaps somewhat deceptively – reported profitability.

Now on to “breakage.” Wouldn’t it be great if you could borrow money and only have to pay back a small fraction of it? Although it would seem that when a rebate is available, anyone buying the product would take advantage of it. However, this is not the case. Breakage rates vary by industry, but a safe overall estimate is that only about 40% of rebates are ever claimed. Click on over to this Wikipedia article and scroll down to the section on redemption estimates to see what I mean. My favorite example is TiVo’s $5 million windfall in 2005. You can bet that there was a nice holiday party that year.

Now that we’ve pretty much established that rebates are a game that retailers don’t expect you to play (let alone win), here’s how to maximize the opportunity to prove them wrong:

  • First and foremost, don’t let them have a chance to “lose” your rebate application or deem it illegible. Grab duplicate entry forms as backups, print clearly (or affix a mailing label featuring your name and address), and scan/copy/take a picture with a digital camera of the requested materials immediately prior to sealing the envelope. Then, maintain maintain your documentation until after you receive the rebate check.
  • Watch out for rebates that aren’t worth your time. *Before* buying a product, note the terms and conditions to make sure you are able to complete the task without an inordinate amount of effort. Certainly, a $1 mail-in rebate on a bottle of your favorite brand of irish crème liqueur does make the price look more enticing. However within the 6-8 week turnaround time, how likely are you to come across an actual sale on the same product? Plus, assuming it takes about 30 minutes to collect, complete, archive, and mail in the rebate, is your time worth more than $2 an hour?
  • A caveat to the above: if you’ve already made the purchase, it is always worth your time to complete the rebate. Don’t follow through and you are simply leaving money on the table – which of course the retailer will always happily keep without so much as a thank you.
  • Watch out for special case rebates. At somewhat prominent regional home-improvement warehouse Menard’s, all rebates offered come in the form of an in-store credit. This type of rebate must be applied on a future purchase. Worse, it can’t be partially applied, so you better make sure that you will be making a return visit for something else you need if you opt to buy on rebate. Don’t fret, however, as this can work to your advantage. One trick I use is to save the rebate credits from the weird “one-time” promotions they have (beef jerky, Famous Dave’s BBQ sauce, etc.) and then use them to save a bit more on necessities when they go on an actual sale – such as furnace filters.
  • Last, but definitely not least, if you aren’t in the mood for receiving future promotions (e.g. junk mail, spam, telemarketing calls, etc.), make sure you scan through the rebate terms and conditions *before* making the purchase. Sometimes this is difficult, as rebate forms are typically (and many times intentionally) small, making it very hard to actually read the fine print. To avoid carrying around a magnifying glass with you, watch for indicators to make this step a breeze. Asterisks (*) typically indicate required information. If the information isn’t required to get the rebate funds back to you, don’t provide it. Checkboxes typically indicate opt-in or opt-out clauses. Many forms are not blatantly evil by making you opt out of future offers. But some are, so read these and make sure you check / leave blank the boxes according to your preference.

Before closing, lets talk a bit about returning items purchased with a rebate offer. Retailers really clamp down on this due to potential consumer fraud, but there is another larger factor at work. Even if the item is actually broken, doesn’t work properly, or is genuinely a wrong purchase (“I bought the wrong model”), the retailer can not return the item back to the manufacturer for full credit. For this reason, be sure you allow time to test out functional items before you act on the rebate, including clipping out the UPC symbol from a box or label. Don’t ruin your Dealicacy by being too efficient and proactive!

Yours for great deals,

– Nathan
PS – We’ve reached the end of our series on “Retail Strategy Secrets”!  We’re not done though – not by far.  Keep watching Dealicacy.com for more great content… Hungry for more in the brief interim?  Don’t miss out on the exclusive info we have just for you.  If you haven’t taken advantage of this yet, what are you waiting for?

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One Response to “Retail Strategy Secret #20: Rebates”

  1. obviously says:

    This info was surprisingly useful. Thanks a lot. I will domain for any updates.