I’ve been looking to buy a computer, and a lot of the computers at places like BestBuy.com come with mail-in rebates from Best Buy and the manufacturer. Is there a point? Are they hoping that the consumers are too lazy to mail in the rebates thereby letting them keep the money? Do they keep it for that short time in order to gain interest? Can I get some Straight Dope up in heya?
They hope that you won’t send it in. If they truly wanted everyone to get the refund, they’d just knock the money off the price.
Some consumers are price-sensitive. They shop around at several places for the best price, and won’t buy an item if it’s a few dollars too much. Others don’t care. Time is more important to them than money, and they’ll grab the first item they find that satisfies their needs.
The ideal situation for a merchant would be to sell the same item for a lower price to the first class of consumers and a higher price to the second. The rebate comes close to doing this. Price-sensitive consumers will send it in, while others will blow it off and pay full price.
So it’s not so much that the merchant hopes that no one will send it in, but that they want you to send it in only if it’s important to you.
It’s not to rip off the consumer; if anything, it’s to make sure the buyer gets the lowest price. After all, computer rebates are so high that only a fool wouldn’t try to cash them in.
If the computer maker cuts prices, there’s no guarantee the retailer will cut their prices, too (this happened a few years ago with breakfast cereal). The manufacturer may want to cut prices by, say $400, but Best Buy might just drop prices $200 (or nothing at all) and keep the difference (the economic incentive is obvious). So by giving a rebate the manufacturer ensures that the price cut is fully passed on to the consumer.
Addendum:
The retailer also prefers rebates since they don’t cut into his cash flow. He still gets the same amount for the computer that he would if he charged full price. If he cut prices to go along with a manufacturer’s price cut, he’d make less on each unit.
Another point that my suspicious mind has also considered a factor: if you send in your mail-in rebate the vendor has your name and address and can send you advertisements/sell your name address to a company that will send you advertisements.
All of these are correct - especially RealityChuck’s second point. I would much, much, much rather be able to sell price shoppers on a rebated “real price” (if they ever send it in) than achieve the same thing by cutting my margin on the same item. I’d much rather deal with a rebate than a coupon discount because the onus isn’t on me to redeem it.
My distributors (wholesalers- middlemen, in other words) love rebates, too, because they don’t affect what their profit is on anything, either. They do, however, bring sales up, which means that the distributor makes more money without lifting a finger (except sometimes to place rebate materials in the stores that they serve).
On top of that, the actual producers of the goods (alcoholic beverages in my case, but substitute whatever industry you want) love rebates, too. Higher sales at the retail level travel up the supply chain, and not all of the merchandise they ship in response to the rebate program will itself be eligible for the discount. On top of that, the usual estimate is that less than 50% of the people who buy a rebatable item will ever actually make the effort to obtain the rebate. On top of that, the availability of the rebate as a “special offer” serves to underline what the regular retail price is - people understand that the rebate is a reduction from the “regular” price, so they’re less averse to paying the full price if they have to, when the rebate isn’t available.
Oh, and consumers like rebates, too - after all, they get some money back. Capitalism in action.
Rebates are NOT handled by manufacturers, they are settled by fulfillment houses. Sending your name and address to them will get you on the original manufacturers mailing list, and dozens of others as well, I’m sure.
Manufacturers who cut their prices to venders by $400 and discover that said vendor is only discounting $200 to the public can do two things: Drop that vendor or do an end run and advertise the price cut directly to the public, thereby forcing the vendor to sell at the discount.
Sometime I just change my name by one letter so the check comes through but I can trace where they use my name & address & as Arnold mentioned, yes they seem to sell it. Same thing with those stupid warrentee cards, which I refuse to mail in as they just send me a ton of crap.
There’s also the fact that by holding onto that money for a few more months, the rebate providers get to make a tiny bit more interest on it. Tiny, yes, but it adds up. This is why most rebates are from a bank in the middle of nowhere. Every small delay in paying out the rebate is a bit more interest to the rebate provider.
Well said, gonzoron. And here we can include a link to this classic Straight Dope column:
Why are rebate checks drawn on obscure banks in the middle of nowhere?
Drat, I knew I’d read that somewhere on the web, but I didn’t remember that it was actually SD! Apologies for not linking. Cecil explains it better than I did. Thanks, Arnold.
Another plus is if another entity (such as a corperation) is paying for the item you can get the rebate personally (not that I would do such a thing).
I hate rebates. I strongly debate the notion that “consumers love rebates”. Many times I have passed up buying something because there’s a rebate involved but I would have gladly bought it for a little more if there wasn’t a rebate.
In computer world, because prices tend to fall during a product’s lifetime, rebates are one way of adjusting the price without screwing up the whole supplier chain. But that’s not the real reason. As mentioned before, the real reason is that most consumers don’t bother mailing them in, or not yet mentioned, get screwed over for some reason on the rebate. Certain refund centers are notorious for “not receiving the rebate” even when people have sent it by certified mail and have a signed receipt of the letter. There’s a lot of sleaze in the rebate business.
I urge people to not buy anything that involves a rebate so we can get rid of this nonsense.
Oh yeah, ever tried to get a refund of your sales tax???
I remember hearing about a 100% rebate scheme here in the UK (related to sales of large items of furniture); the idea was that you would get all of your money back after 12 months; IIRC they were investing the money, but (of course) that didn’t generate nearly enough interest to pay back the entire sum - they imposed a 14 day window (at the end of the 12 month period) in which you would have to apply for your rebate, relying on most people’s poor memory or organisation.
I too, hate rebates, especially from Best Buy. I went there twice, once to buy a modem and once to buy a hard drive, both of which had rebates. The rebates were for good-sized amounts, $50.00 and $75.00, respectively. The first problem was that the rebate entries were out of date. The second problem was that the Best Buy employee waiting on me was incompetent. He wouldn’t call me to say when the new rebate entries would come in; he made me come in a couple of weeks later to pick up my entry. Guess what happened: by the time I filled out the new entry form, attached my receipt and notarized everything and sent my first born child along (just kidding) I had only a week left in the rebate window. I tried calling the 800 number on the rebate form ( I made a copy of my paperwork and mailed it off; I kept the originals), but I got no answers. Yeah, I forgot about it after a week. Three months later, I got a letter back from the address I sent the paperwork to. I submitted the paperwork too late and wasn’t qualified. I was steamed. I went back to Best Buy and ranted at the manager. No satisfaction. So I returned all the merchandise to the return counter and made sure the CSR noted the reason for my dissatisfaction on the return slip. I then purchased the merchandise at Circuit City, without any rebate nonsense. Best Buy sucks.
This one pisses me off too. Not only for rebates but sometimes for coupons - they ring up the price then tax it then take off the discount - so now I’m paying much more tax then the already way to high sales tax rate.
wow, thanks for the great answers guys. and thanks for the link to the cecil answer. i don’t even recall seeing that in the archive. i thought i’d browsed the whole thing… oh well. thanks again. now i can try to think of more questions that have been bothering me.
Funny, the second I started reading your post, I was instantly reminded of being screwed over on a rebate at Circuit City.
I bought a CD Burner with an advertised $30 mail-in rebate. Once I bought it, I found out it was actually two rebates, one for $10, one for $20, to be sent to different addresses. I got the $10 check after several weeks, but never got the $20.
I called up the rebate company and asked, where, exactly my money was.
Them : “Oh, we sent that out two months ago”
Me : “No you didn’t. Or if you did, I didn’t get it.”
T : “Yes we did. I can prove it to you. I’ll give you the check number.”
M : “What are you talking about? How does that prove anything? For all I know you could just be making up a number out of thin air!”
T : "We wouldn’t do that, sir. Now, I have that check number right here if you want to…
M : “Again, the check number proves nothing. Why don’t you fax me a copy of the cancelled check with my signature on it if you’re so sure I got it?”
At this point, the rebate guy started to get very rude. He refused to provide proof of any kind that the check had been cashed.
When I told him I thought his company was nothing more than a bunch of thieves, he sarcastically replied, “Yep, we sure are.”
people, people… best buy and circuit city suck equally!! wait, actually no… circuit city is more expensive. but anyway, the point is they both rip u off w/ obscene prices and throw around rebates like there’s no tomorrow. my mother bought a printer from circuit city and never even got her rebate. go to fry’s. you’ll pay less… oh yeah, umm… to answer the original question, umm… like so many other people said, they think youre just gonna get lazy and let them keep the lousy 30 bucks (or however much). and for u sticklers who really want your damn 30 bucks, they’ll find some way to stiff u… bastards