All Time Great Scams– the Rebate
Started by auto-makers 20 years ago and spreading through personal computers to virtually every form of consumer electronics and many other markets, the “rebate” could very well be the Perfect Scam. Perfect, because it’s 100% legal, and unless the manufacturer gets greedy, he just can’t get caught!
The concept is elegantly simple– a manufacturer offers a refund or “rebate” amounting to a substantial part of the purchase price, and makes the customer apply for it. One way or another, the manufacturer will pay out the rebate on only a fraction of the sales. The size of that fraction depends on how greedy the manufacturer is. State and local governments just love rebates, because they collect sales tax on the original retail price, before the rebate, and as often as not that price has been inflated!
The only legitimate reason for a rebate is so a manufacturer can help a retailer clear out excessive, outdated, or overpriced inventory. But it’s such an obvious cash-cow that it is seldom used for that purpose– the usual case is just another way to milk the customer. There are genuine rebates, but they are few and far between and the manufacturer is still going to make money on them.
There are so many ways a manufacturer can rip you off with a rebate that it would be pointless to try to list them all, but we can run through a “worst case” scenario to illustrate some of the finer points that might otherwise escape your attention. The key points to remember are that anything that makes it difficult or inconvenient for you to get the rebate is (a) probably deliberate and (b) puts money in somebody’s pocket.
Let’s say you want to buy a new computer and you see an ad in the paper for a brand new Excitium Gigglebyte system that is “ only $299!*.” Comparable systems are selling for around $500. It’s a real eye catcher, but of course there is an asterisk there and you will find much smaller print saying “after in-store and mail-in rebates” or words to that effect. In some states they must show you the detail, in other states you don’t find out till you get to the store, and the detail will look something like this:
Retail price $585 (note this is about $85 more than comparable systems)
Less $86 in-store rebate
Less $100 Excitium mail-in rebate
Less $50 Monitor mail-in rebate
Less $50 On-line Service Rebate (subscription required)
- - - - - - -
Only $299!
The rebates make it a very attractive proposition, even if you allow for the fact that you aren’t going to “qualify” for the on-line service rebate because you already have an ISP and it would take more than that to get you to switch to MSN. The figure of $299 is stuck in your head and you pull out your credit card.
As we shall see, it is extremely unlikely that you will be able to get all four rebates, and it’s possible that you will only get the $86 “in-store” one, which brings the price back to a competitive level, nothing special.
To understand the rest of it, let’s become a “fly on the wall” in the Excitium boardroom back a few months ago when they worked out this scam.
Boss: Guys, I’m worried. We’ve still got thousands of Gigglebyte systems in the stores and we’re ready to roll out the new Wafflebyte in a couple of months. What can we do?
Sales: How about a $100 mail-in rebate?
Boss: Gasp! We can’t do that– we only make $110 on them to start with!
Sales: Ok. How about we sell them out real fast, and make about $130 on them?
Boss: Yeah, I wish.
Sales: No, seriously! We can do it, by offering a $100 mail-in rebate. Let me explain. Here’s what we do step by step.
1. We put the price UP by $50, so the $100 rebate only costs us $50.
2. We make it applicable to units sold between today and one week after the signs go up, and we have to receive the rebate request within two weeks after that. A lot of people won’t notice that the eligibility period has expired. And a lot more won’t get around to mailing in the form until after the deadline!
3. We make them send in the official form, their original receipt, and the UPC code off the box. They have to get the official form from the customer service desk, and a lot of ‘em won’t want to wait in the line. A lot of ‘em won’t want to send in their original receipt because they might need it for warranty service later! And a lot of them will have thrown out the box before they realize they need to cut out the UPC code! And we tell them it can take up to 6 months to process the rebate and if they haven’t received their check they should call a special toll-free number and – I love this part– that number appears only on the rebate form that they’ve mailed in to us!
4. We make the official rebate form difficult to complete– three tiny lines on which they have to enter their name and address, the store where they bought the Gigglebyte, the serial number, and their car’s VIN number. OK just kidding about the VIN number. But they have to mail it with the address exactly as shown on the other side, which is Excitium Gigglebyte Rebate Center Department 1X4899bqv52. It’s so complicated a lot of them will give up in disgust. And of those that manage to complete the application, a lot aren’t going to realize that the cardboard with the UPC code on it is so thick and heavy that the Post Office is going to want extra postage! They’ll whack a first class stamp on the envelope and it will come back marked “insufficient postage,” probably well after the deadline!
Boss: Is all of that legal?
Legal: Oh yes.
Sales: So out of a thousand sales that were generated by the rebate offer, we’re probably going to get maybe 100 valid rebate requests. And don’t forget we’ve made an extra $50 on each of the 900 sales where the customer didn’t apply for the rebate. But wait, there’s more! When the rebate applications arrive, one out of every three goes straight into the trash.
Legal: Now that’s not legal.
Sales: OK, but how is anybody going to prove it? Worst case, some of them call and we tell them we never got the request, or there was something wrong with it like they put the wrong department number or wrote “Dept.” instead of “Department.” But of course we’re polite about it, and we invite them to send in a copy of their rebate application. Along with proof that they mailed it during the eligibility period. Snicker
Legal: I didn’t hear that.
Boss: Me neither. Snicker
Sales: OK. So hypothetically we are only dealing with two thirds of the rebate applications that arrive, and we can probably disqualify half of those for technical faults like the address on the envelope or we can’t read their crummy handwriting. Net result, we’ve moved 1000 boxes at an increased price by offering to pay out $100 each, but in fact we only have to pay a couple hundred bucks. Total. Neat, huh?
Boss: I love it. But what if a couple of them get seriously cranky?
Sales: Simple. We just send them, wait for it… a $200 mail-in rebate coupon for the new Wafflebyte!
Back to the “real world.” We said that our little scenario was a “worst case” and it is unlikely that you would encounter all of these maneuvers in any single transaction, but we’d bet big dollars that you’ve already encountered a lot of them. What can you do?
The perfection of any scam is directly proportional to your inability to do anything about it. Sad, but true.
What you can do is:
1. Where a rebate is involved, look at the real numbers and base your purchase decision on a reasonable expectation of what the item is actually going to cost you.
2. Tell the retailer that you “don’t do rebates” and see if he can come up with a comparable deal without them. Often you’re stuck, because rebates have become a normal way of doing business, but if you don’t ask, you don’t get. .
3. See if you can look at the actual rebate form to be sure that you will be eligible.
3. Make sure the retailer gives you a duplicate receipt so you can send an original in with the rebate request and still have an original for the warranty claim that is almost guaranteed to be necessary if you don’t have all the right paperwork .
4. Double-check everything you send in, and keep a copy. Follow up if the rebate check doesn’t arrive in a reasonable time frame.
5. If you encounter obstacles, get seriously cranky. Most manufacturer’s representatives (you didn’t think you were dealing direct with Excitium Corporation, did you?) don’t want a lot of aggravation and would just as soon go ahead and cut the check as fight a protracted battle with you– and after all, it’s not their money.
6. Tell your friends– give them a link to this article. Manufacturers and retailers are going to keep this up forever, or as long as we let them get away with it.
We hope this little exercise in “consumer edumacation” has been of value to you– so you’ll think favorably of us when we start charging for subscriptions to Sten Gazette.
Yes, our costs for, um…postage, and um…. bandwidth and, um… liquor oops! um… office supplies, etc. keep going up and we have to make ends meet. But Sten Gazette can still be free if you act now. The price is $10 per year, but there’s a $10 mail-in rebate.*
*The subscription charge and the rebate are applicable only to those of you who were born yesterday.
–SG
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