About Rebates

Manufacturers and retailers know that many consumers use price as a key factor in their decision to buy. While sales can be used to provide a lower price, their cost is reflected in every purchase. A rebate, on the other hand, produces a lower profit only when the purchaser files a valid rebate claim.

Function

Rebates allow for retailers and manufactures to offer lower prices to stimulate sales. This works by providing an incentive to the customer to buy now in order to get the lower price later.

Significance

Because a regular sale or reduction in price results in lower profits and revenues, sellers must weigh the value of the potential extra sales generated by reduced prices versus the loss in revenue per sale. With a rebate, the number of people who actually follow through and file the rebate is a low percentage of the total purchasers. Thus, the lower price can be offered with less impact on profit per sale.

Time Frame

Most traditional rebates are filed via U.S. Postal Mail and processed by a rebate fulfillment center, which is usually outsourced from the company offering the rebate. Thus, the rebate claim must be received, then validated, then submitted to the rebate originator, then paid to the fulfillment house, which finally mails a check, again via USPS, to the purchaser. Most rebates require 8 to 14 weeks or more to process.

Warning

The percentage of rebate offers that are actually redeemed is very low. Most purchasers don't ever end up attempting to file their rebate claim due to a lost form, forgetfulness or complicated directions. Even among those who do file their rebates, many never receive them. Failure to follow deliberately complicated directions exactly can disqualify a rebate application. Many properly completed rebate claims are simply said to be never received.

Considerations

Considering the extraordinarily low percentage of purchasers who ever receive the rebate, it is usually wise to ignore the rebate in calculating the price. If the purchase would not be made at the pre-rebate price, then you should not buy the item. That way, you will not overpay and if the rebate happens to be received, then the lower price is just a bonus.

History

Due to the small number of rebate filers who ever receive rebates and the high number of customer complaints surrounding rebates, some states, such as Rhode Island and Connecticut, have passed laws prohibiting the practice of advertising an after-rebate price as the sale price of an item. Other states, such as Texas, have passed laws regulating the practice of redeeming rebates and setting limits on how long it can take to process a rebate.