Why Shoppers Love to Hate Rebates

Complaints soar as consumers face rejections and often fail to follow through on filing claims.

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Growing complaints inspired Best Buy and Office Max to almost completely eliminate their use of mail-in rebates.

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Despite the complaints, rebates apparently make shoppers more likely to buy. "A well-featured, high-value rebate can increase sales during a given period...by as much as 500 percent," says Hal Stinchfield, founder of Promotional Marketing Insights and former executive at the fulfillment company Young America in Minnesota. At Office Max, the company reported that eliminating rebates dampened technology sales.

Retailers that use rebates regularly, such as Hewlett-Packard and Office Depot, say customers appreciate the discounts. "As long as we keep it simple and offer strong customer service throughout the process, they are very positive about it," says Laura Autrey, director of merchandising for Office Depot. The company eliminated the need for UPC codes and now only requires a sales receipt and rebate form. HP began offering online rebates last year after customers requested an easier process. (Neither company would disclose its rebate redemption rate.)

In fact, redemption rates below 100 percent are what enable companies to offer rebates in the first place. Jim Wohlever, chief executive at Young America, explains that companies could not afford to offer as many rebates if everyone took advantage of them. Requiring effort on the part of customers separates those who will make a purchase only if they can get the refund from those who are willing to pay more. Plus, it allows retailers to maximize their profits by selling to both groups at different prices. "It's a price segmentation strategy," Wohlever says.

Or it may just be a paperwork-tolerance segmentation strategy. "It may only separate those who can better fill out forms from those who can't, or those who have more time to complete forms from those who don't," says Sovern, who questions the fairness of rebates.

Those who find themselves perpetually missing out on $100 rebate checks may want to replicate Pentecost's strategy. He tracks his rebates in a spreadsheet and successfully cashes in on six to eight a year, on products ranging from cellphones to thumb drives. "As soon as I have the product in my hands, the very first thing I do before I use it is I cut off the UPC code, then put it in the envelope," Pentecost says. "I know that if I don't, it will slip my mind."