Rebates of ill repute

There is an interesting little thread over at Slashdot about computer rebates and how good or bad they are. Everybody likes the discount but hates the paperwork, and some pretty sinister conspiracy theories are bandied about, which, of course, is the way we have come to like it at Slashdot.

What gets me, though, is the marketing consultant quoted in the point article, who says that there are rebates because "unlike regular sales, people perceive them as a one-time opportunity to get a product at a lower price than it would normally be sold at."

What utter rubbish. The simple reason rebates and coupons exist is that they allow price discrimination. They are a way of offering a price reduction only to those customers who want it. If they didn’t exist, the seller would have to discount the price for everyone, losing revenue from the customer who would be willing to pay more.

I live in a pricy country on a pricy continent, and tend to buy electronics and other things when in the US. I get the rebate coupons but often don’t bother sending them in – both because of the hassle (the rebates often can be redeemed to US addresses only, adding extra complexity), but also because the price already is significantly lower than in Europe and I just want the product. I can easily imagine many rich and/or busy Americans buying things and not bothering about the rebate – which means that the seller gets more total revenue.

Price discrimination works to the benefit of both the spendthrift and the miser: The former gets the product he wants at a price he is willing to pay. This allows the seller to increase the amount on the rebate, making it cheaper for the miser, who is willing to spend the time and do the paperwork.

Rebates and coupons are outlawed in Norway and in many other European countries, less, I suspect, because they are seen as tricking the consumer than because the wage differentials are smaller in Europe, making price discrimination less effective.

Anyway: To all those carping about how much work the coupons are and the 60% fulfillment rate: If all rebate coupons were redeemed, the rebates wouldn’t be so good. So keep quiet and keep filling in those forms. They are good for you precisely because they are a mechanism allowing you even lower prices than you would get without them.

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2 thoughts on “Rebates of ill repute

  1. Computerworld Blogs

    High-tech retailers, low-tech rebates

    Tis the season to be Jolly – and to fill out rebates. Most consumers love the holiday sales on consumer electronics items. But the majority also hate mail-in rebates.
    Rebates are clunky, bricks and mortar affairs that involve paper forms, clipping labels

  2. Computerworld Blogs

    RLM hates rebates (and tin can amp)

    In today’s IT Blogwatch, we look at those darn rebates. Useful market segmentation tool or nemesis of the savvy consumer? You decide. Not to mention making a pocket-sized, high quality headphone amplifier housed in a mint tin…
    Love them or hate them wha

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