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How does mail-in rebate work in favor of companies?
irock




msg:524171
 1:25 am on May 3, 2004 (gmt 0)

Hi, I was wondering how all the mail-in rebates work in the favor of companies. I mean companies still have to pay the money back, right?

I heard from a guy saying that there is some kind of accounting trick that allows companies to use this method to polish their financial statement.

Anyone has a brief explanation? I saw a website like ebates.com uses rebate as a business model.

Thanks. You guys are great.

 

danpeg




msg:524172
 1:39 am on May 3, 2004 (gmt 0)

I don't know about ebates.

But rebates in general are used for market segmentation. It creates a hassel (you need to send the rebate request by mail and wait a few weeks) that requires some time invested on your part. Companies do not know how much your time is worth so they give you the rebate as an option; if you ask for it, they make less money on you but you still bought the product.

Some people's time is very expensive and filling the rebate would be more expensive for them than the rebate.

raywood




msg:524173
 2:45 pm on May 3, 2004 (gmt 0)

It's a statistics game. There will be a portion of customers who never claim the rebate. There will also be others who don't precisely follow the rules.

One common trick is to require the customer to mail in the bar code label cut from the original product carton. By the time the customer gets around to reading the rebate instructions, the box has been thrown away. This one is popular for computers and consumer electronics.

Many of these rebate programs are designed and operated by third party companies who sell their services to manufacturers. They show statistics on actual rebate payouts and make a deal.

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