Question: Everyone has seen the rebates that are offered when buying something new. It is never easy to get your rebate, as it is required to fill out paperwork, submit forms and the process can take a long time. However, it is money that retailers are willing to give up just to get one to buy their products. The Great Rebate Runaround is a prime example of how these rebates can cause confusion but also help a company increase their bottom line.
Customized Pricing
According to Krishna, Briesch, Lehmann, and Yuan (2002), "Research has shown that different price presentations affect consumers' evaluations of a deal offer" (as cited in Weisstein, & Monroe, (2009), p. 216). In this case study, The Great Rebate Runaround, one could see that this type of strategy would be a customized pricing technique that companies use to get different customers to buy at different times during the time the product is eligible to be bought. Some customers will be willing to buy the specific product at full price, while other will be willing to wait until the price is more affordable for them. Companies will uses the different rebates to entice those customers who are on the fence until a deal is offered. These companies plan on some of those customers will not renew the rebates, thus resulting in greater profits even at offering their products at lower prices.
Offer Rebates than Decrease Wholesale Prices
Even if all rebates were redeemed, which is highly unlikely, companies should offer rebates as opposed to decreasing wholesale prices. Why? Consumers love a bargain, or the perception of a bargain. If companies lower wholesale prices, they will be leaving money on the table. The odds of every rebate being redeemed will be rare and as a result, many of those who buy with the thought of redeeming those rebates will not follow through allowing those companies to have higher revenue than they would with lowering wholesale prices.
Why is Best Buy Considering Eliminating Rebates?
According to Ong (2008), "Because of high ‘breakage' or unredeemed rate, mail-in rebates are unlikely to go away soon despite many consumer complaints. Ong (2008) also says that manufacturers and retailers count on a portion of their buyers not redeeming their rebates. This will help reduce promotional costs and it gets the buyers to think about the discount and not think about the full retail price. For this reason, I am surprised that Best Buy is considering eliminating their rebates to their customers. Sony and other big competitors realize that by offering rebates there will be customers who will not redeem those rebates and will increase the revenue of their products.
One reason that Best Buy may be considering in discontinuing their rebate program is the many complaints that consumers file because of the long and sometimes tedious process of filling out and mailing in the rebate form. Sometimes the impression of the consumer is more important than going through the process of trying to improve their respective image that complaints cause.