Mail-In Rebates, Psychology, And An Interesting Analogy

by golbguru on January 31, 2007

mail in rebateYesterday, I was trying to put together some documentation for a mail-in rebate and got to thinking about mail-in rebates in terms of why’s and how’s. In my quest to learn more about the mind games behind mail-in rebates, I stumbled on a very interesting paper titled ” The Consumer Psychology of Mail-in Rebates: A Model of Anchoring and Adjustment“. Everyone knows about the basic psychology behind mail-in rebates; from a retailer’s point of view, it can be concisely put as: bait, sell, delay, and hope that the customer messes up. However, the paper goes beyond this basic psychology to explain why consumers behave the way they do when it comes to mail-in rebates. Here are some key excerpts from the paper:

We argue that there is uncertainty associated with performing effort in the future and that consumers use this uncertainty to justify a preferred purchase precision. If consumers are motivated to purchase a rebated product, they overestimate their probability of redeeming the rebate in order to make the purchase more attractive. However, if they are motivated to avoid purchasing that product, they underestimate their probability of redeeming the rebate in order to make the purchase seem unattractive.

In the context of mail-in rebates, we propose that when consumers are strongly motivated to purchase a rebated product, they might choose the product mindlessly without elaborating about the likelihood of rebate redemption, or simply use the rebate as a reason to buy the product.

Though the main theme of the paper is about mail-in rebates, there are some other analogous insights into consumer psychology. Read this and you will know what I am talking about :) :

…. the main points that we make hold true in any situation in which the rational evaluation of a purchase opportunity requires a consumer to incorporate an estimate of their own future actions. For example, an exercise machine is worth it if the consumer believes s/he will exercise sufficiently, and buying a car might be better than taking cabs if the usage of the car will be sufficiently large….

….If a consumer is motivated to buy the exercise machine or the car, he might tell himself that his usage rates will be high – on the contrary, if they were motivated to avoid these purchases, they might convince themselves that they don’t really have the time to exercise too often, or that they don’t commute a lot.

Click here for the entire paper; it’s 38 pages long, so…good luck :) . You might have to register with Social Science Research Network in order to obtain the full text (it’s free).

The paper is an outstanding source of information on this matter, but it talks more about the “pre-purchase” psychology behind mail-in rebates. However, in my opinion, it is the “post-purchase” period that the retailers are banking on for profits. I think they create a lot of requirements (lot of documents/time contraints….stumbling blocks if you prefer) just to increase the probability that you will fail at least one of them. That sort of delivers a one-two punch to the consumer…you first bought the product (because of a mindset that the above-mentioned paper explains)..and then you stumble along the way (throw away a bar code sticker…or your dog eats the receipt or whatever). For retailers, this is good news…first the sales rise, and then there are profits due to unclaimed rebates.

Here is a silly analogy to mail-in rebates that crystallized after some thoughts. Have you seen a track & field hurdles race? Mail-in rebates are like that. You are the runner, the rebate money is your finish line, and the sundry requirements are the hurdles. If you knock even one hurdle off, you will be disqualified. Some make it, but some won’t. If you start loosing often, you will think twice before you participating in the next hurdles race. :)

rebatehurdles deals

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{ 16 comments… read them below or add one }

1 HC 01.31.07 at 10:06 am

I refuse to consider rebates in my purchasing decisions, because I value having the originial codes and receipts in case I need to make a return.

So by the researchers’ logic, I guess I’m motivated to make every purchase less attractive. Hee.

2 MoneyFwd 01.31.07 at 12:08 pm

I like the picture.

I also won’t buy because of a rebate, although I rarely am faced with the issue. If I get a rebate, it’s fine, although I don’t trust them at all. I’ve had at least one that I never received the check for.

3 Stingy Student 01.31.07 at 1:35 pm

While you must be careful with mail-in rebates, I think avoiding buying products because they have a mail-in rebate attached is silly. Most rebate companies are honest, and if you have a problem, many times, it’s resolved pretty easily. You just have to keep meticulous records of everything. At least that’s been my experience, and I’ve done dozens of them.

4 moneysmartlife 02.01.07 at 1:45 am

Great article! It’s insane how much “psychological warfare” goes on in personal finance. Thanks for helping the good guys win :)

5 MoneyFwd 02.01.07 at 5:57 am

Also, Staples has an excellent rebate program. All online and everything. I rarely buy stuff there, but when I do and I get the rebate, it’s really easy and no hassle. I wonder what their strategy is.

6 golbguru 02.01.07 at 10:46 am

Where there is money..there are mind games :)

I personally don’t like mail-in rebates, but there are situations where I fall for them, and I am not very happy when I do.

At least two times, I have very deligently filled in rebates and never heard about it ever again.

7 TFB 02.01.07 at 4:11 pm

In one year I submitted over $3,000 in rebates and received all of them except one $10 one. So they are not that bad if you are careful. But I understand the hurdles are intentionally placed there so a certain % of people will not get them, but they were attracted to the low after-rebate price.

8 Golbguru 02.02.07 at 8:39 am

TFB: you are one of the guys who always finish the races :)
Btw, $3000 is a lot of rebate…unless some of the stuff became free for you after rebate, that sounds like a lot of purchasing :)

9 TFB 02.05.07 at 1:39 pm

Yeah, that was 2-3 years ago when I did rebate stripping for extra income. I don’t do that any more. If you hear about “rebate stripping” remember I coined the term. :-)

Basically I gave part of the rebate to other people up front in the form of a discount from the before-rebate price. I took the risk for collecting the rebate and kept part of the rebate as compensation for my service, risk, and float. I think Sun is doing the same now as I did then.

10 golbguru 02.05.07 at 2:25 pm

TFB: will remember “rebate stripping” (btw, I also know some of my readers who don’t like the idea). Yep I am aware that Sun buys and sells a lot of stuff that way…I think he is happy with that.
If I may ask, why did you stop doing it? not worth the time or something?

11 ispf 02.10.07 at 10:24 pm

I really should figure out how to leave a trackback/pingback. Anyway, for the time being, its still manually done :(

[...] Mail-In Rebates, Psychology, And An Interesting Analogy at Money, Matter and More Musings is an interesting article on mail-in rebates. I absolutely detest mail-in rebates and resort to them only if it’s too good a deal to pass by (it seldom is!). I enjoyed reading this article, and particularly, liked the picture that Golbguru (the author) added at the end :) [...]

12 broknowrchlatr 04.12.07 at 9:19 am

I have had a lot of rebates int he past. They really haven’t discouraged me too much. But, I have a rule of thumb I use to evaluate them. I call it the 10/20 rule. The time it takes to keep the records and make sure the company pays you is worth $10 of my time. I also figure that it will take a while to get it and there is a chance I will never get it. So, I take the rebate and subtract $10 and then subtract 20%. Say I have a $100 product with a $20 rebate. The rebate is worth $8 ((20-10)*.8). So, the ‘real’ price is $92.

A few years ago, you could buy a pack of floppy disks that was $10 with $10 rebate. My rule makes this a worthless rebate. But, a $150 rebate on a computer is much more worthwhile. Still, I don’t buy their logic that price - rebate = real price.

13 Misti 06.21.07 at 7:56 am

I bought a bunch of stuff from Rite Aid that had great rebates. I was supposed to get a $50 check. I follow the directions to a tee and got nothing! My mom did the same exact thing and got her’s. So I certainly believe they pick and choose rebates they send out. What is someone going to do if they don’t receive their check? They’ll either forget or if they do remember, who are they going to complain to?

14 Mordred 06.21.07 at 9:30 am

I never determine the value of an item based on the a/r price. If it is not a good value to start with, then it is not worth it. You are paying tax on the original price, plus having to spend your time doing the rebate. Yeah, a couple minutes in most cases, but some are pretty darned picky. I have had rebates rejected before because I sent TOO MANY bar codes in, when they have 3 right next to one another - and I have not a clue which one to pick. Then they wont send back the original stuff - and say I am out of luck and have to re-submit with the originals - when they have all the original packaging and bar codes. I had another state that they never got the bar code (I know it was there when I sent it). They would not take a copy of the code - and insisted that the letter was not damaged - but that phone person was not the person who opened the letter. So it just disappeared between the time I sent it to you - and you received it with no damage to the letter.

You just have to look at the value of the items and see if it is worth it. Getting a Free-be on Black Friday might be worth it, but I do nothing that is not electronic anymore (staples, office max/depot, etc.)

15 d 11.04.08 at 11:03 am

try this site, http://www.rebateremedy.com
they pay you in 3-5 days for your rebates!

16 Property Marbella 06.17.12 at 12:04 am

Many people hunt all the time discounts, offers, specials, etc. it is a large purchase group, there are websites that only annnserar out all deal.

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