Are Mail-In Rebates Headed for Extinction?

Illustration: Michael Klein
Don't you just hate mail-in rebates? It really galls me when a tech product's advertised price turns out to be based on a refund that I won't receive until several weeks after my purchase--and only if I mail in a properly completed form, a UPC code that I have to hack off of the product packaging, and my receipt. (In some states, advertising a post-rebate price is actually against the law.)

For those of you who despise rebates as much as I do, there's good news: Best Buy and OfficeMax have been on a crusade to eliminate mail-in rebates (and these huge chains have the clout to make most vendors heed their wishes).

If you use tax-preparation software, you may have noticed that last year Intuit got rid of the complicated rebate price structure for its popular TurboTax software line; and this year H&R Block followed suit by eliminating mail-in rebates for TurboTax's principal competitor, TaxCut.

But don't break out the champagne and party hats just yet. Retailers such as Circuit City and Office Depot continue to use rebates as marketing tools; and in the highly competitive cell phone industry, rebates on handset purchases seem to be more popular than ever. The decline of rebates may save everyone a lot of hassle, but it may also mean that we'll be paying higher prices.

Deal or No Deal

Stephen Baker, vice president of industry analysis for market research firm NPD Group, even expresses skepticism about whether rebates are as unpopular with shoppers as I believe they are.

"I don't think it's clear at all that customers hate rebates. There's a dedicated group of customers who fill out their rebate forms and send them in," Baker says. "While we hear about the few people who don't get their rebates, the vast majority of people who fill out forms get their rebates back."

It's tempting to think that a $40 product carrying a $10 rebate should cost $30 if no rebate is offered. But the math doesn't really work out, since only a fraction of buyers go to the trouble of applying for a rebate. Nevertheless, the price ought to drop if the rebate disappears, right?

Not necessarily, says Baker. The money that a company previously earmarked for a rebate program may get redirected into additional advertising, say, or bonuses for sales representatives. In other words, "product prices don't go down as quickly as they otherwise might," Baker observes.

Case in point: When Intuit eliminated rebates for TurboTax, the company didn't lower the software's price. The Deluxe edition, for example, currently costs $40. I looked back at PC World's tax software reviews from two years ago, when Intuit still played the rebate game. They showed that the Deluxe version cost as little as $25 after mail-in rebates.

TurboTax's FAQ acknowledges that with the elimination of mail-in rebates "some people will pay more." But the same FAQ says that the change was made for the benefit of customers, who "overwhelmingly told us they did not like rebates." (The FAQ doesn't say whether these customers hated rebates so much that they welcomed higher net prices.)

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