Rebate or Rip-Off?

The Check's in the Mail--Or Is It?

Reed's experience isn't unique. In the past year, PC World has received many letters from irate consumers who filled out rebate forms, clipped UPC codes, and mailed off their proofs of purchase, but never received the promised check. Their purchases run the gamut: Zip drives from Iomega, modems from 3Com/U.S. Robotics, virus detection software from McAfee, and more.

Rebates are nothing new to the PC industry. Software companies in particular have been using them for years to boost sales and garner information about consumers. But as the marketplace has grown more competitive, the use of rebates--and the value of the offers--has skyrocketed. Big $40 and $50 rebates have become commonplace as peripherals companies fight for market share. Hewlett-Packard, Compaq, and others offer rebates of $100 or more for items like PCs or printers.

Why the explosion of rebates? They give the perception of savings without requiring a company to actually drop prices. Retailers like CompUSA and Computer City advertise rebates aggressively to draw traffic into their stores. Their Sunday circulars typically feature the post-rebate price in big, bold type, with only a small notation that the highlighted price is "after rebate." Web retailers, too, use rebates to increase sales.

As hardware and software companies are quick to point out, when a promotion goes smoothly, everyone wins: Consumers save money, and retailers and vendors reap the added revenue. But fewer than half of all consumers who are eligible for rebates actually submit the necessary forms (estimates range widely, from 2 to 40 percent, depending on who is providing the statistics). In addition, poor planning, an ill-equipped fulfillment house, or a cash-strapped business can quickly destroy a rebate promotion--and with it customers' faith in a company.

Just ask Iomega, which became embroiled in a class-action lawsuit last year after thousands of customers complained about the firm's failure to process rebate checks for its Zip drive in a timely fashion. The company has finally caught up with the backlog and, as part of the settlement, has issued $3 coupons good toward the purchase of any Iomega product to consumers who participated in the original promotion.