NJ Legislators Tackle Rebates
New Jersey may soon follow Connecticut and Rhode Island
as a state that requires retailers to provide instant rebates to consumers
rather than making them fill out paperwork to get money back on purchases.
Critics
of traditional rebates argue that they are essentially a ruse to get consumers
to buy products with manufacturers knowing full well that it is unlikely that
many will actually receive a return check in the mail.
Legislators in New Jersey
sponsoring the bill point to research, which shows roughly 40 percent of manufacturer
rebates are never redeemed by consumers.
"Customers should not be deceptively lured into stores by low prices that
only exist after they take the product home, cut apart the packaging, fill
out aggravating paperwork and then wait weeks or months for a check," Assemblyman
John Burzichelli, D-Paulsboro, told The Associated Press.
"This bill would not prevent manufacturers from offering rebates to New
Jersey consumers but would only prohibit stores from deceptively passing off
a net price to unwitting customers," Vincent Prieto, D-Secausus, told
the AP. "It’s
a consumer protection measure that makes common sense."
If the law and
a corresponding piece of legislation in the New Jersey Senate pass, than violators
could be subject up to $20,000 in fines along with other damages and restitution.
Discussion Question: How effective are rebates as a means of driving product
purchases? Do you think that rebates are on the way out?
When I see a deal that requires a mail in rebate, I avoid those products. To me it’s a scam, often requiring customers to send in valuable UPC labels, provide personal information, or not be able to use their PO Boxes.
Instant rebates solve that problem. Some companies do a better job that others. But the whole point of a rebate is that the customer will not follow all the rules so the company doesn’t have to pay out.
Rebates are a proven method for driving sales. Manufacturers count on limited redemptions when using this promotional tactic. Perhaps a compromise would be to prohibit retailers from posting the after-rebate price, thereby forcing the full price to be advertised, while showing that a rebate is available.
Reducing the cost of a product is usually a pretty good way to drive product purchase, especially given the price of many “rebate-able” products. I’m having a hard time figuring out why government is getting involved, except in those cases where a low price is advertised but not the fact that you have to fill out a rebate form and wait for the check. As long as the rebate is advertised, the fact that many do not submit for the rebate is the buyer’s problem, not the manufacturer’s or retailer’s problem. It’s the same with coupons; a low percentage are redeemed.
This topic erupts every few years. Perhaps most ironically, the “40% redemption research” is an urban legend. I’ve spoken a lot with the ostensible author. Since we worked at the same company (although not concurrently) I took a lot of press calls on the subject in 2005-2006.
Having said that, rebates are indeed problematic. Even if you remember to redeem them, there are issues: 1) The rebate processing company gets to ‘play with’ the consumers’ money between the time the rebate paperwork gets received and when the rebate is actually paid (which seems to invariably be 4-6 weeks). Further, revenue and gross margin are distorted, since the rebate is not applied to sales until the form is submitted at minimum.
I think most consumers wish they would just go away.
If I’m reading this correctly, 60% of the consumers who purchase these products with rebates redeem the rebate. 40% do not. Gee, maybe the rebates aren’t that important to them. Nevertheless, the geniuses in Trenton feel it imperative to pass another piece of business-hostile legislation. The result is predictable; disclaimers will be added to the products which will remove the rebates in NJ, hitting primarily the 60% who were redeeming the rebate, reducing sales for the retailers along with sales tax revenues.
Another victory for the legislators.
I agree with Mr. Needel and others that as long as the higher price is posted, the state should not be involved. Those of us who do take advantage of the rebates know we have to follow the rules to get the money (in whatever form it comes) but when it does arrive, I look at it as “found” cash.
As an avid user of “rebates” I fear that these restrictions could eventually cripple that promotional vehicle. Unlike the old days, I find that there are extremely few instances of unwarranted denials. I thank the retailers for that–they look out for the interests of their consumers. Staples has an online submission system that makes it very easy for consumers to submit those rebates and no UPC clipping is required.
What I would support is a prohibition on sending out those rebate checks on what is essentially a postcard. Those sometimes get lost, stolen or misdelivered.
If I were a marketer I’d just make those rebates “Void in NJ, RI and CT” and when consumers from those states ask why, tell them to write to their state legislators.
The Nanny State is once again out there protecting us. Rebates are a very strong incentive to purchase. A cost effective way of getting new products into the consumers home. It is offered on a fair and equitable basis. If the consumer fails to submit the documents as per the rebate agreement, that is their shortcoming and should not need to involve government. That is, unless the rebate processor uses unethical means to deny payment.
What happened to personal accountability? IF you do not want to subscribe to the conditions of the discount, rebate or multiple purchase, simply don’t buy that product. Offer, acceptance, and consideration. If both parties perform, life is good.
A consumer should look at the store-level purchase price and determine if there is enough value without the rebate redemption. The trouble is, those rebates are often such a high percentage of the purchase price, it compels the consumer to make the purchase regardless that the rebate takes six months to receive.
That’s the good news for the retailer/manufacturer. However, that does not indicate that additional legislation is required. A consumer is aware that the money will take a long time to be redeemed, and that is the risk they take.
I was both CTO and CMO for e-Save.com in New York in the 90s, a service enabling consumers to immediately collect on mail-in rebates. Our pitch was the immediate and guaranteed payment to participants who mailed their rebate forms to us (remember, this was several years ago, prior to several subsequent electronic developments which would have made it even slicker). Our bidness pardner, Kmart, went south at exactly that time, so it all fell apart. Raise your hand if it’s never happened to you.
We had a bunch of consumer research we used to sell our service, which signaled extreme customer dissatisfaction with the standard rebate process along with extensive evidence of manufacturer flimflam and retailer bait-and-switch. We came to an inescapable conclusion: Mail-in rebate programs are criminal. I haven’t changed my opinion.
Manufacturers always win in these types of deals. Chances are the 40% chose to buy the item based on the rebate, but they either forget to fill out the paperwork or they fill it out incorrectly. If the convenience store industry has figured out how to do instant price rollbacks on fuel right at the pumps when a customer swipes his loyalty card, there is no reason why suppliers can’t work with retailers to offer instant rebates at the point of purchase. They just don’t want to because that 40% translates to millions of dollars in their pocket every year. Tactically, it’s the proper move for them to oppose this rule in NJ and elsewhere.