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The premise behind the claim that rebates are scams is that when manufacturers promote a product by offering a mail-in rebate, even though they may intend to honor all properly-submitted rebate requests, they nevertheless intend to maximize the "breakage", or dollar amount of rebates that don't ever get paid.

This is not mere suspicion, but common knowledge within the industry. Companies that manage rebate promotions, such as Howe Marketing ( http://www.howemarketing.com/ ), make claims such as the following:

In most cases, a discount can be substantially increased when it is offered as a rebate versus a POS discount. For example a 25% POS discount can be converted to a 50% rebate and still give the retailer a higher gross margin.

Why? Because usually less than half of the consumers who buy items because of rebate savings will actually follow through and send for their refund. The net result is more traffic and more profits for the retailer.

Undoubtedly, many companies get started in rebate promotions thinking that the only source of breakage will be consumers who just never mail in the rebate form and proof of purchase. Surely, it's not the company's fault if consumers don't even ask for their rebate.

But this initial denial of responsibility can easily evolve into the use of techniques that are specifically designed to increase breakage. These can be complicated submission rules, limitations on the time to mail in the rebate, finding arbitrary reasons to reject rebate requests. Here's a claim that TCA Fulfillment ( http://tcarebates.com/ ) makes about its services:

TCA’s advanced 35-point verification process accurately rejects more than 20% of rebate claims as invalid or fraudulent, providing significant savings versus our competitors.

Here's my personal opinion:

Undoubtedly, there is a substantial amount of fraud when it comes to rebate programs. The bulk of that fraud occurs when manufacturers induce customers to purchase products based on the promise of a rebate; but this promise is not made in good faith. The manufacturer intends to make the purchaser jump through hoops. And even when the customer has jumped through one set of hoops, there may still be more hoops.

Read some more about Rebate Fraud web search for Rebate Fraud.

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Revision r1.2 - 18 Apr 2004 - 04:02 by EliMantel web search for EliMantel
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