As Rebates Spread, Some Consumers Fume

For many people, the challenge of setting up a new computer is pure torture. Mastering the software can be mind-boggling too.

But now the computer, software and consumer electronics industries have come up with another way to torment customers: Offer them mail-in rebates.

On the face of it, these ubiquitous come-ons--which have become an important force in marketing everything from simple pagers to speedy PCs--are tantalizing. Buy a product, mail in a little paperwork and just wait for your money, often $100 or more on a big purchase. It’s often really as easy as that.

Trouble is, sometimes the rebate checks never come. Or they come only after someone writes a letter of complaint to the manufacturer or the rebate fulfillment center. And even in the far more common scenario, when manufacturers make good on their rebates without having to be hounded, the checks arrive weeks or months after the promised delivery date.

Those delays, along with eligibility rules written in fine print and the minor paperwork hassles, vex even the most patient consumers.

“A lot of people are so frustrated with the rebates, they won’t fool with them,” said Ron Cohen, the owner of a print shop in Sherwood, Ark., who has given up hope of getting a promised $20 rebate on a modem he bought for $30 a year ago.

What’s behind the rebate snafus? And why is the consumer electronics industry becoming increasingly hooked on rebates even though these promotions end up peeving more than a few customers?

The story involves computer, software and electronics companies that are trying to learn your buying preferences and lure you away from their competitors. It also includes big retail chains that want to pull you into their stores with the promise of cash back, while making sure that paying the money is somebody else’s responsibility.

What’s more, the rebate phenomenon relies on simple consumer psychology. Manufacturers and retailers know that if an advertisement touts a powerful computer as costing less than $1,000--after rebate--it draws customers to the store. They also know that many of those same consumers will forget to mail in their rebate forms or give up when the requirements prove to be too much of a burden.

That’s “the dirty little secret about rebates,” said Roger Lanctot, research director for PC Data, a market research firm in Reston, Va., and the author of a recent industry report on rebating.

People who don’t have the patience to fill out the necessary form, submit the original receipt (photocopies commonly aren’t accepted, ostensibly so as to curb fraud) and clip the bar code from the package within the required deadline aren’t hard to find.

Michael Leonard, a vice president with Continental Promotion Group Inc., a fulfillment house in Scottsdale, Ariz., that processes rebates for computer and software companies, concedes that “I have some people who work for me who say: ‘I’d never submit a rebate. I don’t want to bother with it.’ ”

Even so, Lanctot estimates that computer equipment and software companies will pay U.S. consumers $300 million in rebates on products bought in 1998.

In the supermarket and drugstore industries, where mail-in rebates have been around for decades, redemption rates--the percentage of customers who receive rebates--average below 10%. But in the computer and software industries and in the rest of the consumer electronics field, where the practice of offering mail-in rebates has taken off over the last few years, redemption rates commonly run from 15% to as high as 80%.

The main reason for the higher rate for consumer electronics is the larger amount of money that consumers stand to receive. It might not be worth the inconvenience of mailing in the form for a $1 rebate on toothpaste, but getting back $200 on a computer system or satellite TV equipment is another matter.

Redemption rates tend to be on the high side when such variations as net-to-zero rebates are offered. These are rebates that cover the entire cost of the purchase, often for items such as software programs costing, say, $20 to $30.

Why not just make life simple for consumers and provide the discounts at the cash register? Because for most retailers and manufacturers, that would defeat the purpose of rebating.

Todd Thibodeaux, chief economist of the Consumer Electronics Manufacturers Assn., a trade group based in Arlington, Va., called rebates a marketing ploy that often is cheaper than other promotions or advertising.

“It’s a way to make the price look attractive, and whether someone chooses to take advantage of it or not is up to them,” he added.

On the other hand, Thibodeaux acknowledged, with some manufacturers and their fulfillment houses, “the customer service emphasis isn’t there” when it comes to dealing with rebate problems. Thibodeaux should know: He has waited four months for a $100 rebate on a software program he bought in August, and he hasn’t been able to get through to the customer service department on the toll-free phone number listed on the redemption coupon. “It’s been a frustrating experience,” he said.

Much of the initiative for rebating in the consumer electronics industry has come from the big retail chains. These chains are tired of constantly slashing prices, so they lean on manufacturers to offer rebates that help satisfy consumer demand for discounts.

For manufacturers, rebates are a tool to clear outdated merchandise or help introduce new products.

They also use special rebates to try to wean consumers from competitors’ brands; these “trade-in” programs provide rebates to customers who turn in another company’s product.

In addition, manufacturers rely on rebates to collect information on consumers. Many consumers neglect to fill out the registration cards that come with their products, so manufacturers gather the names of those holdouts when they apply for rebates. Someday, manufacturers could tap that information to try to sell directly to consumers.

But a number of manufacturers, though hardly the majority, apparently want to enjoy the advantages of rebates without paying for them promptly, if at all.

Persistent customers often turn to government agencies for help. For instance, the Los Angeles County Department of Consumer Affairs said it recently has received more than 100 complaints about overdue rebates involving a Westlake Village-based computer components company, NewCom Inc., which markets products under the NewCom and Atlas Peripherals names.

Sonia Kiarashi, a NewCom senior vice president, blamed the problem partly on a backlog at one of the fulfillment firms it hired, and said it is now doing some of the processing itself to speed up the work.

She also said NewCom’s rebate processing has been slowed by the large number of fraudulent claims it has received. She said fraudulent claims appear to account for 30% to 40% of all submissions, roughly 10 times higher than some experts say is the norm.

Fern Collins, supervising investigator with the county’s consumer affairs unit, said she is monitoring the situation to decide whether the case should be turned over to prosecutors. She said some NewCom consumers lately have been paid only after lodging complaints. “What I wonder is, what happens to people who don’t file complaints?” Collins said.

Payment delays, industry officials say, normally stem from processing backlogs at the fulfillment houses, or from cash flow crunches at the manufacturers. They also say that measures taken by the fulfillment firms to prevent fraud, such as verifying that the rebate applications are for genuine sales and not for stolen or returned merchandise, take time.

Industry officials contend that few, if any, manufacturers impose requirements simply to dissuade consumers from seeking rebates. All the same, they concede that many manufacturers don’t want to make the process so easy that everyone gets rebates.

John Chiappetta, an advertising copy writer from Greenwich, Conn., blames inept customer service for his recent rebate snafu. Chiappetta said he bought a Packard Bell computer two weeks ago that came with a $100 rebate offer, but that when he got home and opened the box, the rebate form was missing.

So, fearing he would miss out on the 15-day deadline for submitting the form, he called Packard Bell. In fact, he wound up calling the company five times.

The first customer service agent, Chiappetta recounted, “said he didn’t know anything about it and blew me off.” On another call, the customer service specialist directed Chiappetta to a Web site but, even though the site had information about rebates, it didn’t have a form that could be printed. On his last call to customer service, Chiappetta said, the employee’s response was, “Why are you calling this number?”

Finally, Chiappetta received an e-mail from the company saying that “we are currently working to make the coupon available” and that he shouldn’t be “overly concerned” about the 15-day deadline. Still, no coupon has come from Packard Bell.

“This is enough of a hassle that I might not do business with them again,” Chiappetta said.

A spokesman for Packard Bell NEC Inc., Ron Fuchs, said the company’s rebate program appears to be “very successful. I’m aware of few, if any, complaints.”

Rebate requirements can trip up the savviest of consumers. Lanctot, for instance, said he recently had a Microsoft Corp. rebate application sent back to him because he failed to say on the form when his credit card will expire.

“I don’t know why they need it,” he said, “but at least they sent it back to me to give me another try.” (Microsoft declined to comment on its rebate practices.)

Lanctot says he is still owed $75 in rebates from another software publisher whose products he bought in the spring. He guesses that he might have forgotten “to check a box or sign something.” Given the amount of time that has passed and the fact that he mailed in his original receipt to the manufacturer, he doubts he’ll ever see the money. “I’m out of luck,” Lanctot said.