Redemption Of Mail-In Rebates Declines With Increased Time Allowance

Published: June 15 2004

Category:Research

GAINESVILLE, Fla. — People may be in a hurry to save, but they’re slow to take up the offer, a new University of Florida study on mail-in rebates suggests.

The study found that giving customers more redemption time made them less likely to apply for rebate money than those who were galvanized by short submission deadlines.

Twenty years ago consumers were typically given 60 to 90 days to cash in rebates, while today 15 days to a month is the norm, said Timothy Silk, a UF marketing instructor who did the research for his doctoral dissertation. Rather than benefiting companies, the trend toward shorter redemption deadlines may instead aid consumers, he said.

“Interestingly enough, this approach has exactly the opposite effect as it is intended,” Silk said. “Our results show that the less time you give people, the more likely they are to redeem a rebate, provided they are aware of the deadline. Giving more time encourages procrastination. Consumers are likely to say ‘I have lots of time, I’ll get around to it’ and then end up doing nothing.’”

In response to growing consumer complaints, California lawmakers are considering legislation requiring retailers to allow customers to fill out and submit rebates at the time of the sale, Silk said.

“My results suggest that this will have a huge impact on redemption – that it will go up – because you’re eliminating the opportunity for procrastination or forgetting to interfere with redemption,” he said. “If this legislation goes through, companies may be less likely to offer rebates.”

The UF study of more than 1,200 people found participants were significantly more likely to redeem rebates when the deadline was one brief day compared with a more leisurely three weeks, and were much more likely to do so if given one week as opposed to three. And perplexing to researchers, the harder the customers were forced to work at processing a rebate, the more likely they were to cash it in, he said.

“The conventional wisdom is that people don’t redeem rebates because it is too much work,” Silk said. “Although effort does play a role, these results show that it’s not only the effort that gets in people’s way. Procrastination and forgetting also play a major role in failing to redeem rebates.”

Sixty percent of study participants who failed to redeem their rebates said procrastination or forgetting was to blame, compared with 20 percent who said the redemption process was too much effort, and 20 percent who lost their receipts, mistakenly threw out the required packaging or faced some other constraint, he said.

Rebates are a popular marketing strategy of manufacturers because they boost sales yet result in little payout, since few buyers bother to redeem them, Silk said. They are most frequently used as a tactic to promote consumer electronics, where redemption rates, even on larger-ticket purchases such as computers and televisions, are well below 50 percent, he said.

In the 2003 study, Silk offered rebates on movie tickets to 1,233 undergraduate students in UF marketing and statistics classes. Students could choose between paying a straight $11 for two tickets to a local movie theater or up the ante to $13 with a rebate offer of either $6 or $9. Students were given one, seven or 21 days to redeem the offers.

A total of 184 students purchased the rebate offers, of which 67 percent followed through and mailed them. Of the students who had the opportunity to purchase the rebate offers, the 21-day offer was most popular, chosen by 20 percent of the 410 students to whom it was offered, compared with 12 percent of the 412 offered the 7-day rebate and 13 percent of 411 others given the one-day offer. However, the longest term resulted in the lowest redemption rate, with just 58 percent of 82 students who bought the 21-day rebates redeeming them, compared with 70 percent of the 50 who opted for the seven-day deal and 77 percent of the 52 who chose the one-day offer. Participants were more likely to purchase the larger $9 rebate than the $6 offer, but the redemption rates were the same at 67 percent.

Silk also took effort into account. He recorded when the rebate buyers logged into a Web site to fill out the rebate application and the postmark date of the completed submission.

“If the problem was the effort involved, we would expect a lot of people who started the process not to finish it, which is not what we found,” he said. “About 60 percent of the people who failed to redeem did not even log in on the Web site.”

And making the redemption process harder had a “backlash effect,” said Silk, who varied the requirements so that some participants had to retype their names, addresses, ticket numbers, receipt codes and purchase dates, as well as read a terms and conditions agreement. Rather than being discouraged, they mailed in the rebate applications more quickly and in larger numbers than those who had the easier task, he said. Sixty-one percent of buyers in the low-effort condition redeemed compared to 73 percent in the higher-effort condition.

“They appeared to be more determined to get the rebate, which is interesting in light of the fact that some companies have increased the effort required of consumers to redeem rebates,” he said.

Two decades ago, most customers merely needed to fill out a form asking when and where they bought the item, Silk said. In an effort to limit fraudulent rebate claims, companies may require today’s buyers to also attach the original receipt and proof of purchase, which may not be available, he said.

John Gourville, a marketing professor at Harvard University, said Silk’s research is important because it demonstrates that rebates work in some counterintuitive ways. “The fact that shorter redemption cycles result in increased rate of redemption goes against industry practices, theories of rational decision making and common sense.”

Credits

Writer
Cathy Keen, newsdesk@ufl.edu
Source
Timothy Silk, tsilk@ufl.edu, 352-392-0161 ext. 1280

Category:Research