Wednesday, September 16, 2009

Buy a Car, Get a Check

This is a (very slightly edited) re-post from Home of the Free, a blog that has been even more neglected than this one has of late, but still full of interesting tidbits that have not appeared anywhere else. Enjoy...

Robert B. McCurry, Jr., former vice president of sales and marketing for Chrysler died almost three years ago.

So what?
Never heard of him?

Perhaps not directly, but because of a marketing ploy he developed more than 30 years ago, retail advertising has never been the same.

McCurry holds the dubious distinction of inventing the factory (or manufacturer’s) rebate.

The gimmick was originally introduced in a half-time TV commercial during Super Bowl IX. Former professional baseball player turned sports commentator turned advertising pitchman Joe Garagiola announced that those who purchased a brand new Plymouth Duster or Dodge Dart would receive a $200 check directly from Chrysler.

“Buy a car, get a check,” Garagiola said, without one single wardrobe malfunction. It proved to be pure genius. Sales rocketed the very next day as Ford and GM scrambled to catch up.

Today that pesky rebate has inundated every area of consumer and retail life.

Googling the term “rebate” returns no less than 36 million hits. There are sites dedicated to tracking rebates, finding the most attractive rebates and even locating those products that are “free” after the rebate. There are rebates for electronic gadgets, garage door openers, laundry detergent and pharmaceuticals, just to name a few. Some products even carry multiple rebates - a combination of offers by the manufacturer, the distributor, the retailer and others. It’s enough to drive even the most conscientious shopper insane.

Surely if McCurry knew how his creation has evolved, he would be rolling over in his grave.

According to data collected by Brian Grow for a November 2005 article in BusinessWeek, fully 40 percent of all rebates are never collected. The data, supplied by the market research firm Vericours, Inc., goes on to conclude that roughly $2 billion in extra revenue remains with the manufacturers and retailers every year. And that was in 2005.

It’s no wonder the rebate is such an appealing marketing strategy. The customer is sold the product based on the advertised “after rebate” price, but 40 percent of those customers never realize their discount - they have actually paid the full price. And even those who are able to navigate the exceedingly narrow path to redemption, often they are so thrilled to have won the prize that they have forgotten who paid the sales tax on their rebate. Furthermore, they fail to realize who has been earning interest on their money during the weeks and months spent waiting for the check to arrive.

I avoid rebates. The labyrinth set up between me and my money most often renders the victory hollow. Occasionally the rebate is sufficiently large or perhaps it is offered through a retailer or manufacturer that I know and trust. Sometimes it’s worth the risk, but as a general rule they only serve to make me take my business elsewhere. Once in a while, just for grins, I’ll go through the motions and jump through the hoops for the $5 or $10 rebate. Sometimes they actually come, but so long after the fact that I can’t even remember sending off for it. Like finding a five spot in a parking lot, I feel as though fortune has smiled upon me. There is no telling, however, how many checks are still languishing in rebate purgatory.

California Assembly Bill 1673 is currently sitting on Governor Arnold Schwarzenegger’s desk (update: AB 1673 was vetoed on Oct. 14, 2007). The bill is an attempt to make retailers truthfully advertise the price of merchandise with rebates. The bill would give them two choices: Either emphasize the full, un-rebated price or process the rebate instantly - at the time of purchase. Of course, those on the business end of the continuum say the fine print is clear enough and that consumers are aware of how rebates work while those representing consumer interests say the rebate claims process has become so convoluted that advertising the “after rebate” price with the details in the fine print amounts to false advertising.

This bill goes a long way to reeling in the rebate monster. The manufacturers and retailers can still offer their rebates, but the price featured in bold print will have to be the full retail price. Or, if they really want to advertise the discounted price prominently, they would have to assure that the customer actually pays the advertised price by giving the rebate at the point of sale.

Maybe then McCurry could rest in peace.

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