Disadvantages and Advantages of Rebate Programs

Rebate programs offer consumers a chance to receive a reward such as a full or partial reimbursement on the purchase price, a free product or a gift card, in exchange for purchasing a specific product and expending some effort. This effort typically means the customer must submit a rebate request along with a receipt or other proof-of-purchase by postal mail. As is common with most product promotions, rebate programs come with their own advantages and disadvantages.

A rebate program can be helpful for creating awareness and instilling brand loyalty for a new or existing product. For example, a rebate offering a full purchase price refund or a coupon that makes the next purchase free can entice a customer who might not otherwise even consider a new product. In addition, rebate programs often appeal to budget-conscious shoppers, many of whom make buying decisions based on available coupons and rebates.

Rebate forms can be a valuable consumer information resource. In addition to demographics such as a customer’s state, city and zip code, rebate program forms can help determine what customers are interested in buying and may be useful for targeting future promotions. Including an opt-in check box at the bottom of a form and asking the customer to provide an email address is a way to use a rebate program to expand a customer database and potentially increase sales.

Complex rebate procedures might be necessary to make sure customers actually purchase the product, but they also can reduce a rebate program’s effectiveness. For example, a customer may simply give up, lose or discard the required purchase verification and never mail the rebate, or he may send the rebate in but follow instructions incorrectly and thus not get the reward. This can reduce the effectiveness of a current rebate as well as jeopardize future rebate programs.

Implementing and managing a rebate program in-house can result in a significant time cost for a company. On the one hand, assigning enough employees to manage rebate tasks effectively can affect internal operations and overall productivity. On the other hand, assigning too few employees can cause processing delays and increase customer complaints. According to Entrepreneur.com., improperly managing a rebate program can create a customer relations nightmare that has the potential to damage both a company's reputation and its brand.