Most Outrageous Rebate Offer Ever

By on February 1, 2005

I stumbled upon this while looking for a deal on TurboTax. I honestly cannot believe they expect customers to spend $300 and then wait 12 weeks for them to send back $270. Then they throw in this little gem:

Note: Some rebates in this Tax Software Bundle are UPGRADE / COMPETITIVE UPGRADE rebates. Please review those rebate coupon for detailed information.

I won’t even get into the fact that my Mac doesn’t need half the stuff they are offering for “free”. What a bargain.

Gadgetopia

Comments

  1. Yeah, so, ever wondered why? It’s a smart business move. Now, you’re right that some people gasp are stupid. And so the company makes money on those fools who still aren’t bright enough to shine thier little (really little) lights on the small print. But what of those who actually do get their money back? On them the company has to not only pay for the rebates, and thus the cost of the merchandise they give away, but the stamp on the envelope, and the costs of having people make them out, the office, the equipment, etc. So why do it? Because of the power of compound interest! Both what they can earn, and what they can charge. Here’s how it works: the store offers a deal that gets some people a bunch of free stuff. But since the stuff is free after rebate, they get to keep your money for a little while. So they put it in the bank, get a little interest, and then send it back. Well, if you sell $270 worth of rebate stuff to 7,000 people a day for a week you’ll raise THIRTEEN MILLION TWO HUNDRED THOUSAND DOLLARS! CHA-CHING!!! Now, if you take that money and invest it for 8 weeks in a mixture of high performance, high risk, and moderate yeild low risk stocks, you’re pretty much guaranteed to either make a bunch of money or at least break even. Either way, with that kind of lettuce you get a damn good dressing (when you put it in the bank, you’ll get a great interest rate) at the end of the 8 weeks. Even two weeks of that kind of interest on that much money will pay off costs, even if you only broke even. But wait, there’s more. Since the average consumer can’t afford to whip out $270 for “free” anything just to get the $30 whatever they need, they turn to the store for FINANCING! Most people are absolutely loathe to pass up anything “free” and so in order to afford it, they get a store credit card. So the store hooks them up, assuming they meet the credit criteria, with a high interest store credit card. But not to worry – there’s 90 days 0% interest! Oh yeah, by the way, that’s 12 weeks. Coincidence? I think not! See, the store knows that most people will only make the minimum payment during the 90 days/12 weeks while they wait for their rebate check, and they know that most people will NOT pay their bill early, so even though the store reimburses you for the $270 you spent that they loaned to you, they will get to charge you about 12% APR on that money for one month. In other words, they’ll get to charge you $2.70 in interest. Well, that doesn’t seem like much but remember they’ll get to do this to about 60% of the 49,000 people who went for the deal in the first place, which will raise $132,000.00 in cash revenue, or about a day’s business for a single store location in a mid sized market – nothing to sneeze at. In addition, about 10% of those 49,000 people will be stupid enough to carry that balance a few months because they spent the rebate check on something else. This will earn them compound interest for, say, an average of 4 months interest. So that’s another 40 grand or so. Now add to that the fact that they actually chaged the manufacturer of the product they sold an advertising fee since they advertised the product nationwide, which is probably another 10 grand, which they probably justified as “contributing” to the rebate, and you’ve got about $200K in sure profits, and very likely around another $200K if you got even 9% compound in the stock market for the 2 months the rebate money was invested. So now you’ve got about three good solid days of the kind of revenue a store would produce, without building or staffing the stores. And all this from this one promotion! And then, to top it all off, there’s the coupe de e’tat, the creme de’la creme, the crowning glory of this achievement: customer loyalty, and increased future spending. You see, this whole exercise on the store’s part has been designed to sperate the suckers and the credit unworthy (usually one and the same) from the credit worthy cash cows, make some fast cash on both, and bring back those cash cows, ready to spend. The store knows that any customer with their credit card is likely to spend twice as much as any customer without it when shopping for the same things. And they know that credit card holders are five times as likely to reply on a survey that they are satisfied, loyal customers, and that 99% will continue to shop at the store so long as they have credit there. And when they shop, they’ll use their card, and on the card, the store can charge compound interest! So the whole idea was to make a lot of money at getting credit cards into the hands of shoppers. Now, why tax software? Well, who buys it? Only the kinds of people who do their own taxes. And those are just the kinds of people to watch their money closely, and therefore, the kind of people to be very likely to have good credit. Now, go get your BA in business… :)

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