Rebates and warranty cards: Marketing gimmicks galore

Tuesday, April 18, 2006 by Mike Adams, the Health Ranger Editor of NaturalNews.com (See all articles...) Tags: computer industry, marketing gimmicks, computer equipment

Did you ever wonder why so many products are sold with rebates? Whether you're buying computer equipment, monitors (LCD or otherwise), hard drives or just regular office equipment, it seems like everybody has this lower price advertised, but you have to apply for this rebate. You might wonder, "Well, why is this going on? Why is everything sold with a rebate? If the manufacturer is going to give me this $10 back or $20 back, why don't they just lower the price?"

Here's the answer, and this tells you a lot about the marketing behavior of these companies. Number one: It creates a perception of a lower price without them actually having to give this price to all the consumers who buy their product. This is because most people won't apply for the rebate. It's simple math -- maybe only a third of the people actually fill out the rebate form. Most people buy the product and they think they're getting a better deal because the rebate is advertised, but then when they get home they forget about it or they lose the UPC symbol, or they lose the receipt and they say, "Forget it, it's not worth my trouble. It's only $10 or $20 (or in the case of a computer maybe $50)." Of course, to some people, $50 is definitely worth keeping track of all that for, but the company selling the computer knows that not everyone will follow through on the rebate anyway.

The second reason that this happens is because these manufacturers, whether they're a computer company, a monitor company or some other kind of manufacturing company, sell their products through the channel, but when you as a customer buy their product from a retailer, they don't get your name. They don't have your email address, your mailing address, your name or any other useful contact information. So, they don't know who you are, which means they can't sell your name to other companies.

But if you apply for a rebate, then they've got you. They have your name in their database, and even though it may have cost them $10 to get your name, they can then turn around and sell your name to list rental companies or other companies that are trying to sell you other computer products. They can basically rent your name over and over again, and make quite a hefty fee. They can also do follow-up marketing to you directly. They might send you a direct mail piece or an email that says, "Hey, we have a new monitor coming out, or a new computer coming out, maybe you'd like to buy one of these as well."

Beyond that, there's yet another reason why a lot of these companies use rebates, and this is a more sinister reason, and some may call me a pessimist or cynic for saying this, but those who have applied for these rebates know this to be absolutely true. I believe that some of these companies lose or reject most of, or all of, the rebate applications that come in. They just lose them -- the mail comes and they just send it to the round file. Then it's gone, and so you, the customer, are sitting there waiting for six weeks to get your rebate. It doesn't come, you've already sent off your original UPC symbol, you really can't apply for the rebate again, and the company knows this. They know that you have no way to apply for a second time, so if they happen to just lose all of the incoming rebate applications, there's just not much people can do about it. They don't have to pay out the rebate fee, yet they can still trick people into thinking they're getting a better deal at the point of sale.

At some companies, they process your name, put your name into their database, and then they lose the rest of the process, so they get the benefits of having your name, which they can sell, but they refuse to mail you the rebate, or they send you back a rejection. "It's rejected," they say. "It's the wrong date, or it's not the original UPC code, or you cut the corner off of the barcode," or some other ridiculous excuse to not pay you the rebate money, and any of you who have applied for rebates and been rejected know this to be absolutely true. Companies do this routinely.

So in all, the rebate is really just a gimmick to get your name, to create the impression of a lower price where there is none, and to make consumers jump through hoops to try and get $50 off. This is why personally, when I shop, I don't want any rebates. I want an honest, low price on a great product that doesn't require me to fill out a mountain of paperwork, track a bunch of receipts and follow up with some company that tells me to wait six weeks for something. I don't want those headaches. It's not worth it.

This is why, when you go to a place like Sam's Club or Costco -- even though I don't particularly enjoy shopping there for many other reasons -- at least most of the computer products they have there aren't hyped with all these rebates. It's just an honest, low price. You can pick up a good computer at a great price, take it home, and you're done. You don't have to worry about filling out something and applying for rebates. But if you go to some other places, like CompUSA or Best Buy, it's rebate city -- everything's got a rebate, it seems. Sometimes, you can't even find a computer that doesn't have a rebate. What if I just want an honest, low price? Well, you can't find it there. You might as well just leave and go shop somewhere else.

Unfortunately, I believe that this practice of rebates will continue, because it fools a lot of consumers. They see the price, they think, "It's only $700 instead of $800," but then there's a little asterisk beside that price that says, "Oh yeah, by the way, after the mail-in rebate." But people don't look at that -- they just look at the price. It's that first impression -- "Oh, wow! It's only $700 for this PC. That's amazing!" So they jump on it, and then later they realize, well, it's really $800 plus tax, when it's being rung up, and then they have to apply for the rebate.

Warranty cards really only allow companies to sell your name; your products are already covered

Another gimmick that a lot of manufacturing companies use is, of course, that little warranty registration card. This is a card for idiots. If you fill this thing out, you need to go have your brain checked, because these companies are fooling you. You don't have to register to have a warranty. Products that you purchase are warranted anyway. It's called the Uniform Commercial Code, and when a company sells you something, it has to work or you can just take it back.

In fact, most retailers in the United States have a very liberal policy of refunding your money for products, so if you buy them and they don't work, the store will usually cover you, if not the manufacturer. The reason that these warranty registration cards are in the boxes for various products that you might purchase at retailers is because these companies want your information. They want your name, your address, your email address, your phone number -- they want as much as they can get about you, so they can market to you again or they can sell it to other companies. This is how a lot of companies get your name -- you fill out these silly warranty registration cards, and then they've got you.

As long as we're talking about ridiculous schemes at retailers, here's another sneaky tactic: When you go to a retail store, let's say Best Buy, and you purchase a computer, the salesperson there is telling you what an incredible computer this is -- "This is a high-quality computer with outstanding components. This is top-of-the-line." You might be spending $1,500 or a couple thousand dollars, but it's top-of-the-line, they say. This thing is a great investment for your future, they say.

And then you go to ring this thing up and they say, "Do you want the warranty plan?" Well, what's the warranty plan? They say, "Well, you know, in case it breaks, you know, for a couple hundred dollars, we'll come out and replace it." I thought you just told me this thing was the best computer in the world -- quality systems, quality components, and now you're telling me it's going to break so I should buy this other thing? Yeah, it's quite a contradiction, isn't it? Of course this happens all the time, whether you're buying a washer or a dryer or a computer, or even some small electronic gadget. These days, they're always trying to sell you this follow-up warranty.

Now, I hope that most of you reading this don't buy these things, because you know it's just a rip-off. You know that it's a big profit center for these companies. It's not that they don't honor the warranty. It's that they know that most people just lose the details. Most people who buy the warranty never, ever use it. It's just like selling health club memberships -- health clubs know that only about 10 percent of the people who join, and who keep paying, are ever going to show up. It's the same deal with these product warranties. They know only a very small percentage of people (far less than 10 percent, by the way) are ever going to use this warranty. People lose the paperwork, forget they bought it or move to another city. And then, if these companies that sold you these warranties ever go under -- guess what? Your warranty is useless because they're bankrupt. They're out of business and so much for your warranty. You're not warranted against their bankruptcy, it turns out.

So, the warranty, again, is just another profit center for these organizations. It's just a gimmick, and well-informed consumers seldom buy these things. I think in the past five years, I have purchased one, and it was for an item I knew I was going to use very heavily and that I thought would fail. That's the only time that I've ever purchased one. I had to pin the documentation on my bulletin board to make sure I would never lose it. Otherwise I knew I would lose it like all the other consumers who buy these things. But on everything else like computer components, hard drives, memory, cable routers and things like that -- forget it! Don't buy a warranty! Besides, by the time the product that you purchased breaks, you'll probably be able to buy a brand new one for the same price that you paid for the warranty. Prices are always dropping, and more and more technology is available at lower prices with each passing year.

Overall, smart consumers know that these rebates, warranty registration cards and for-sale warranties are really just gimmicks, and when you're shopping for computer components, or any kind of hardware, it's best just to look at quality products with an honest, low price, from an honest retailer. Don't fill out the registration card, don't buy the extended warranty, and you'll usually be just fine.

Where does warranty coverage end, and can computers fly?

There's a humorous note to all of this: At my last visit to Best Buy -- because I do go there quite a bit, I actually think it's a great retailer -- the person that was trying to sell me the warranty was telling me all the ways in which I could invoke this warranty for this new PC I was buying. He said, "You know, even if you drop it, we'll replace the computer, it doesn't matter if you drop it." I said, "Really? That's interesting -- what if I drop it from a second floor window? What if I drop it from the top of a tall building? Will you replace it then?" He said, "Yeah, we'll replace it."

I got to thinking... I wonder what you could do to a computer and drag it in and they would still replace it, as long as you have that warranty. I just wonder what they would do if you said, "Well, I dropped it." They would probably say, "How could this damage have occurred from dropping it?" "Well, I dropped it from the top of a tall building, accidentally." It would be interesting to find out what would happen there, so if any of you out there have this in mind, send me some pictures or even a video -- it would be great to share that with the other listeners and readers.

Until then, be a smart consumer -- don't fall for any of these warranty registration cards, low-dollar rebates or other merchandising gimmicks.