Rebate (marketing) - Redemption Rate Inconsistencies

Redemption Rate Inconsistencies

It is difficult to get an account of redemption rates from most rebate companies, partly due to a reluctance on the part of rebate fulfillment houses to release confidential business information. Among different sources, radically different numbers on both ends of the spectrum can be cited. Part of the reason is that most "redemption rates" do not distinguish whether they are calculated as part of total sales or incremental sales.

• PMA, a marketing firm, estimated that in 2005 $486.5 million worth of rebates were redeemed. The redemption rates averaged 21.1% when calculated as a percentage of total sales, and 67.6% when calculated as a percentage of incremental sales. They go on to note “These statistics reveal that redemption rates calculated as a percentage of total sales can be misleading when diluted by non-incremental sales, consequently making redemption rates appear lower than they truly are.”
• Not all buyers remember to mail the coupons, a phenomenon known in the industry as breakage, or the shoebox effect. Though it can be used interchangeably with breakage, slippage is the phenomenon when a consumer has their rebate fulfilled but they lose or forget to cash the check. Some rebate companies could tout a higher "redemption rate" including the breakage, while not calculating the potential slippage of uncashed checks.