The Rebate Explanation

A Twitter listener asks how cash-back rebates work on electronics and other items. Dave explains that it purifies the buying process.

QUESTION: A Twitter listener asks how cash-back rebates work on electronics and other items. Dave explains that it purifies the buying process.

ANSWER: If you buy an item for $1,000 and you get a cash rebate for $100, you basically paid $900 for that item. That’s how you compare price. What they are trying to do there is incentivize certain retailers to buy certain items, yet sort of protect the sticker price in the consumer’s mind. To me it’s ridiculous. Why not just take off the money and price it at $900?

That keeps the retailer from jerking around with the margins. It purifies the process a little bit but it adds to the hassle. We don’t want to fool with it.