Please note: This site's design is only visible in a graphical browser that supports Web standards, but its content is accessible to any browser or Internet device. To see this site as it was designed please upgrade to a Web standards compliant browser.
Signal vs. Noise

Our book:
Defensive Design for the Web: How To Improve Error Messages, Help, Forms, and Other Crisis Points
Available Now ($16.99)

Most Popular (last 15 days)
Looking for old posts?
37signals Mailing List

Subscribe to our free newsletter and receive updates on 37signals' latest projects, research, announcements, and more (about one email per month).

37signals Services
XML version (full posts)
Get Firefox!

Proof that coupons "work" for companies

29 Apr 2004 by Jason Fried

Only 5,000,000 songs out of a possible 100,000,000 songs have been claimed so far in the iTunes/Pepsi free song giveaway. I’d be interested to see if Pepsi’s sales were up over the same period. I know I bought a few Pepsis instead of Cokes because of this promo.

Seems like this could be a good case study for the effectiveness (and higher profitability) of offering coupons and rebates instead of instant discounts. Offering them gives the perception of a great deal, but the low level redemption makes good economic sense for the manufacturer. It’s like having a sale without actually having one.

How often do you buy something with a rebate but forget to redeem it?

16 comments so far (Post a Comment)

29 Apr 2004 | Justin said...

I know Starbucks has done well from their chargable gift cards. They expire if you don't use it and they have your money. Most people don't use every penny on those things, and very often the account becomes revenue without actually having to serve a beverage. It's been very successful for them.

29 Apr 2004 | Matt Haughey said...

It's great they shared the data. I was eager to see why kind of redemption numbers they'd get.

For me, I think this doesn't illustrate how little people turn in coupons/rebates but how many folks are technically proficient enough to even redeem the prize.

Think about it, you need:

- to have an interest in music so much that you'll go through the process to get just one single

- to own a PC or Mac modern enough to run the latest iTunes reliably

- know how to install software on said computer

- know how to navigate your new software to redeem your coupon (you have to go to the music store, then click on the icon to redeem, not totally intuitive)

- learn how to use the new store interface to find the song you like

- go through the apple user signup and login process

- have a fast enough connection to download your new 2-5Mb single

- have the means to play the song on your computer

Now, think about grabbing a phonebook from any city in the US, say Montana. Now imagine going to page 143, then picking a name. Call them up and ask them if they know how to do all these things. If they answer no, then go to the next name in the phonebook. I'd be surprised if you got yes 5% of the time.

When you consider just about everyone from every walk of life in the US can readily find a bottle of pepsi and buy it, I'm not at all surprised that only 5% were interested and technically aware and adept enough to go through the process.

29 Apr 2004 | f5` said...

How often do you buy something with a rebate but forget to redeem it?

Never. Really, who forgets to send a rebate in? Rebates are generally for high-priced items, no? And at a lot of retail that regularly uses rebates as part of their pricing, you're usually very aware that the rebate is what's getting you that low low price.

29 Apr 2004 | jkottke said...

A few years ago, I worked (on behalf of my employer) for a company that did online rebates and promotions similar to Pepsi's iTunes promo. My memory is a bit fuzzy, but redeem rates for rebates are usually pretty low, usually around 5% and certainly less than 10% (depending on the amount to be redeemed, ease of redemption, etc.)...which is why companies do it. They count on that low rate of redemption. A $25 rebate on a $100 DVD player will entice people to purchase the product (25% off!), but if the redemption rate is 5%, then from the company's perspective, they're only losing $1.25 on each $100 sale, which (in theory) can easily be offset by the profit margin on increased sales due to the promo.

29 Apr 2004 | Brad Hurley said...

Really, who forgets to send a rebate in?

Actually I think it depends on the amount of the rebate. Sometimes I'll buy something that has a $5.00 rebate and I won't bother to claim it because it's not worth my time to sit down and fill out the claim card, find a stamp, etc., especially if the claim card doesn't give me an option to prevent the company from selling my name and address to junk mail lists.

29 Apr 2004 | nick said...

Really, who forgets to send a rebate in?

I do. All the time. I think I've successfully gotten a rebate about twice. As for the ones that I forgot to send in before the expiration date, lost, et cetera, they probably add up to well over a month's income. Which is wholly upsetting. The consequences of poor organization and laziness, I guess.

30 Apr 2004 | pb said...

who forgets to send a rebate in?

PRactically everyone. Maybe they don't "forget" but they don't do it on average.


30 Apr 2004 | matt smith said...

I can't speak for the entire nation, but here in LA, at least, the bottle caps weren't even available for about 2 months after the announcement, and I was discouraged to seek out Pepsi after the fourth or fifth time looking for the caps and not finding them. The ads faded away, and I assumed that iTunes caps in my area were DOA until I finally found one about 3 weeks ago.

I'm not trying to poke holes in your theses, but it seems that distribution was a major failing of this promotion.

30 Apr 2004 | jake said...

I also never saw a single cap in Connecticut. I wasn't looking particularly hard, and I don't usually just buy a bottle of soda when I already have plenty at home, but I still didn't see any.

I'm really surprised it's only 5%-10% for rebates. I always send in my rebates. It's the whole reason I'm buying the product from that particular place, etc. Of course, when trying to get out of debt, every little bit helps.

In fact I bought one of those cheap crappy DVD players with a rebate last year and when it broke and Best Buy, incorrectly, told me they weren't getting any more in I decided I didn't want to watch movies on my PS2 and I just upgraded. They say won't honor the rebate even though they screwed up, but I fought it and right now it's under review. So I guess I'm really in the minority... ;)

30 Apr 2004 | Darrel said...

Yea, reabates are pretty much a bait-and-switch tactic...especially when there are multiple rebates on one product. There are times when you can't even claim both. On top of the percentages that don't bother with rebates, there's also the precentage that fill out the rebate incorrectly, again reducing numbers of actual claims. Don't forget that they have your rebate money for those 3-6 months it takes to get it to you as well, earning interest for them.

As for the iTunes thing, the rebate thing is probably one issue, but so is the fact that it's often still easier to download the song off of P2P then deal with any DRM from an iTunes song.

30 Apr 2004 | Don Schenck said...

I hate hate HATE rebates. They are a ripoff and I'm sure that many times they never send them (the checks, that is). Bastards.

30 Apr 2004 | Ryan Mahoney said...

FYI, the industry term for what we are discussing is "breakage", the concept that a relatively small percentage of people that get a coupon or rebate actually use it or, frankly, jump through the hoops that are often associated.

30 Apr 2004 | Don Schenck said...

Yeah, well I'd like to "breakage" the people that foist this insiduous cancer upon us.

I do my best to avoid rebates.

I'm feeling aggressive today. Better hit the gym COME ON 64 DEGREES (water temperature in Maryland) I WANT TO SURF!


(sorry; I feel better now *smile*)

01 May 2004 | Carl Mangold said...

In my opinion, one of the biggest reasons for the low redeem rate is that only youngsters are interested in downloading one single song.

03 May 2004 | One of several Steves said...

Never. Really, who forgets to send a rebate in?

The overwhelming majority of people who qualify for them. I can't find a quick link, but it's a story that makes the rounds in the business press every year or two. They either don't send them in, or send them in improperly.

It's a big reason why companies offer rebates instead of discounting their prices. Because they know they're still going to get full retail on the bulk of what they sell.

18 May 2004 | johnza said...

Great question about the power of couponing vs. other promotion. It is totally true that actual fulfilment rates of coupons are very low. And that should be good from an economic perspective. but you wonder if over time that simply reduces their brand effectiveness.

Also note on the comment above that on the Starbucks and any other stored value card they don't keep any unclaimed dollars, and they don't get to count them as revenue until coffee is bought. By law now, they have to give this back to the state at some point. They don't even get to keep much of the float on the dollars. Their motivation is entirely to keep people buying and giving and to keep the brand top of mind.

Comments on this post are closed

Back to Top ^