Rebate and Switch
By Myrlande Davermann

(FORTUNE Small Business) – REBATES WOULD SEEM TO BE THE PERFECT SALES TOOL. The promised savings bring in customers, many of whom never claim the rebate that drew them. University of South Carolina professor Timothy Silk estimates that rebates can boost sales at least 10%, yet only one-third of customers who intend to claim a rebate do so, thanks in part to the maze of delays and paperwork that greets them.

But customers and consumer watchdogs have caught on. In late April the Federal Trade Commission launched an investigation of XM Radio for its lackluster approach to honoring rebates; XM's stock fell 5.5% the day of the announcement. And the Council of Better Business Bureaus says that the number of rebate complaints rose from 974 in 2002 to 3,641 in 2004.

That's why any business considering offering a rebate should be aware of the latest shocking trend: honoring them. Firms including Canon, GE, and Maytag have even begun using online services such as rebateshq.com to help customers fill out forms and track their progress. The results are already clear: Last year the number of rebate complaints received by the Better Business Bureaus dropped 24%.