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Offer rebates? Make sure they stand up to legal scrutiny

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in Small Business Tax

If your promotion strategy includes rebates, make sure that they’re legally sound. Reason: Federal and state regulators are increasing the oversight of these incentive strategies and cracking down on misleading deals.

For example, the Federal Trade Commission (FTC) will look into companies that routinely pay out rebates late. By law, companies must send rebates by the time promised or, if no time is specified, within 30 days. And state officials are filing complaints against companies that fail to track or pay rebates properly.

Rebate offers can be a double-edged sword. They’re great for stimulating sales on your high-cost, slow-moving products and boosting new market entries.

But fraud risk is ever-present. Plus, if the rebate strategy is too successful, it can cut into your profits.

To improve your rebate experience, follow these four tips:

1. Offer rebates during tough times. Discounts do better when the economy is slow and worried consumers are more sensitive to price.

2. Take them online. Consumers are more receptive to rebates online, according to the Promotion Marketing Association of America (PMAA). Nearly one-third of Internet users respond to online rebates, compared to about 5 percent of respondents offline.

3. Participate in bundling programs. Join with other businesses to bundle offers into a rebate booklet. Shoppers redeem them en masse. And books make it easier to track redemption.

4. Build a defense to fraud. Reject claims that don’t meet your terms or conditions. (The feds report an increase in counterfeit or stolen “proofs of purchases” being submitted in bulk.)

Online resource: Read the FTC’s consumer alert, Taking the ‘Bait’ out of Rebates, at /rebatealrt.htm.

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