45% of Mail-in Rebates Go Unclaimed in 2006

According to a CNN piece I saw earlier today, 45% of mail-in rebates went unclaimed in 2006. That is a staggering number if you think about it, and it is exactly why rebates are offered in the first place.

If only about one half of mail-in rebates are claimed, a company that offers a $10 rebate, will only need to pay $5 in discounts on average. About half of customers will get a $10 discount, and about half will get $0 - but even those customers that do not claim their rebates make their purchasing decision based upon a discount they will never receive. This leads me to my main point: mail-in rebates are a form of discrimination against lazy people. Such financially lazy people use the rebate as a way to fool themselves into thinking that they are buying something for a lower cost than they do in reality.

Discrimination against lazy people is actually a very common practice in modern society. It does not end with rebates. For example: AOL used to offer free Internet service for a month. To get it you had to sign up for service, but could terminate at any time. Of course, many people are too darn lazy to remember to terminate on time, and then KA-CHING. The same is true for a vast range of services - from "free" credit reports to various "book of the month clubs".

A millionaire that I know made his fortune by selling travel packages to affinity groups (alumni associations, churches etc.), in the days before the Internet introduced us to the likes of Expedia. In one of our conversations, this gentleman told me that soon after he started his business, he discovered that one of the most profitable things he could sell was travel insurance. To sell more of it, he moved from an opt-in system - where he offered people the option to buy travel insurance, to an opt-out system - where he automatically quoted travel insurance as part of the package and gave people the option to NOT buy it. According to him, this minor change made all the difference and his profits soared. His lesson to me was simple: because people are lazy, they tend to allow decisions to be made for them by accepting a default position that is offered to them.

Lazy people let financial decisions happen to them. They make a decision, by not making a decision and thus hand control over their financial life to a someone else who may not have their best interests in mind. It is true for mail-in rebates, but it's just as true for many other other things in life. If you can't be bothered to get off your mental couch, expect people to reach into your pocket and help themselves to some of your hard earned cash.