The Palm Beach Post recently ran a story about rebates and how frustrating it can be to redeem them. The article reprints the famous strip in which Dilbert confronts the three-headed Rebaterus monster and finally gives up trying to get his money.

Rebates aren’t something most small business have to concern themselves with, and they certainly aren’t part of Zavee‘s model. Nevertheless, they are an interesting touch point between marketer and customer. How large companies handle the complex questions about rebate redemptions may have implications for how smaller businesses deal with analogous situations in which the cost of making a customer happy may be to lose her altogether.

Consider what happens with a rebate: On the one hand, the marketer is willing to pass along an amount of money that may be significant both in absolute terms and as a percentage of the purchase price. This should create a positive interaction, especially for rebates that result in, say, a mobile phone costing the customer zero out of pocket. On the other hand, a redemption process that the consumer views as overly complicated or simply unfair can leave an unpleasant aftertaste and potentially threaten a relationship that may just be beginning.

Marketers have a legitimate reason for making the redemption process at least somewhat complex: preventing fraud. Fake bar codes and forged receipts are only two of the ways companies could be preyed upon if redemption were too easy. Moreover, some non-redemptions, or “breakage”, is attributable to consumers’ own inability to follow directions, such as mailing in the rebate by the deadline. Unfortunately, it is difficult for the consumer to differentiate between redemption strategies that are designed to protect the company (and, ultimately, consumers), from strategies that are expressly intended to increase breakage. And consumers do not seem inclined to give rebate marketers the benefit of the doubt.

We haven’t seen a great deal of discussion about the potential impact on customer loyalty of rebate redemption strategies, and we think there a great many unanswered questions. Here are a few that we hope loyalty professionals will consider and talk about:

• If a consumer comes away from the rebate redemption process convinced that the marketer was attempting to (or did in fact) prevent her from redeeming her rebate, how long does that ill feeling remain? What are the variables that determine whether the consumer chalks it up to lessons learned or is lost to the marketer forever? Assuming that a given rebate redemption strategy will result in some loss of customer business, how do marketers calculate those losses in determining the ROI of a rebate program? Does the breakage always pay for the lost customers?
• Do marketers take into account the propensity for frustrated consumers to share their experiences with their social graph, e.g., on Facebook and Twitter? What steps are marketers taking to participate in the conversation with consumers, e.g., to explain how the marketer’s redemption strategy reduces fraud and keeps rebate programs alive?
• What are the fulfillment industry’s goals in structuring rebate redemptions? More specifically, is maximizing breakage an overt goal or merely an inevitable byproduct of loss prevention strategies? Is it reasonable for consumers to expect that marketers are capable of balancing their desire to prevent fraud with the customer’s desire to receive the rebate without undue difficulty or delay? Some companies have taken steps to make the redemption process easier, without changing the underlying eligibility rules, by walking consumers through the process on their Web sites. Is this the wave of the future, or do these marketers have unique reasons for making redemption easier?

At Zavee we don’t have answers to any of these questions but we hope the loyalty industry recognizes their importance and gives them the consideration they deserve.