The Consumer Psychology of Mail-in Rebates: A Model of Anchoring and Adjustment

Abstract:     
Consumers who buy a product intending to use an accompanying mail-in rebate often do not redeem the rebate. To explain this behavior, we argue that consumers use an anchoring and adjustment approach to predicting the likelihood of redeeming a rebate. In keeping with previous research on anchoring and adjustment, for instance, we show that when presented with a desirable product, consumers anchor on scenarios of successful redemption and adjust insufficiently for things that could go wrong in the redemption process.

However, we also propose this anchoring and adjustment process is impacted by a consumer's motivation to purchase the rebated product. In particular, we propose the anchor employed will be driven by the valence of a consumer's underlying motivation. Specifically, a consumer that is motivated to purchase the product will anchor on scenarios of successful redemption while a consumer that is motivated to avoid purchasing will anchor on scenarios of failed redemption. We also propose that the degree of adjustment consumer's employ will be driven by their strength of motivation - i.e., the stronger the motivation, the less the adjustment to the motivational anchor.

Consequently, mail in rebates either can serve to enhance or to dampen purchase intention depending on a consumer's underlying motivation. In other words, rebates offer consumers a means to justify a preferred course of action. Across a series of three studies, we show this to be the case.

Keywords: mail-in rebates, anchoring and adjustment, debiasing

JEL Classifications: M30, M31

Working Paper Series