Dell to Eliminate Most of its Rebates (DELL)

| About: Dell Inc. (DELL)

By Carl Howe

Dell (NASDAQ:DELL) announced Thursday that it will sharply cut rebate promotions after its customers complained about them. This story from Yahoo tells it all:

Dell said it expected to reduce the number of promotions for U.S. consumers and small businesses by about 70 percent per product line. Promotions tied to a single product would fall by 80 percent, it said.

The reductions will be implemented over 12-to-18-months, beginning in August with the Inspiron notebook computers and Dell televisions.

"People hate rebates," said Cindy Shaw, an analyst at Moors & Cabot Capital Markets who has a "sell" rating on Dell stock. "This is a good move for Dell."

Dell is following the lead of other companies like Best Buy (NYSE:BBY) and OfficeMax (NYSE:OMX) in ditching the rebate. And for good reason. While rebates often appear to boost revenue for vendors because many consumers never bother to redeem them, they are actually bad marketing. Why? Because consumers have figured out that they border on a scam (particularly those companies that require you to submit receipts, call multiple times and wait six weeks to six months for the rebate), and they transfer that opinion to the brand. The result: short term profits followed by long-term brand decline. Not exactly the way you want to spend your marketing dollars in today's economy.

So kudos to Dell for getting on board with eliminating rebates (although taking twelve to eighteen months to do so feels like they are not exactly embracing this as an urgent initiative). Now if they can just fix their appalling consumer customer service, they might start to reverse their brand erosion. But never fear. Once Dell stops being the most hated tech company for its rebate policies and lousy customer service, we can always start in on the cell phone companies.

DELL 1-yr chart:

DELL 1-yr chart

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