Cashback – what’s that all about?

Giraffoto

I don’t understand who benefits from this arrangement (apart from me). I’ve just bought a couple of nice new Nikon dSLR bodies with a “cashback” promotion. This means that I pay the full price, register with Nikon and they send me a pre-paid Visa card with £50 on it for each one. Which I’ll almost certainly spend on petrol, but still . . .

Why not just knock £50 off the price? How does Nikon benefit from this arrangement, or the shop, or Visa, or the petrol station? Why do it this way?? Don’t get me wrong, I’m grateful for a £50 discount, but why do they do it this way?

me-109

Manufacturer's promo so retail outlet still maintains its profit from each sale and its turnover.

jibberjim

The tax man benefits too... (VAT paid on full price not the discounted one)

It's odd, but it's clear that the marketing folk think it drives more sales, although it's more common in north America than here.

veronese68

There is probably a percentage of people that fail to register for the promotion so the £50 is not always paid out.

4kicks

it actually is a good measure of how much the manufacturer reckons your purchase data and information is worth for future promotions and to understand more about their current customers.

MountainMonster

I'd echo 4kicks post.

It is mostly due to data collection, they can add you onto their newsletter and target you for other promotions in future. Data on consumers is extremely valuable these days.

verylonglegs

It's nothing to do with collecting data, cashback offers of this kind have been around for many years, long since before data collection had any value and besides no company in it's right mind is going to give you £50 for your name and address.
Jibberjim and Veronese are correct, it's a predominantly American thing. I once stood in a electronics shop in the US with a work colleague many years ago, he wanted to buy a PC graphics card whilst we were over there but the ones he wanted all had big dollar discounts on cashback rather than just low prices, not much use as a tourist. It's not something we'd seen in Europe so he asked the shop assistant about it and he said quite openly it's because American consumers were lazy and less likely to actually return the form.

southdownswolf

Whilst there may be various uses, collecting data is a main reason for cashback as are extended warranties. Offering a 3 year warranty instead of the standard 1 year enables a manufacturer to gain the end users details. Normally the manufacturer would not know the end users as the shop makes the contact. These details can then be used for targeted advertising.

RDW

Probably all of the above. The Nikon cashback I used a few years ago was pretty straightforward, but with a Samsung tablet there were more hoops to jump through to get the cash, including a fairly complicated website registration process that had to take place in a specific date window. The catch was that the window didn't open until some time after the purchase was made, so I imagine they'd figured that a fair proportion of purchasers would forget. As for data collection, even if your details aren't worth £50 to the company it may still be worth them setting things up this way rather than a straight discount - if it's promoted well, a cashback can be nearly as attractive as a discount, so they'll get additional sales AND your details. The warranty thing is also clever - with most products, the retailer is probably obliged to provide extended support in any case, even if you don't have this in writing from the manufacturer.

morstar

In addition to points already made...
If the seller reduces the price by £50, this is £50 less in their pocket. If they supply £50 worth of goods (or credit) to that value, the seller is only incurring the cost of the goods, not the face value.
With a credit arrangement, there will also be a hope/expectation that additional purchases will be made.
You perceive a £50 benefit. It costs the supplier £25 but the promotion has hopefully secured some sales that might otherwise not have converted and there is a good chance they'll make at least a little bit of that £25 back elsewhere.

triban

i imagine in cases like this it allows the manufacturer to clear stock that is not selling well without damaging the perceived value of the product. So, instead of dropping the price which could deflate the market for items of similar spec and make it difficult to put the price back up, they just give you credit on a visa card and hope you never spend it.

The Mechanic

A word of warning. Prepaid Visa cards are a pain in the neck. I was given three by some work colleagues for my birthday. You have to use them in their entirety, no change given. You can't use them for part payment and they are really only useful on line as you have to register the cards and then you get a visa card number and pin. I have yet to see an online retail site that lets you use more than one card for the same transaction so only one can be used at a time. You can't go to a shop with just a number and a pin. They want to see the card but it is, in fact, not a card as such. You can "cash them in" and get the money paid into your bank account but they take a percentage for their trouble.

Giraffoto

The Mechanic wrote:

A word of warning. Prepaid Visa cards are a pain in the neck. I was given three by some work colleagues for my birthday. You have to use them in their entirety, no change given. You can't use them for part payment and they are really only useful on line as you have to register the cards and then you get a visa card number and pin. I have yet to see an online retail site that lets you use more than one card for the same transaction so only one can be used at a time. You can't go to a shop with just a number and a pin. They want to see the card but it is, in fact, not a card as such. You can "cash them in" and get the money paid into your bank account but they take a percentage for their trouble.

Mine was great - thank you Nikon! I took it straight to the petrol station and put £50 of petrol in. Card in the slot, type in the PIN, no trouble.

Mr_Cellophane

I got a pre-paid card from BA after being bumped off a full flight. Best part of £1k on it. I managed to clear it all off, although the last couple of £1s were a pain to spend.

Dave L

The Mechanic wrote:

A word of warning. Prepaid Visa cards are a pain in the neck. I was given three by some work colleagues for my birthday. You have to use them in their entirety, no change given.

If you use Amazon quite a lot, as I do, what you can do is buy an email gift card, with yourself as the recipient, (which can be any amount over £1 (eg £57.01). Then if you buy something over the amount of the gift card, you can part pay with that, and pay the rest with another credit card.
I recently bought a Nikon DSLR which had £100 cashback and used that to buy a lens from Amazon. (Which had another £20 cashback).

markhewitt1978

I remember looking in an electronics store in America (must have been 2002/2003) and they had stickers on each item saying what the full price was, and then the price after cashback. Does seem a strange way of doing things I wondered if it was some sort of tax scam.