Alberta has announced a $36-million rebate program to encourage rooftop solar panels on homes and businesses — but a marketing professor who has studied how consumers respond to rebate offers, it's unlikely we'll actually redeem the offer.
Tim Silk, professor of marketing at the University of British Columbia's Sauder School of Business, spoke to the Calgary Eyeopener Thursday.The following interview has been edited and condensed.
Q. What is the draw of a consumer rebate? Why do we like them so much?
A: They represent savings, or at least a chance to get savings. And so when we're standing there in the aisle making our decision, we kind of look at how much are they offering off the price of the product, and they can look attractive.
Q: Typically, do Canadians take advantage of them?
A: They're very popular in North America and they're just as popular in Canada as they are in the U.S.
But when you say do they take advantage of them, the question is do they redeem? We know that they're influencing purchase but whether or not people go through the work to receive their money is another question.
Q: So what's the answer?
A: Sadly, we're not very good at this. You would assume that we just follow through with the effort that's needed, but unfortunately if we don't have a chance to redeem right away, we can procrastinate, we can delay, and it introduces a whole host of things that could interfere.
And while people will tell you that they have a strong motivation when they buy that they're going to redeem the rebate, the actual redemption rates are pretty low, oftentimes less than 10 per cent. Sometimes less than one per cent of people actually follow through.
Q: What are those factors that typically interfere with that initial intention?
A: A big factor is actually the length of the deadline. Conventional wisdom would say the longer you give people to redeem, the more likely they are to get around to it, but what we showed was actually the opposite.
The redemption rates were actually lowest when you gave people the most amount of time. The redemption rate was actually the highest amongst those that you only gave one day to redeem the rebate. In other words, if I don't allow you to delay and I kind of force you through a deadline to act quickly, you're actually more likely to follow through and get your money.
Q: What about whether or not it's a big ticket item, like solar panels? Does that make a difference?
A: What we observed in our studies with real people and real products was that the size of the rebate had a big impact on purchase rates, so the bigger the rebate, the more likely you were to buy the item, but the magnitude of that effect did not carry over to the redemption.
Q: Are rebates program a good use of government money?
A: The government's goals or objectives might be a bit different from a retailer or manufacturer. I think the government would probably want to encourage redemption. They would like to put the money in the hands of the consumer that's going to buy the solar panels.
There's things that can be done in the implementation of the rebate, but we've also got to recognize this is a bit of a failure on our own part, a bit of a failure in human nature that we don't follow through.
With files from the Calgary Eyeopener