Thursday, October 04, 2007 Cashback Turmoil

12 months free on a 12 month contract. Sounds familiar? Sounds too good to be true? Well, it is now.

While checking my emails, an email from popped along in reference to my wife's phone. I was expecting this to say that I would expect the first cashback installment. But lo and behold, they cannot give the cashback.

Being an early adopter of this cashback philosophy, this email from may see the beginning of the fears for other companies and spell disaster for those caught up in cash back contracts.

So how does this work and how come they cannot pay the cashback? This can be answered in a letter from stating:
"...we adopted a 40% redemption model. This model was based on the business assumption that only 40% of all customers would claim their cash back. This model, however, proved to be wrong as the redemption actually was approximately 80%. As a result the company’s financial resources were drained."

The question is how many other companies are potentially affected? This is unknown, but is a growing trend for mobile phone businesses to lure customers. The result can spell be disaster, if this news spreads quickly.


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