Rebates target different consumer groups and are a good short-term way for companies to boost sales (Kokemuller, 2018). This is accomplished by lowering prices or offering money back. Some consumers will feel as if quality is compromised but other will feel they are getting a great deal and that the rebate is worth the effort to obtain (Kokemuller, 2018). By moving excess, companies can reduce inventory and holding costs that could be costing way more than what is required (Kokemuller, 2018). Another advantage is the rebate can increase product visibility and take customers away from competitors. This is often present when a new company starts up or a new product is released. Another example would be season end sales and rebates.
Rebate disadvantages can be damaging to company image and long-term sales. By offering rebates and sales, companies are perceived to offer lower prices consistently even when that is not the case. If consumers become accustomed to lower prices, then it is more difficult to sale inventory at the actual required value. Perception plays a huge role in both advantages and disadvantages of rebates and sales.
Rebates are intended to influence and divide consumers into different groups. Price discrimination has allowed companies to target consumers and potentially gain more profit. Costumers are drawn into brick and mortar establishments by the allure of the rebate or sale and then may wind up purchasing other items for full price. By increasing the volume of customer traffic wither online or in store companies can stand to sell more product both on sale and full price (Leonard, 2018). A good example of price discrimination is the consumer who will be the first in line for the new product release and pay full price no matter what. This is one group of consumers. Another group will wait six months or longer for prices to drop or rebates to be offered.
Rebates work by having the consumer pay full price at the time of purchase and then mail in a form to be processed and then wait for the rebate to show up. Processing centers are used to process these claims, and many are rejected due to simple errors. Some consumers will give up but other keep on trying and eventually the claim gets processed and the rebate is received Hamel, 2017).
Studies show that when all rebates are not claimed the manufactures will benefit. On the flip side, if all are claimed then the manufacturer will not see any financial benefit. When consumers are too lazy to send in the rebate form not all rebates are claimed, and manufacturers do not pay out the rebate (Simchi-Levi, Kaminsky, Simchi-Levi, 2009). This is especially true when the rebate is a small amount. When the rebate is an instant one, for example at a car dealer, the customer receives the rebate immediately and then the dealer does not necessarily benefit (Simchi-Levi, Kaminsky, Simchi-Levi, 2009).
I do not feel rebates are unethical. Manufacturers use rebates as a sales tool that usually will decrease inventory or move product in a way that is needed. While some may feel that rebates are deceptive and can be used to pressure customers, this is perception. Consumers are responsible for their own actions and should research the pros and cons of purchases prior to making them. They should educate themselves on the best possible purchase in order to take full advantage of the rebate opportunity.
Hamel, G. (2017). How Does a Rebate Work? Retrieved from https://bizfluent.com/how-does-4743508-a-rebate-work.html
Kokemuller, N. (2018). Advantages & Disadvantages of Sales Promotions. Retrieved from https://bizfluent.com/list-6673344-advantages-disadvantages-sales-promotions.html
Leonard, K. (2018). The Disadvantages of Marketing & Promotional Strategies. Retrieved from https://smallbusiness.chron.com/disadvantages-marketing-promotional-strategies-35199.html
Simchi-Levi, D., Kaminsky, P., & Simchi-Levi, E. (2009). Designing and managing the supply chain: Concepts, strategies, and case studies. New York: McGraw-Hill/Irwin.
Rebate programs have been popular for as long as I can remember. Oftentimes people just consider rebates as sales gimmicks used to promote a company’s product. An actual definition of a rebate program is, “any kind of opportunity your company provides customers for them to get a portion of their money back.” (Incentive Insights, 2018) There are multiple types of rebate programs. An instant rebate (IR) is a rebate received at the time of purchase. It can really be thought of as the actual sales price of the product as that is all the money the consumer pays. A mail-in rebate (MIR) requires the customer to mail in the rebate form, along with some sort of proof of purchase and receives money back either in the form of a check or a gift card. Mail-in rebates can be included in the final category known as customer-initiated rebates. This is where the consumer must take some sort of action in order to received their money back. This could include mailing in a form or simply completing one on the internet and submitting it. (Chief Marketer Staff, 2007)
I don’t think rebates necessarily are used to divide customers into categories. Rather, I think they can be used as a way to attract consumers in different categories to one item. For example, Whirlpool may offer a mail-in rebate on their $2,000 refrigerator. Price sensitive customers, who wouldn’t normally be able to afford the refrigerator without it around now interested, along with those consumers who aren’t as affected by the price, but who are attracted to “steals”, along with the consumers who just want the refrigerator and they don’t care what the price is.
Supply chains can benefit greatly from rebate programs. “it induces prospective customers to try their products; it boosts company sales and visibility; it relieves problems of excess inventory; and it attracts interest from retailers.” (Rebates, n.d.) While there are many advantages for the companies who initiate rebates programs, if they are poorly managed, it can wind up being a mess. When companies fall behind in issuing rebate checks, or simply don’t send them, it affects their reputation and the consumers trust. Additionally, if the company doesn’t have those funds earmarked to go out to customers, they could run into potential cash flow issues down the road.
The only unethical thing I could see about a rebate program would be if a company advertises and sells product with the promise of the rebate, but then refuses to issue the rebate when the required customer action is taken. Otherwise, I think it’s an interesting tactic that broadens the reach of the company to different consumers who wouldn’t normally purchase the product otherwise.
Chief Marketer Staff. “Rebate Strategies”. (August 1, 2007) Chief Marketer Website. Retrieved from: https://www.chiefmarketer.com/rebate-strategies/
Incentive Insights. “Pros and Cons of Rebates for Companies”. (November 15, 2018) Incentive Insights Website. Retrieved from: https://incentiveinsights.com/pros-and-cons-of-rebates/
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