Are Manufacturers Rebates Better than Just Lowering Prices of those Goods - Example

Are manufacturer’s rebates better than just lowering prices of those goods? Lecturer’s Introduction A manufacturer rebate is an amount that is paid to a commodity as a return or a refund after the commodity has been fully purchased. It is a method promoting sales that company’s and marketers use as incentives to market for their products i.e. Mail-in rebate (MIR) that entitles the customer to mail in a receipt, barcode and a coupon for them to receive a check with a particular amount depending on the rebate product, place of purchase or time. They are offered by the retailer or manufacturer of the products and at times; large enterprises will work in conjunction with the manufacturers of the commodities offering two or three rebates for the purchase of a certain product. The manufactures rebate are at times valid at only a single store thus may at time be inefficient. There are no eligibility restrictions on rebates, and if a commodity has a rebate then, the customer is entitled to get their refund. Rebates commonly considered as refunds are a popular tool utilized in business for the purpose of promoting services and products and have proved to be effective. The term evolved in the 20th century from “rebaten’ meaning to deduct from the marketing technique of offering coupons that was broadly proved successful. Rebates are more successful than lowering the market price of commodities in marketing as the enable the manufacturers to market their products. Currently, the use of debates is becoming diverse (Arya & Mittendorf, 2012). The cash rebates that manufactures offer to their customers may range from less than one dollar to as much as $500 depending on the product and the retail price. Pricing It is import for manufactures to make sound and effective pricing decisions for them to realize a good market thus maximizing on their profits. Therefore, a firm makes the decisions on whether it will lower the prices of their commodities or offer rebates. Pricing and sale are the only part of the marketing mix that brings revenue to the company (Shoemaker, 2005). Once a certain price for a commodity has been set, the customers will often show a great deal of resistance of showing any attempt of changing it but the firm will decide on their prices of their commodities depending on the market demand and competition. Thus, pricing has important implications for the positioning of the product in the market. Reducing the market prices of commodities by the manufactures is essential to enhance marketing. However, rebates offered directly to the buyers by the manufactures are also essential in marketing but are effective for increasing the sales of slow selling products as well as for reducing excess inventories by a firm (Terry A. Taylor, 2002). Rebates have been the current trend used for advertising sales of manufacture in retails store. Cars electronics and other machinery seem to take a greater portion of the rebates sales. However, in the United Kingdom, they are less common and manufactures prefer giving discount to the commodities sold rather than requiring mail-in or coupons (Johansson, Hallberg, Hinterhuber, Zbaracki, & Liozu, 2012). For the customers, manufactures rebates offer a great way for them to save their money. If a firm or an enterprise has too many cars stock of a certain model and it is slow in selling as expected, then the manufacturers offer rebates that act as good incentives for the customers urging them to purchase the model. For the majority of people, when buying a car, they check for dealerships and websites that advertize for manufactures rebates. Thus taking advantage of the manufactures rebates is important as it helps customers get the best deal possible of their new cars at the lowest price possible. At other times, rebates and incentives interest rates may be combined thus attracting many customers to purchase the commodity (Zenger, 2012). Types of rebates 1) Cash rebates- they are the most common types of rebates as well as the least complicated. This entails consumers getting a refund from the manufacture after purchasing the product. Cash rebates have proved effective in attracting customers to purchase a certain product i.e. a car model. 2) Loyalty rebates- manufactures will offer loyalty rebates to customers who are loyal to the manufactures particular brand as a car brand or model. This is because the customer is already promoting and creating market for the product. 3) Conquest rebates- this is a rebate that is opposite of the loyalty brand. They are normally offered by the manufacturer to lure them away from the manufacture of their current commodity. Through conquest rebates, more consumers are pulled to the market of a particular brand. 4) Military and students rebates- military personnel will get rebates due to their proof of service. On the other hand, students will get rebates upon purchase of a commodity as a way of encouraging others to buy the product and to ask them to purchase more. Advantages of rebates over price reduction Rebates are very attractive to most of the customers as they offer a partial cash reimbursement for product purchase of a certain commodity or product that is tax-free. As a way, some customers view it as a way of income. For the manufactures, they provide numerous advantage i.e. rebates induce prospective consumers to try their product that is the way of marketing. Thus, they end up boosting the company sales, helps in relieving problems of excessive inventory of a product and as well attracting the interest from retailers who help in the promoting the product offered and expand the shelf space that is allocated to the particular good (Economides, 2012). Thus, rebates promotions are essential to help the company increase its leverage with the customers and retailers to develop a brand loyalty and enhance business among the consumers over the long run on the product. This is readily observed in seasonal enterprises and businesses such as that for the small batteries manufactures. The battery industry estimates that about a half of their products sales will occur during the holiday season, so the manufacturers announces and provide rebate programs that extend from the holiday season in to the low season of the spring and summer to enhance their market during the period (Caliskan-Demirag, Chen, & Li, 2011). A study conducted by Taylor & Xiao (2009), found that rebates are essential and effective means of establishing their product awareness rather than reducing the prices with the consumers. Moreover, information that the consumers provide on rebates forms is used for targeting future promotions for the product and other commodities. Even with the increased popularity in the recent days there are a number of challenges that have emerged. Many companies have experienced problems of honoring their rebate offers that result from the inability of keeping up with the demand. At such an instance, for such companies, decreasing the prices of the commodities is the best option for them if they are not sure of the market trends. In fact, many of the companies will offer rebates with the thought that only a few customers will bother taking advantage of them (Maille & Stier-Moses, 2009). Such kind of companies will fail to anticipate the interest of a particular offer, planning their rebate processing poorly that result to long delays for the customers in receiving their checks due to delays in sending the checks. Additional Manufacturer Benefits over price reduction Many people do not follow through the rebate process and manufacture, and enterprises have realized that. Therefore, the initial incitement motivating the consumer to buy the commodity will not cost the manufacture anything. Rather the manufacture will have a gained some profit if the consumer does not follow-up on the rebate. Example is when an item that is advertised for $2.50 after a $1 rebate is really $3.50 at the checkout all for the benefit of the manufacturer. Gathering that 1 dollar up will require extensive paper work and a 37 cents or more for mailing the dollar. Thus, the rebate becomes so tiresome to get, and many of the consumers will not prefer following it as it is a waste of time. Manufacture will end up enjoying all the profits. For price reduction, manufactures, and companies will suffer a straight loss as commodity prices are reduced even before the purchase of the products (Bruce, Desai, & Staelin, 2006). As a result of the mix-ups in processing and the anticipated delays in processing, consumers tend to consider rebates as sleazy marketing tactics. Thus, fewer consumers base their purchase decisions on rebates as at times it provides 100 percent profits to the companies and manufactures. However, the customers can increase their chances of receiving such rebates by providing all the documents that are necessary to process the money as well as by reporting any problems to the Better Business Bureau, to the attorney general or the Federal Trade Commission. (Davis & Millner, 2005). Thus, consumers need not to buy any commodity just because it has a rebate. Consumer’s rebates advantage Many of the auto manufacturing companies offer special and good rebates products on their products i.e. vehicles. It is important for the customer to call the manufacture before purchase for the clarification of their information as well as keeping an eye on the products adds on television and other advertisement channels on the offers available. Rebates often with other string attached such as financial packages so it is essential for the customer to check the print closely before getting committed to purchase the product. Before considering the rebate, it is important for the consumer to discuss the lowest possible price. Some manufactures will offer rebates at a certain specific time i.e. batteries manufactures as discussed earlier (Maille & Stier-Moses, 2009). Therefore, the consumer needs to determine the best time of purchasing the product to get the lowest price out of the commodity. However, getting a rebate may consume a lot of time for the consumer when determining the rules to be involved, filling the paper work, cashing in checks, dropping mails as well as making the follow-ups. Thus, the process can be considered as being paid to do some extra paper work and provide personal information to the company. Therefore, there is a great effort of the rebate failing or getting lost. For the customers who are aware of this tedious process involved and their time, effort and opportunity cost above the price of such products will ignore the rebates and go the products without them or just ignore them. On the other hand, if the customer makes good use of the rebates, they will get the lowest prices of the products thus reducing the purchase price making a good deal (Shapiro & Slemrod, 2009). Conclusion It is import for manufactures to make sound and effective pricing decisions for them to realize a good market thus maximizing on their profits. A manufactures rebate is an amount that is paid to a commodity as a return or a re-fund after the commodity has been fully purchased. It is a method of sales promotion that company and marketers use as an incentive to market their products. Rebates are very attractive to most of the customers as they offer partial cash reimbursement for product purchase of a certain commodity or product that is tax-free. Thus, they end up boosting the company sales, helps in relieving problems of excessive inventory of a product and as well attracting the interest from retailers who help in the promoting the product offered and expand the shelf space that is allocated to the particular good. Rebates promotions are essential to help the company increase its advantage with the customers and retailers to develop a brand loyalty and enhance business among the consumers over the long run on the product. This makes them better than only doing price reduction in marketing products. However, many companies have experienced problems of honoring their rebate offers that result from the inability of keeping up with the demand. References Arya, A., & Mittendorf, B. (2012). Managing Strategic Inventories via Manufacturer-to-Consumer Rebates. Management Science. doi:10.1287/mnsc.1120.1626 Bruce, N., Desai, P., & Staelin, R. (2006). Enabling the Willing: Consumer Rebates for Durable Goods. Marketing Science. Caliskan-Demirag, O., Chen, Y., & Li, J. (2011). Customer and retailer rebates under risk aversion. International Journal of Production Economics, 133, 736–750. Davis, D. D., & Millner, E. L. (2005). Rebates, Matches, and Consumer Behavior. Southern Economic Journal, 72, 410–421. doi:10.2307/20062118 Economides, N. (2012). Tying, bundling, and loyalty/requirement rebates. In Research Handbook on the Economics of Antitrust Law (pp. 121–143). Johansson, M., Hallberg, N., Hinterhuber, A., Zbaracki, M., & Liozu, S. (2012). Pricing strategies and pricing capabilities. 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