Why Use Rebates?

Rebates are widely used in the USA, however this is not the case in other countries such as the UK who would prefer to simply offer discounts at the point of sale. The question arises then, why do manufacturers and retailers use rebates, since they seem to be a complicated way of providing discounts. There are several key reasons why rebates are used:

• When a product receives a temporary price reduction as part of a product promotion or in order to move stock, ultimately once the promotion is over or the stock levels are reduced, the price for the product will be increased to its normal price point. Any increase in the price of the product will inevitably be met with a negative response from the end customer. However in the case of a rebate, it is clear that the discount is conditional on the customer sending a rebate entry. In this case the price point of the product stays the same, overcoming the problem of any customer negativity towards perceived product price point increases.
• Rebates offer companies with the opportunity to gather a wealth of information about their customers. The customer data collected from rebate entries help companies to not only better understand the types of people who represent their customer base, but also at the product level, which of their products are appealing to what customer groupings. By carefully analyzing this information, companies are better able to tailor their marketing campaigns for their target customers and also explore options for new product lines in order to reach new customer groupings.
• Rebates also provide companies with the contact information for established customers. Subsequently, companies are able to use this information as another means to market their products directly to people who have purchased their products in the past.
• There are also financial benefits for companies offering the rebates, coming in the source of unrequested rebates. A fair percentage of customers who purchase an item with a rebate offer do not follow through on redeeming their rebate, consequently the company offering the rebate is able to retain the unclaimed money.
• Another financial benefit is the interest earned on the money set aside by the company for the rebate checks.

It is obvious from the above examples that there are in fact many advantages for manufacturers and the retailers to provide rebates. Rebates also give the customer an opportunity to make significant savings on their purchases, as long as they follow through on correctly redeeming their rebate.