Rebates

Mac Lorenz C. Santos

11481684

MKG501M – G01

Exercise # 3

Rebates are refunds paid to consumers after a purchase. This is a cash back guarantee for customers. Sometimes, manufacturers prefer to offer rebates instead of directly lowering the price of the product. Lowering the list price will only appeal to those individuals who look for the best bargain. Lowering the price may further lower the profit of the firm in the long run since customers (regardless if they look for the lowest price or if they are willing to pay a high price) pay a lowered price.

Due to this, rebates are then offered by firms in order to satisfy both types of customers and at the same time maximize their profit. Offering rebates on a product will appeal to individuals looking for the best value for money since even without lowering the price, there still is an added value if the customer buys the product. They are willing to exert extra effort into finding a product that offers the best value for their money. On the other hand, individuals who do not really care for the rebate will still be willing to purchase the product since they believe that the product is worth the offered price. These individuals do not need the additional incentive of the rebate in order for them to buy the product. In both instances, rebates appealed to both kinds of customers. With this way, a firm can increase and maximize its profit.

Reference:

Perreault, W.D. Essentials of marketing: A marketing strategy planning approach.