Rebates are usually price cuts given to the consumers by the sellers of goods with the aim of improving the company’s sales. Huge sales due to rebates will also have the effect of reducing the stockpile up in the company. Rebates can be in cash, minimal rates asset funding in the case of property acquisition. Rebates can be offered to consumers and even retailers. The catch in rebates is that one should fill up the rebate form within the stipulated time so that it does not expire. Generally most rebates are in cash form. Effects of rebates on the company The nature of rebates of any kind is to increase the company’s sales.
This in essence is a good thing to the company’s bottom line business. Rebates make companies engage in price competition i. e. a price war. This is beneficial to the consumer because he is able to have a wide variety of quality goods at a competitive price. It also helps in price check in that it prevents companies from overcharging the customers. Although this could have a flip side as we will see later. As seen earlier most rebates are in cash from rather than price reduction. This form of pricing tends to confuse the customers that they are being refunded their money.
If a company was to use a price reduction itself, it would incur cash losses immediately as compared to cash rebates, which takes months to be redeemed and even in most cases, they are never redeemed. Rebates can be helpful to the company if used in a proper and ethical way. Rebates results in a pricing scheme similar to promotion where the company offers rebates on for example stock that are slow moving. Rebates can also be beneficial to the company in that it is able to use the money used to pay rebates when the consumer have not redeemed them.
This is due to the fact that the redemption of these rebates usually takes a long time. Ethical issues involving rebates Rebates have generated a lot of debates on their ethical nature and if the companies issuing them really are honest about these rebates. Some companies are rebates to stifle out competition; this is where large multi-corporations offer huge rebates for their products and services. There have been instances where companies receive huge rebates from manufacturers and fail to disclose these receipts.
This is exemplified by Medico, who did not disclose to their clients that they were receiving huge rebates from the manufacturers. This raised the question of ethics. www. washingtonpost. com/anpdyn/articles/A5845-200may05. html Rebates not disclosed are in essence kickbacks. Kickbacks are those cash receipts that a company receives through “blackmail”. Any rebate that is not disclosed by the company to the consumers is taken to be kickback and it is unethical and unlawful. Companies can inflate prices and then offer rebates which leads to high consumer prices.
Quality of the goods can also be compromised. Rebates may make smaller companies retort to low quality products in order to stay afloat in a situation where big companies offer huge rebates which may affect the market existence of small firms. Percentage of rebates paid The percentage of rebates actually paid by the companies offering them is usually minimal. This is due to the fact that the rebates are naturally designed not to be redeemed at all. Companies offering them usually wish they are never redeemed. This is explained by their long redemption period and stringent conditions.
They are usually written in small print so that in a hurry one can forget some conditions. Many of the rebates also get lost in mails and they are never refunded, as these companies take no liability over the refund cheques. Company that can use rebates A company like Home Depot can use rebates on a wide range of its products. Home Depot deals in a wide range of home appliances. It can use rebates on the slower moving goods to boost the sales of those goods. Since rebates tend to instill customer loyalty, because consumers view as they are being rewarded by the company.