REFUNDS AND REBATES

A refund can be defined as a repayment of total money paid for

purchase whereas the rebate represents repayment of the part of
the money paid for purchase.However both of these words can be
used interchangeably in the real world of marketing.
The various objectives behind the usage of refunds and rebates
can be
 Encourage trial of the new product(very effective in this

objective).
 Purchase the increased quantity .

 Increasing the frequency of the purchase .

 Encourage the customers to purchase the product whose

purchase can be postponed mostly consumer durables as A.C and

refrigerators etc.
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- Consumers look at refunds as rewards for the purchase and
thus it builds brand loyalty for the company.
- It also helps in dampening the competition for the while in the
market ,due to overstocking the products and thus reduces
demand for the product in short interval of the time.
- It is very useful in situations when there is little or no
differentiation between the brands.
- It works very well when the product is good but having low
market share.
- It again works well when a product is introduced in new
geographical areas.
- Highly accepted tool in convenience stores .
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So in aggregation we can say that the refund or a rebate
offers are generally found in having active role in fulfilling
following objectives.
• To guarantee trial of the product.

• To reward loyal customers.

• To load consumers.

• To increase purchase frequency.

• introduce new products .

• Selecting new markets.

• To encourage the purchase of related products.

 ADVANTAGES AND DISADVANTAGES
Advantages
- It excites customers at a relatively low cost.
- A higher percentage of customers forget to claim their refunds
unless the amount is very significant. This phenomenon of
forgetting is known as Slippage hence an attractive offer can be
made again at low cost.
- Some refund offers are associated with a single purchase
whereas some are attached with several multiple purchases, in
both the cases proof of purchase are required to claim the
refund ,this ensures that marketer pays only when claim is
shown.
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These various reasons why customer forgets to redeem the refund offers
can be- they forget, they lost the claim form or the process of claiming is
cumbersome and time taking etc.
- Consumers generally perceives refund offers as the rewards and thus the
brand loyalty increases. refund offers when combined with trade
incentives can help in gaining in store displays.
Disadvantages
-If the refund offer is not large enough to increase sales significantly ,the
profitability may be hurt badly.
-They are often used by the customers who would have otherwise
purchased the product(Attraction to scheme only not the product).
-For immediate salesperson refunds are not very useful.
-Difficulty in collecting proof of multiple purchase often discourages the
customer participation.