Business Studies

Please rewrite case study in your own words and add 4 different sources in APA (2017-2022) format with Doi format and 1 biblical source… only keep Simchi-Levi, D., Kaminsky, P., & Simchi-Levi, E. (2021. as a source: The Great Rebate Runaround Case Study (Simchi-Levi et al., 2021).
The Great Rebate Runaround Case Study
Over 400 million rebates are offered every year with a face value around $6 million. Companies use rebates to maintain or increase their competitive advantage for both new and current products. According to Staples, it and its vendors pay $3.5 million in rebates on a weekly basis. This information explains why manufacturers offer rebates instead of decreasing wholesale prices and explains if offering rebates can be viewed as customized pricing (Simichi-Levi, 2021). Rebates versus Wholesale Prices: Is it Customized Pricing Approximately 40% of rebates are never redeemed by consumers because many consumers are too busy, forgetful or lazy to apply for the rebates or to remember to use them
(Elberg et al., 2019). This can harm the manufacturer because most manufacturers could benefit from using rebates instead of decreasing the wholesale price. Furthermore, some consumers are frivolous or unable to pay full price, so they would be more willing to redeem rebates (SimichiLevi, 2021). Rebates attract consumers with the promotion of a discounted price. The bottomline price of a product depends on whether the consumer redeems the rebates and their ability to pay full price. As a result, rebates can be considered customized pricing (David et al., 2017). Manufacturers Offering Rebates Rather than Decrease Wholesale Prices Rebates are used by manufacturers as a discount tool to attract consumers and as price discrimination. While only a portion of rebates are redeemed, manufacturers might use them instead of decreasing wholesaler price because rebates attract consumers while a decrease in wholesaler price often does not (Elberg et al., 2019). In addition, rebates can have an impact on profits and costs. The use of rebates and promotions helps attract consumers which can help increase the manufacturers sales and market share. As a result, manufacturers see an increase in
cash flows when consumers pay the full price for products. Redeemed rebates are recorded as an expense on the company’s income statement. Overall, rebates can be more profitable and can attract more consumers than decreasing the wholesale price (Akgun & Chioveanu, 2018). Best Buy Considers Eliminating Rebates While manufacturers often use rebates as a discount tool to attract consumers, it is a tedious and costly process (Agrawal et al., 2016). Best Buy, in comparison to Sony and Panasonic, is considering eliminating rebates because of the process costs and consumer complaints. Over the years, consumer complaints have increased because of rejections, delayed applications, and the fulfillment service companies hired to process the rebates. The process
costs are both tedious and costly. When compared to the cost and time of wholesale price, the wholesaler price often matches or beats the rebate price of other retailers and competitors without the process costs and complaints. As a result, Best Buy is considering eliminating rebates to save costs and decrease complaints as well as to protect their reputation and brand image from
the consumer complaints (Simichi-Levi, 2021).
Conclusion
Rebates help companies increase its competitive advantage by attracting consumers with the discounted price. While it does attract consumers and increase cash flows for companies, it does have additional costs and time to process the rebates as well as can cause some consumer frustration due to
rejections and delayed applications. As a result, some companies, such as Best
Buy, consider eliminating rebates and focusing on decreasing wholesaler price, as the wholesaler price, at times, matches or beats the rebate price.

ANSWER

Rewrite Case Study (The Great Rebate Runaround)

A rebate is a form of refund given to consumers for a certain purchase. Companies use rebates to increase their competitive advantage as customers are likely to return to the organization that gave them a rebate. Consumers will prefer to return to a company that gave them a certain percentage of their money to purchase a certain good. Over 400 million rebates are offered every year, with a face value of 6 million dollars (Simchi-Levi et al., 2021). This is a strategy that most companies use to increase their competitive advantage for new and current products. Staples and its vendors pay about 3.5 million dollars in rebates weekly. The concept of rebates explains why manufacturers prefer to offer rebates instead of reducing the wholesale prices.

Offering rebates can also be viewed as customized pricing. Customized pricing is altering the prices of goods or services based on customer factors. This is a strategy used by companies to appeal to consumers (He et al., 2018). In this case, offering rebates instead of lowering the wholesale prices is customized pricing. One of the major aims of customized pricing is to increase profits. Most manufacturers offer products with the original price but mail the consumers with the rebate option. However, 40% of rebates are never redeemed as some consumers do not want to undergo the hassle of redeeming and submitting forms for the rebate (Houde & Aldy, 2017). Some consumers are also forgetful and thus do not redeem the rebates. This is a profitable scheme for the manufacturing industries. Offering their products for the original price with the offer of a rebate and the percentage of consumers that do not redeem their rebates turn into a profit for the company.

Manufacturers offer rebates instead of decreasing wholesale prices to attract customers and as a discount tool. It is also used as price discrimination. Only a portion of rebates are redeemed, but they also attract customers (Hu et al., 2017). A decrease in wholesale prices does not attract customers as much as rebates do, and thus this is offered by most manufacturers. Rebates also have an impact on the company’s profits. An increase in customers increases the manufacturer’s sales, and their market shares also increase. Rebates, therefore, help manufacturers increase cash flow when the consumers of their products pay at full price. The redeemed rebates are usually recorded as an expense to the company in the income statement. In general, rebates are profitable and attract more consumers than a wholesale price decrease.

Customers who get frustrated are likely to abandon the organization, and the organization will suffer the loss of a customer (Houde & Aldy, 2017). Best buy is considering abandoning the whole idea of rebates. Rebates are a great way to capitalize on a lazy customer and also to increase sales from customers who received their rebates, but it is also a way a company can lose its customers. Consumer complaints have increased over the years due to delayed rebates and rejections. The process is tedious, and the costs are high compared to reducing the wholesale price. Decreasing wholesale prices looks like the better idea for Best buy as there are no long processes and there are no cists. Eliminating rebates is also a good way to eliminate complaints and save the company’s reputation. A company that receives constant complaints from its consumers is in the danger of a tarnished brand image and losing its customers, which is what best buy is trying to avoid.

In conclusion, rebates are an excellent way to attract customers and increase cash flow, but it also has their cons which are increased costs and complaints from the customers. As the Bible says in proverbs 19:9, “a false witness shall be punished, and a liar shall be caught.” Capitalizing on the consumers who do not redeem their rebates as other consequences and thus companies such as best buy are considering wholesale price decreases.

References

He, H., Ai, X., & Chen, X. (2018, July). Manufacturers’ Optimal Consumer Rebate Strategy in Competitive Market. In 2018 15th International Conference on Service Systems and Service Management (ICSSSM) (pp. 1-6). IEEE. DOI:10.1109/ICSSSM.2018.8465016

Houde, S., & Aldy, J. E. (2017). Consumers’ response to state energy-efficient appliance rebate programs. American Economic Journal: Economic Policy, 9(4), 227-55. DOI: 10.1257/pol.20140383

Hu, S., Hu, X., & Ye, Q. (2017). Optimal rebate strategies under dynamic pricing. Operations Research, 65(6), 1546-1561. https://doi.org/10.1287/opre.2017.1642

King James Version Bible.

Simchi-Levi, D., Kaminsky, P., & Simchi-Levi, E. (2021). Designing and managing the supply chain: Concepts, strategies, and case studies. (Third edition.). New York, NY: Richard D. Irwin, Inc.