Business Studies

Reply must be a paragraph long of at least 275 words or more not including references which should supported by citing at least 2 peer-reviewed journal articles between 2017-2021 for each reply and a biblical reference. Your reply must be in current APA format and must include a reference list. Make sure that you are adding new and relevant information with each reply. Reference sample make sure to include DOI-Drollinger, T., Comer, L. B., & Warrington, P. T. (2006). Development and validation of the active empathetic listening scale. Psychology & Marketing, 23(2), 161-180. https://doi.org/10.1002/mar.20105 Discussion to Reply to:
Discussion Thread: The Great Rebate Runaround Case Study

This article describes one reason manufacturers might want to offer rebates rather than decrease wholesale price. Explain why this can be viewed as an example of customized pricing?
This can be viewed as a customized pricing strategy considering it gives the consumers the idea that the price of the product is actually less than what the current sales asking listed price. Rebates can stimulate additional sales via a temporary price drop, while maintaining the marked price (Cho et al., 2009, p. 426). Manufacturers prefer the idea of offering rebates to their customers instead of reducing a products wholesale price because many customers don’t have the self-discipline it takes to claim rebate offers once they purchase a product. Many customers quickly feel that it is not worth their personal time to sit down and fill out a rebate offer once they buy a product and read the fine print of the rebate offer. This allows the manufacturer to be able to sell their products at competitive prices and attract customers in the store who really need the rebate and will redeem it aswell as those customers who see a great deal but are too lazy to spend 10 minutes later at home redeeming the rebate offer due to the hassle. The breakage and slippage financial earnings associated with rebate offers increases organizations profit margins on their products sold. Rebates in general are an example of customized pricing as it targets both types of consumers, those who shop for bargains and those who look for great deals but then decide the rebate is not worth the hassle to claim after they make the product purchase.

Even if all rebates were redeemed, why might manufacturers still want to offer rebates rather than decrease wholesale prices?
Manufacturer rebates are used as price discount tools as a way to attract consumers to buy their products over their competitors’ products. Even if every customer redeemed their rebate offer the manufacturer would still benefit in the long run because more of their products would be sold which increases the manufacturers profit margin through the pricing strategy. A simple reduction in a products wholesale price does not catch the consumers attention as a sale or good deal. This also allows the manufacturers to show increased cash flows as a result of their products higher initial sales on their statement of cash flows. Rebates will be shown on the income statement as an expense which will increase their sales revenue and increase the company’s stock value. Some rebate expenses may also be written off as a financial loss on the company’s tax reporting statements which can reduce the company’s taxable revenue.

Why do you suppose that Best Buy, rather than one of Best Buy’s big suppliers such as Sony or Panasonic, is considering eliminating rebates?
Big suppliers like Sony and Panasonic charge all retailers a similar unit price for each product unit sold at wholesale price. Sony and Panasonic wholesalers have no concern regarding the retail price that retailers like Best Buy list their products for in-store or online. In addition, the wholesalers do not process the rebates that retailers offer customers. In the case of Best Buy, their retail prices already match or beat the retail prices of their market competitors which is why Best Buy is considering eliminating rebate offers on products sold. Therefore, Best Buy is actually losing money on each product where the customer redeems their rebate offer. More than $8 billion worth of rebates were issued to American households in 2010 (Ha et al., 2017, p. 2122). Rebate offers are a pricing strategy that help build and maintain customer loyalty amongst retailers and their customers. Consumers are more likely to make a decision to purchase a product if it involves a rebate offer and results in a customer satisfaction experience. The retailers’ products sales will also likely increase as a result of the satisfied customers word-of-mouth communication amongst his or her peers aswell as result in repeat consumer purchase behavior. Rebate offers and product selling prices also bring customer complaints to a retailer like Best Buy which cost the company money to resolve which is a factor in Best Buy’s consideration of rebate offer elimination.

ANSWER

The Great Rebate Runaround Case Study

A rebate is a refund issued to a customer in terms of a coupon upon sale of a product. The customer can redeem the coupon and get refunds from the product sold. The post on why the companies prefer using the rebate strategy rather than reducing the price of a product makes a valid argument. The argument is that many customers do not claim their rebates because they are too lazy or busy to fill out a rebate form. Therefore, the rebate becomes an advantage to the company as they retain the cash they would have instead refunded (Chen et al., 2022). Rebates are better than reducing the price because they blind the buyer to view the price of the item they are buying as an advantage; hence the companies have increased sales (Fouli, 2021) which can result in increased loyalty among the companies’ customers (Chen et al., 2022).

In a case where all the customers decide to claim their rebates, the companies would still make profits because the price of the product sold is relatively higher; therefore, they would still have good profit margins for themselves to enjoy (Fouli, 2021). In terms of them reducing the price, the goods would be sold cheaper, but these would not catch the attention of the buyer as well as a sales deal of rebate would thus companies do prefer using it (Chen et al., 2022). To add to this argument, the companies can also include the rebates as part of the companies’ losses while filing taxes, reducing the total financial impact of a rebate.

Best Buy, after analysis, is considering eliminating its rebate scheme. The reason lies in what a rebate first uses as a tool to implement it, and this is a higher price so that the companies maintain good profit margins even when claimed (Chen et al., 2022). However, Best Buy sells at prices similar to other retailers, meaning that any claimed rebate makes them lose (Fouli, 2021). The rebates also bring customer complaints that are expensive to solve; hence, the company can go into losses. All in all, the arguments made in this threaded discussion are legitimate and have not only answered the questions but brought more insight on rebates.

References

Chen, Y., Xu, Y., & Hu, M. (2022). Effects of Rebate on the Evolution of Cooperation in Spatial Social Dilemmas. In Applied Mathematics, Modeling and Computer Simulation (pp. 199-205). IOS Press.

Fouli, Y. (2021). A primer On Carbon Tax Relief For Farmers. SPP Briefing Papers, 14(34).