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:
Question 1
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.
Customized pricing allows firms and manufacturers to compete in markets while mitigating costs and risks. Consumer addressability plays a factor in pricing, as set pricing doesn’t necessary work in every market. This helps firms highlight the incentives to strategically pursue consumer addressability under competition (Chen & Lyer, 2002). Rebates are much the same way, as manufacturers can offer rebates on products in certain markets to target competition and market towards certain consumer segments. For example, Chevrolet isn’t going to offer rebates on trucks in southern California, a state that is strict with emissions regulations and not a state that relies heavily on work that requires that type of vehicle. Chevrolet however might offer rebates in midwestern and southern states, where agriculture and farming is huge, and the needs for trucks is much larger. The amount of trucks that can be sold in those states would likely far outweigh the possibility for truck sales in California. Offering the rebate in larger quantities is better than targeting a market that might not even be interested in the rebate. Chevrolet however could offer rebates on their electric cars, as California is more welcoming of lower emissions vehicles.

Strategically, pricing plays a role in advertising and marketing to specific segments. Rebates do the exact same thing as a “sale”, but without lowering the wholesale amount. Again, rebates are dependent upon the consumer filing for the rebate and waiting to receive it.

Question 2:
Even if all rebates were redeemed, why might manufacturers still want to offer rebates rather than decrease wholesale prices?
Rebates are easier to advertise as discounts without having to actually decrease prices. Rebates are dependent upon the consumer filing the rebate in order to get the discount. Plus, it appears as if the manufacture is offering a “sale” price, and therefore adds value to the product and the company who is selling it. All without having to lower the wholesale price which is what reimburses the costs of manufacturing and transportation.

However, rebates are still very attractive. Rebates drive more sales and higher store traffic. NPD Group warns that eliminating rebates can be risky because rebates can drive higher sales and higher store traffic (Cho et al., 2009). If consumers are in the stores, they are more enticed to purchase other things that go along with their rebated item, or to discover further rebates. This strategy works well for both the manufacturer and the retailer. However, the retailer is left with processing the rebate and the pros and cons of manufacturer rebate programs. Decreasing wholesale prices means taking a risk of not turning a profit on each item, rather, they offer rebates with a 50/50 chance of redemption. Even if all rebates are redeemed, higher sales might be driven due to increased consumer satisfaction and additional purchases.

A decrease in wholesale price also means renegotiation of profit margins and advertising prices. Retailers want to ensure they are also turning a profit and obtain a profit that is friendly to their efforts. Decreasing the wholesale price means that both the retailer and manufacturer have to adjust their pricing in order to profit and could mean an increase in sale price to accommodate. That isn’t bringing value to the customer and affects competition. Rebates over the appeal of a “sale”, without compromising the sales strategy for both the retailer and manufacturer.

Question 3:
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?
The rebate is the responsibility of the organization that offers it, and therefore if rebates are slow or inefficient, the responsible organization gets the blame. Best Buy has no incentive to do rebates when they get all the blame and none of the reward. Sony gets to advertise rebates as a method of reducing pricing without actually reducing pricing. Rebates are dependent upon the consumer filing for the rebate, and there is a 50/50 chance of each consumer actually doing the work to receive the rebate. Consumer product makers such as Procter & Gamble pioneered rebates in the 1970s as a nifty way to advertise small discounts without actually marking their products down (Simichi-Levi, 2022).

Retailers utilize manufacturer rebates to increase market share. However, customer rebates are not always good for retailers, and instead would utilize retailer incentives. When rebates do not lead to market expansion, the manufacturer always prefers the retailer incentive over customer rebate (Demirag et al., 2009). Retailers prefer that rebates and promotions work in their favor, not just the manufacture or the customer. The main tradeoff is that customer rebates are given to every customer, while the use of retailer incentives is controlled by the retailer (Demirag et al., 2009). With retailer incentives the retailer has control over that process, and can control it as opposed to being the middleman.

Conclusion

Rebates can be used in many ways, and can work for both the consumer, retailer, and the manufacturer when an affective strategy is created. Rebates can offer the appeal of “sales” without compromising the wholesale price or the strategy of pursuing higher sales and larger foot traffic in stores.

ANSWER

Discussion reply

From your post, customized pricing indeed helps manufacturers compete in markets while mitigating costs and risks. Many manufacturers are using rebates to help them overcome these risks and costs and help them target competition and markets. Rebate is the amount of money paid to a buyer as a refund to the total cost of a product. Rebates are offered where markets are good and stiff competition (Houde & Aldy, 2017). Manufacturers prefer rebates over decreasing wholesale prices since rebates are easy to advertise as discounts. Comparing retailer incentives with consumer rebates, it is true that rebates are more profitable and attractive since they drive more sales. Rebates create customer incentives through purchasing rewards, which is like a way of thanking the customer for making a purchase. Rebates are different from decreasing wholesale prices since decreasing wholesale prices lead to a risk of not turning a profit on each item, while the primary goal of every manufacturer is to make maximum profit from the sale of his products (McQueen & MacArthur, 2019).

I strongly support the idea of rebates and I would advise more manufacturers to use rebates in their sales. This will help them sell their products in different markets, enabling  them to survive the stiff competition. Retailers may also consider using manufacturer’s rebates to increase their market shares. Not all rebates lead to market expansions since some might be slow and inefficient, depending on the type of organization offering the rebate. Therefore, manufacturers are advised to go for different options such as retailer incentives if their rebates do not lead to market expansion. However, the retailer incentives may potentially lead to a lower retailer profit. In conclusion, it is true that rebates are more profitable and can work for both the manufacturer, retailer, and the consumer since they offer the appeal of sales without decreasing the wholesale prices (Muzaffar et al., 2018).

References

Houde, S., & Aldy, J. E. (2017). Consumers’ Response to State Energy Efficient Appliance Rebate Programs. American Economic Journal: Economic Policy, 9(4), 227–255. https://doi.org/10.1257/pol.20140383

McQueen, M., & MacArthur, J. (2019). How E-Bike Incentive Programs are Used to Expand the Market. Transportation Research and Education Center (TREC). https://doi.org/10.15760/trec.223

Muzaffar, A., Malik, M. N., & Rashid, A. (2018). Rebate mechanism for the manufacturer in two-level supply chains. Asia Pacific Management Review, 23(4), 301–309. https://doi.org/10.1016/j.apmrv.2018.01.001