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 the product is purchased.

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.

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