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.
.Consumers look at refunds as rewards for the purchase and thus it builds brand loyalty for the company. .CONTINUE
. .It works very well when the product is good but having low market share.due to overstocking the products and thus reduces demand for the product in short interval of the time.It again works well when a product is introduced in new geographical areas. .It also helps in dampening the competition for the while in the market .It is very useful in situations when there is little or no differentiation between the brands. .Highly accepted tool in convenience stores . .
• To encourage the purchase of related products. • To load consumers. • To reward loyal customers.CONTINUE
So in aggregation we can say that the refund or a rebate offers are generally found in having active role in fulfilling following objectives.
. • Selecting new markets. • To guarantee trial of the product. • introduce new products . • To increase purchase frequency.
.A higher percentage of customers forget to claim their refunds unless the amount is very significant.Some refund offers are associated with a single purchase whereas some are attached with several multiple purchases. This phenomenon of forgetting is known as Slippage hence an attractive offer can be made again at low cost.ADVANTAGES AND DISADVANTAGES
Advantages .this ensures that marketer pays only when the product is purchased.
.It excites customers at a relatively low cost. . in both the cases proof of purchase are required to claim the refund .
they lost the claim form or the process of claiming is cumbersome and time taking etc.These various reasons why customer forgets to redeem the refund offers can be.the profitability may be hurt badly. . Disadvantages -If the refund offer is not large enough to increase sales significantly . -Difficulty in collecting proof of multiple purchase often discourages the customer participation. -They are often used by the customers who would have otherwise purchased the product(Attraction to scheme only not the product).
.Consumers generally perceives refund offers as the rewards and thus the brand loyalty increases. -For immediate salesperson refunds are not very useful.they forget. refund offers when combined with trade incentives can help in gaining in store displays.