Rebate - Definition & Meaning
What is Rebate?
Rebate is a sales promotion technique in which certain part of the purchase amount is returned to the buyer by the seller. It is usually given on the purchase of a certain quantity or value, product and for a limited period of time.
It should not be confused with discounts that is deducted from your purchase amount in advance of payment whereas rebates are given only after the payment of full purchase invoice amount.
Rebate is basically a sales promotion method that marketers use to drive sales in the growth phase of the product when there is a competition between various brands to acquire large market share. It is also used to drive the sales of relatively less successful models of a particular product.
It also provides marketers with the customer’s information that can be used for marketing purpose, data mining, or studying the consumer behaviour.
It can also be seen as a tool to keep the price of the products constant, for example during festive period offer, marketers can drive sales by providing rebate rather that reducing the price of product. Because of this the price of the product remained constant before and after festive period and thus saved the firm from negative backlash.
Rebate programs can be of many types: One of the most popular rebate is Mail in Rebate in which the entity offering rebate requires you to send the bar code of the product purchased, certain verified coupons, receipt to the firm or retailer offering rebate in order to receive the cheque or credits of particular amount. In certain case though, rebates may be given instantly after the purchase in the form of checks, loyalty card with points that can be spent immediately or within a certain period of time.
There is also a common complaint against rebate that it can be used often as a price discrimination tool against the less educated, lower class people who are less likely to redeem the rebate than a more educated middle class.
Example
On the occasion of its 80th anniversary Tangs a women’s apparel company is providing 12% rebate offer on its product purchase of worth 5000 or above. So if you are buying an exotic Gown worth 10000 rupees. After buying that gown, you will be entitled to get a cashback, check etc. of 1200 rupees.
Hence, this concludes the definition of Rebate along with its overview.
This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.
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