Why do companies offer rebates

Why do companies offer rebates

A rebate is a special, short term, reduction in prices of goods that has become a very important part of companies sell their goods these days. A lot of people do not like rebates but a majority of the general population finds them quite useful. However, it isn’t always clear to the customer what companies get out of offering rebates. Let’s find out why companies offer rebates.

Temporary reduction of prices to boost sales

Most companies have a range of goods that are higher priced and do not sell well with their original price tag. When offered with a rebate, customers are more tempted to buy these goods. the customer would be infuriated if the actual price of a product is lowered temporarily and then raised again later, but, a limited time offer like a rebate tricks the customer into feeling like they have stumbled onto a great deal while the seller doesn’t need to suffer a loss.

Price protection of premium goods

If a company reduces the price of certain models in a range downright, it would be forced to reduce the price of the models that fall below and above them (in terms of price) as well. However, when offering a rebate, a company can sell certain goods at a discounted price without having to adjust the price of the entire range.

Interest accumulation

The company can earn interest on the money they owe the customers that have availed of the rebate during the turnaround time.

Inflation of sales figures

Rebates offered during the end of a quarter or end of the fiscal year allows companies to legally show inflated sales figures for the period. This helps companies with their stock market projections.

Refusal to return an item

A lot of companies offer rebates on the condition that the customer will not be eligible for a replacement or return of the purchased item if they chose to avail of the rebate. For the seller, this is a beneficial arrangement.