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If you are wondering how does a rebate work, then this blog is for you! Rebates can sound like a discount or a redeeming scheme on a product or a service but they are two different things.
Rebates can be used to lower the price paid on products or services but unlike discounts, they are not upfront and have a more sophisticated process. Rebates are used by suppliers, manufacturers and dealers for their customers or clients or for their distributors. They are very commonly used to increase the transaction and the purchase volume between these parties and for customer retention.
In this blog, we will explain how do rebates work, how they work for consumers and for suppliers, how to claim rebates and the benefits and challenges that come with offering and receiving rebates.
What are rebates?
Rebates are one of the most common discounts in the USA and are offered typically to attract more customers. Most common companies in the US that offer rebates are Staples, Sears, OfficeMax, TigerDirect, Rite Aid etc.
These companies have been offering an effective instant and mail - in rebate program for as long as 2 decades. In the US, almost 8 billion USD was returned to most American homes that claimed back their rebates.
Rebates are used to attract more sales volume and to increase the brand penetration with the customers. Whether you are a consumer at the end or a distributor or a dealer who purchases goods from another business, a rebate allows you to claim a portion of the price you paid after you complete the required process.
This allows you to save money on your purchases and as a business, it helps in selling in volumes. Either way, it is a win - win situation for both parties.
More than 50 percent of retailers use rebates to attract new customers. Businesses should use a combination of the different types of rebates to get the right and the most effective results from your campaign. For example:
- Instant and online rebate works better for end consumer
- Mail in rebates are more suitable for bigger [purchases such as computers or furnitures
- Online rebates make the process easier for both B2C and B2B clients etc.
Types of rebates
Rebates are used by everyone and they have been proven to be effective everytime. Even the US Government uses a rebate system to provide some relief to American households that spend money on energy and electricity in the new bill.
This rebate helps as a discount and helps lessen the price paid by consumers. This is a typical way of how rebates work in the real world. Below are some of the popular types of rebates in the market:
1. Mail-in rebates
Mail in rebates is a common type of rebate. These rebates require you to purchase a product or service at full price, then use a mailing system to mail your particulars, the details of your purchase along with the bill to the business within a specific period from purchase. A cheque will then be sent to you within 12 weeks that can be claimed by the consumer.
2. Instant rebates
Instant rebates are the most common types of rebates. This rebate system works exactly like a discount. A consumer who gets an instant rebate of 5 USD on an item market 100 USD essentially purchases the product at a discounted price of 90 USD.
3. Online rebates
Online rebates are becoming more and more popular as they offer a convenient way to submit rebates. Inline rebates are either submitted at the companies website or at a rebate website that offers rebates for customers as a primary focus. Just like mail in rebates, the rebate form is filled, a bill is attached and when the rebate is approved, a check is sent by the company.
4. Conditional vs. unconditional rebates
Conditional rebates are certain rules or conditions that are set by the seller that need to be met by the customer to be qualified for the rebate. This can include things such as certain actions taken by customers like handing in a coupon or voucher or a used item for exchange etc. Unconditional rebates refer to no certain conditions that need to be met by the customer to claim the offer.
Manufacturer vs. retailer rebates
Another popular category of rebates are those that are offered by manufacturers and those by retailers. Manufacturer rebates are more specific to dealers and distributors. So they may be linked with volume or the transaction that needs to be achieved based on which the customer can claim the reward.
On the other hand, retailer rebates are more oriented towards customers and end consumers who may claim rebates either instantly or using mail in or online rebate.
How rebates work
Rebates, unlike discounts, are more complicated. They have a meticulous filing procedure and an approval stage after which, the customer gets a rebate for their purchases. Here is the process to claim the rebate:
- Purchasing the product or service from a retailer or a distributor
- Filling out the rebate form as per the instructions on the goods
- Submitting required documentation which includes bills and invoices
- Waiting for processing and approval from the supplier end
- Receiving the rebate in the form of a cheque. Some companies are opting for in-app payments such as through Venmo or Paypal.
The role of rebate fulfillment companies
As a rebate fulfillment company, the platform is liable to process all rebates that are filed by customers and to fulfill these rebates by providing them with refunds for their purchases.
There are several rules and legal formalities that need to be taken care of as rebates are signed by the supplier and the consumer. Therefore, a rebate fulfillment company needs to be on point with their rebate fulfillment processing and offer swift and effective rebate processing.
Some examples of the best rebate programs that were delivered by rebate fulfillment platforms are Samsung and their offer to provide free phones for contractual agreements in association with carrier providers.
Common challenges and delays in rebate processing
There are many complications when it comes to processing rebates. Some popular challenges that cause delay are:
- Forms may be incomplete
- There can be mismatch of bills with the customer information
- There could be forgery in the bills for obtaining rebates
- There is also the possibility that the company may not actually be willing to pay out the rebates as possible
From the customer end, this can be frustrating. Using an effective and smart rebate fulfillment channel can be helpful in dealing with these issues.
Rebate programs in business
Studies reveal that 65 percent of business comes from existing customers. To acquire new customers, businesses have to shell out 5 times more than holding on to existing customers.
In a world where customers are becoming more and more brand conscious and loyal, it is important to keep them happy and satisfied with exciting consumer offers. Rebates work as an excellent tool to promote your products and services while also helping the customers gain from their shopping/purchasing experience.
ROI of rebate can be calculated based on how much rebates a company is offering and how much sales it generates using this rebate system.
The difference between the overall sales with the rebate program and without the rebate program and a price comparison between the amount of rebates paid out will help the business analyze if they are effectively utilizing their rebate scheme. Some strategies that help in maximizing the rebate schemes are:
- Use a mixed rebate system for different customer behavior such as volume rebates, growth or mixed rebates
- Create a rebate playbook with all the expected customer behavior and trends and the best strategy to adopt
- Find the best practice area of the business by plotting the type of rebate structure against the value of customer behavior.
Samsung rebate schemes
Samsung offers one of the best rebate schemes on energy efficient equipment and devices to help cut down on the energy consumption. This environment friendly effort requires assistance from local dealers that help in providing rebates for customers online for their purchases.
Another popular example is the association of the US department of energy and the sales of EV vehicles in the US. The government provides a 500 USD rebate for installing a 2V charger set up at home for the usage of EV vehicles.
600 USD rebate for wiring and other set up charges are also provided to encourage the usage of EV vehicles. This inturn has helped in selling more EV vehicles in the US from brands such as Tesla, Audi, BMW and others.
Rebate regulations and compliance
Rebates need to be covered by the government laws of Federal trade and state laws within each separate state. Some states may have restrictions on revealing and pre and post sales prices which can cause confusion and complications when providing a rebate to customers.
It is important to keep in mind the various regulations as the Trade laws in the US and the laws pertaining to each state to stay compliant in the rebate processing functions.
A platform or an outsourced agency such as a regulatory agency or a rebate fulfillment platform is a better way to ensure that all common laws and compliance norms with regards to rebates are kept in check while issuing and processing rebate fulfillment for customers.
Failing to abide by federal and state compliance norms can result in a penalty for companies.
- Overview of regulations governing rebate programs
- Consumer protection and disclosure requirements
- The role of regulatory agencies in overseeing rebates
Rebates are an excellent strategy that help suppliers connect with their customers both in B2B and B2C industries.
When done correctly and fulfilled in the best manner, rebates can help in achieving larger sales in volume and value. Rebates can have a positive influence in the customers mind and help with brand penetration and customer loyalty.
Rebate structures must also be designed as per legal requirements to stay compliant with the norms of the country. But with the right approach, it can help foster sales and relationships.