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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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CONTINUE- 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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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.

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.

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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 offorgetting 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, inboth the cases proof of purchase are required to claim the

refund ,this ensures that marketer pays only when claim is

shown.

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CONTINUEThese 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.