Cash rebates serve a variety of purposes. Not only do they allow
businesses to hold on to cash from a sale and collect interest on it
for a period of time, but they provide businesses with valuable
information about the marketplace and their customers. Furthermore,
cash rebates are more efficient promotion than a simple price
reduction because not everyone who buys the product will apply for the
rebate.
As long as the consumer is informed that the selling price includes a
cash rebate prior to the sale and in all advertising, and provided
that the procedure for applying for the rebate is clearly disclosed
and the rebate is paid according to those terms, then it is an ethical
business practice. No one is forced to apply for a rebate, and as
long as they understand before they make the purchase that they will
not receive the "rebate price" without applying for the rebate, it is
difficult to view the practice is being unethical. Certainly it is
inconvenient from the consumer's perspective, but if it would not be
affordable for the company to otherwise lower the price, then it is
still better than paying full price.
Printers are an excellent example of a business where cash rebates are
very useful. The printers themselves are sold as cheaply as possible
to lock customers into purchasing proprietary supplies. Therefore,
printer manufacturers are extremely competitive when pricing their
hardware, making margins small or even nonexistent. Printers are
typically sold in retailers that are heavily reliant upon promotional
activity to drive traffic. Therefore, retailers prefer to carry and
feature manufacturers that regularly promote their products.
Given the low margins on the printer hardware itself, manufacturers
want to promote their printers as efficiently as possible. Cash
rebates serve this purpose by reducing the effective cost of the
promotion through the 8 to 10 week float minimum before the rebate is
issued. Not all customers will apply for the rebate, so the
manufacturer benefits from the sales at a higher price. Most
importantly, customers are motivated to provide manufacturers with
accurate personal information so that they can receive their rebates.
This personal information can be used by the printer manufacturer to
promote usage and sales of their proprietary supplies, which is where
nearly all of their profits lie. Only those customers who are willing
to provide manufacturer with something of value, their personal
information, are eligible to receive the rebate. In effect, the cash
rebate pays the customer for filling out the equivalent of the
warranty cards packaged with most durable consumer goods.
Not only can the consumer information be used to promote additional
sales, but companies can often sell it to marketers of other goods and
services. Companies can also combine it with other databases of
consumer information to find out more about the characteristics of
their customers. Companies can also use the sales receipts themselves
to monitor the price at which their goods are sold in the marketplace
at various retailers.
Cash rebates are especially valuable to businesses whose profitability
is dependent upon the sale of additional goods and services after the
initial sale. Cash rebates not only lower the cost of promotional
activity, but they also motivate consumers to part with valuable
personal information that businesses can use to encourage follow on
transactions.
Sincerely,
Wonko |
