BUS740DB4

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Feb 20, 2024

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1. This article describes one reason manufacturers might want to offer rebates rather than decrease wholesale price. Explain why this can be viewed as an example of customized pricing. Customized pricing is defined as a pricing strategy that provides customers individual estimates for goods or services, as opposed to a singular price for all consumers (Obermiller et al., 2012). Rebates can act as customized pricing in the sense that the final cost is dependent on the customer meeting the conditions of the rebate. As such, rebates act as customizing pricing in that they will attract customers who are unwilling or unable to pay full retail price, as well those who would have purchased the goods or services without a rebate. Nearly half of consumers are unlikely to fulfill their rebates due to various reasons such as forgetting, losing required documentation, and deeming it unnecessary or overly complicated. With over $500 million in rebates go unclaimed (Moore, 2022), utilizing rebates becomes a better option for businesses when compared to decreasing wholesale prices. Additionally, rebates oftentimes appear more attractive to consumers, who are over 75% more likely to make a purchase when a rebate is involved (Krishna & Currim, 1991) and can aide in reducing inventory. 2. Even if all rebates were redeemed, why might manufacturers still want to offer rebates rather than decrease wholesale prices? Even if all of an organization’s rebates are redeemed, they remain a better option than wholesale pricing discounts due to the benefits they can provide. Wholesale pricing discounts essentially reduce list prices of goods and services, which in return, can impact the consumer perception of market value and potentially their willingness to pay full price. Rebates, however, come after the sale has been completed and can further help a customer remain engaged with a business. Rebates can also benefit organizations by attracting new customers who see the potential for discounted item, which in return will likely expose them to different goods and services offered by the company, and can also provide better insight into their customer base and provide beneficial data for forecasting. Lastly, rebates can act as a catalyst for clearing a path for a product end of life cycle, which can reduce inventory and associated costs, and provide avenues for introduction of new products. 3. Why do you suppose that Best Buy, rather than one of Best Buy’s big suppliers such as Sony or Panasonic, is considering eliminating rebates? Given that companies such as Sony and Panasonic pricing essentially remains unchanged for retailers such as Best Buy, there is little to no benefit for the organization to utilizing rebates as their wholesale prices are often equal or below competitor’s rebated price. Furthermore, given the number of customer complaints associated with the rebate process, it is likely that Best Buy has deemed rebates not worth the hassle. Customers are vocal over concerns related to delayed returns, rejections, late submissions, and other logistical issues. The issues were so prevalent that an Ohio-based attorney general filed a lawsuit against Best Buy over their rebates, stating, “Best Buy offered cash rebates to consumers on certain purchases, but that those rebates were not given. In other instances, customers who requested rebates were given Best Buy gift cards instead” (Seattle Post, 2004). Coupled with their competitive prices, having a burden of rebates

adds no benefit to the organization. Best Buy instead should have their costumers pursue rebates directly from the manufacturers. References Krishna, A., Currim, I. S., & Shoemaker, R. W. (1991). Consumer perceptions of promotional activity. Journal of Marketing , 55 (2), 4-16. Moore, S. (2022). “Rebate Madness - How to Avoid the Rebate Trap.” Retrieved from https://www.consumeraffairs.com/consumerism/rebate_madness01.html Obermiller, C., Arnesen, D., & Cohen, M. (2012). Customized pricing: Win-win or end run?. Seattle Post (2004). “Ohio sues Best Buy, alleges deceptive sales practices.” Retrieved from https://www.seattlepi.com/business/article/Ohio-sues-Best-Buy-alleges-deceptive-sales- 1152119.php

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