Refund

Money back guarantee

a guarantee that, if a buyer is not satisfied with a product or service, a refund will be made.


Tax refund

refund on taxes when the tax liability is less than the taxes paid.


Refunding

when a debt holders calls back bonds with the express purpose of reissuing new debt.


Deposit-refund system

a surcharge on a product when purchased and a rebate when it is returned.


Tax-free shopping

allows shoppers to get a refund of any sales tax.


Rebate (marketing)

A rebate is an amount paid by way of reduction, return, or refund on what has already been paid or contributed. It is a type of sales promotion that marketers use primarily as incentives or supplements to product sales. The mail-in rebate (MIR) is the most common. A MIR entitles the buyer to mail in a coupon, receipt, and barcode in order to receive a cheque for a particular amount, depending on the particular product, time, and often place of purchase. Rebates are offered by either the retailer or the manufacturer of the chosen product. Large stores often work in conjunction with manufacturers, usually requiring two or even three separate rebates for each item. Manufacturer rebates are sometimes valid only at a single store. Rebate forms and special receipts are sometimes printed by the cash register at time of purchase on a separate receipt or available online for download. In some cases, the rebate may be available immediately, in which case it is referred to as an instant rebate. Some rebate programs offer several payout options to consumers, including a paper cheque, a prepaid card that can be spent immediately without a trip to the bank, or even PayPal payout.

Rationale

Rebates have become very popular in retail sales within the United States. Retailers and manufacturers have many reasons to offer them:

  • The information given in the rebate form, such as name, address, method of payment, can be used for data mining studies of consumer behavior.
  • The information can be used as evidence of a pre-existing business relationship for marketing purposes, such as do not call lists.
  • Customers tend to notice price increases and react negatively. Rebates offer retailers the benefit of giving customers a temporary discount on an item, to stimulate sales, while allowing it to maintain its current price point. This method avoids the negative backlash that could be perceived with a price being lowered and then raised later.
  • Rebates also allow companies to "price protect" certain product lines by being selective in which models or brands to be discounted. This allows retailers and manufacturers to move some product at lower cost while maintaining prices of successful models. A straight price reduction on some models would have a domino effect on all products in a line
  • During the turnaround time, the company can earn interest on the money.
  • If the turnaround time crosses into the next fiscal year or quarter, a rebate offer can inflate sales in the current period, and not have to be accounted for until the next period and then it could be attributed as a cost reducing sales or expense for the next period, giving companies an accounting advantage with their Wall Street projections
  • Not all buyers will meet the criteria to receive the rebate.[citation needed] Companies often require the original UPC barcode, receipt, and additional information, which a buyer may forget to include when redeeming the rebate. Companies almost always add other caveats to the rebate as well, such as the redemption having to be postmarked by a certain date. Another tactic that might be used is to disguise the rebate mail to look like junk mail, so that the customer may overlook it.[citation needed] It works in the company's favor if buyers do not act quickly to redeem. However, a University of Florida study notes that shorter redemption periods actually increase the redemption rate in the consumer's favor because it gives them less time for procrastination to set in.
  • New companies that want to make a break into a market can offer substantial rebate savings on their new product as a means of capturing a customer's attention. Zeus Kerravala, vice president at the Yankee Group, has said, "For companies that haven't been in a particular market, the rebate that essentially refunds the customer's money is a great way to get people to pay attention to them. This is especially true in consumer electronics, where brand name does matter. It's a good way to get customers to take a chance on a new brand.

Benefits and costs for consumers

Rebates may offer customers lower pricing. Deal hunter sites frequently tout the benefits of rebates in making technology affordable: "Rebates are the meat and potatoes of the ultimate tech deal, no matter what you are buying… They are paying you money to buy their stuff. All you have to do is take it.According to 2011 research, 47% of consumers submitted a rebate in the past 12 months, whereas similar research conducted in 2009 showed that only 37 percent of consumers had submitted a rebate in the prior year


Industry advisers claim that if mail-in rebates go away, they will not be replaced by "instant rebates" of the same value amount because of the loss of the tangible benefits listed above (fiscal accounting, price protection, etc.) Steve Baker, vice president of industry analysis for NPD Group, comments that "It's a case of be careful of what you ask for. You may see some great deals go away.Rebates take a certain amount of time and effort from the consumer – figuring out the rules, filling out the forms, preparing and dropping off the mailing, cashing in the cheque, keeping track of the paperwork while this is being done. Thus, a rebate can be thought of as being paid to do this paperwork and provide one's personal data to the company. Chances of rebate mailing being lost or failing some criteria may further reduce the expected return on this effort.


Consumers who are aware of this, and who value their time, effort, and opportunity costs above the value of the rebate may choose to intentionally ignore a non-instant rebate that requires such procedures and assume the out-the-door price when considering the purchase. On the other hand, if the consumer does not see it this way, if the consumer's income and budget are extremely limited or non-existent, or if the consumer is more concerned with the price than his or her time for any reason, the rebate may be seen as a good deal. Another potential disadvantage to receiving a rebate is that the rebate does not refund any of the sales tax charged at the time of purchase. Thus the consumer will pay more in tax than if the price had simply been lowered at the time of purchase.

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