Customer Rebate is a Reward that pays back a portion of the total price a customer pays for purchasing merchandise and/or services. In many cases, rebates have proven to be more helpful in inducing customers to make purchases than direct discounts. Many sellers often perceive rebates as a better marketing strategy compared to discounts. The primary reason for this is that it will induce the customer to make a subsequent purchase when offered a rebate.
When managed effectively, customer rebates offer huge value to both the seller and buyer. The seller can build a strong relationship with their buyer through an effective loyalty incentive, and the buyer gets a better price overall.
Types of Rebates:
- Flat Rate – This rebate allows a fixed % or $ per unit to be calculated and paid to customer on a set periodic schedule
- Fixed Fee – This rebate provides a fixed amount to customer if certain conditions are met
- Price Protection – This type of rebate protects the customer from the price fluctuations and provide the flexibility to the customer to buy without worrying about price fluctuations
- Target Achievement – This rebate can be only paid if customer achieves certain targets specified in the contract
- Tier Rate – This rebate allows a % which varies based on the cumulative purchases by the customer in the previous period or current period
- Growth – This rebate is calculated and paid based on growth in purchases from the previous period
