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Week 3' Discussion Thread: The Great Rebate Runaround Mike melesi Question Dne: This Article Describes 'DI'IE Reason Manufacturers Might Want to Offer Rebates Ratherthan Decrease Wholesale Price. Explain Why 111is can be Viewed as an Example of Customized Pricing. Customized pricing refers to a method of determining a product or service's price based on what consumers are assumed to anticipate paying. According to research, customized pricing allows the some products to be offered to different customers at different price points, regardless of the event or circumstance (David et al., 2D17}. Customized pricing can also be dynamic pricing if each consumer is given a price based on an assessment of their own demand for a certain product, at a specic time and location {Simchi-Levi et al., 2021}. Many markets provide dynamic pricing that might not be tailored to the customer. According to David et al. (2on1, one of the main goals of customized pricing is to maximize profits while simultaneously moving inventory. Using rebates as opposed to price reductions can be viewed as an example of customized pricing because some customers might not have the time to spend redeeming rebates and because it consist both, the customers who need rebates, and the customers who are seeking a high-quality product without having to worry about the price. Question Two: Even it All Rebates were Redeemed, Why Might Manufactuers Still Want to foer Rebates Rather than Decrease Wholesale Prices? The case study outlines a potential justication for why manufacturers might prefer to offer rebates over lowering wholesale prices. Consumer product manufacturers like Procter & Gamble invented rebates in the 19TDs as a strategy to offer modest discounts without lowering the price {Simchi-Levi et al., 2D21}. Rebates remain an effective marketing strategy because, even though they encourage customers to buy products, approximately 4D percent of all rebates are not redeemed. generating an additional $2 billion annually for retailers (Simchi-Levi et al., 2021). The purpose of rebates is to draw consumers' attention to a product's lower price before they decide to purchase it at full price. The customers pay the full amount, which boosts sales volumes, the company's cash flow, and the stock price. Redeeming rebates result in an expense being noted. Dverall, rebates boost profitability even after they are repaid thanks to higher sales volumes that wouldn't have been possible with lower wholesale pricing (Zhang et al., 2|]19). There are several additional reasons why businesses might choose to offer rebates rather than lower wholesale prices, including, but not limited to, persuading customers to evaluate products, reducing surplus inventory, transferring soon-to-be- obsolete inventory, and finally generating profits [Zhou et al., 2D1 7"). Question Three: 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? Mail-in rebates are useful for getting fast profits by capitalizing on a negligent consumer but forcing customers to contend with obstacles to obtain a discount may harm the reputations of both the manufacturer and the retailer. Since companies like Best Buy are unable to directly benefit from the mail-in rebate's revenue, it is in the best interest of the retailer to discontinue providing processes that contribute to their customers becoming disgruntled and unprofitable. Best Buy's suppliers won't be as incentivized to end the mail-in rebate because manufacturers stand to gain the most from this strategy and don't have to interact with customers directly. Manufacturing vendors such as Sony and Panasonic don't deal with rebates, and the price they charge for their products at Best Buy enables them to generate the highest amount of income. The profitability of Best Buy is affected by offering rebates because their pre-rebate pricing frequently equals or exceeds that of many other retailers. Furthermore, processing rebates takes time and money, which Best Buy seeks to avoid while striving to protect its brand from negative backlash because of incorrect or time-extensive rebate processing. References David, M. E., Bearden, W. O., & Haws, K. L. (2017). Priced just for me: The role of interpersonal attachment style on consumer responses to customized pricing. Journal of Consumer Behaviour, 16(6), e26-e37. https://doi.org/10.1002/cb.1651 Simchi-Levi, D., Kaminsky, P. & Simchi-Levi, E. (2021). Designing and Managing the Supply Chain: Concepts, Strategies, and Case Studies (4th ed.). McGraw-Hill Education. https://prod.reader- ui.prod.mheducation.com/epub/2257c567ea799716d553e16ec4a851a6/data-uuid- 1487f43d0e5e488a989a94513ce09227 Zhang, Z., Popkowski Leszczyc, P., Qu, R., & Joseph, K. (2019). A joint optimal model of pricing, rebate value, and redemption hassle. Decision Sciences, 50(5), 1060- 1092. https://doi.org/10.1111/deci.12365 Zhou, Y., Cao, B., Tang, Q., & Zhou, W. (2017). Pricing and rebate strategies for an e-shop with a cashback website. European Journal of Operational Research, 262(1), 108- 122. https://doi.org/10.1016/j.ejor.2017.03.037