What is a Rebate?

Definition: A rebate is a fraction of a sale transaction that is returned to the customer after the operation is closed. It is a sales incentive that rewards a client with a certain portion of the transaction value.

What Does Rebate Mean?

Rebates are a marketing strategy employed to create an incentive to keep purchasing. Differently from discounts, rebates are given after the sale is concluded. These rebates were normally sent by physical e-mail with an application that had to be filled and sent back in order to receive it. Companies would ask for certain personal information from the client to issue the rebate, which also serves as a market research tool.

After the rebate application is received the company processes it and if it meets certain criteria the rebate is issued and sent to the customer. In modern days, instant rebates also exist. Those are delivered to clients immediately after they have completed the purchase, normally through gift cards or coupons. Rebates are highly advantageous for both clients and companies since both parties benefit from them. Most rebates are stated as a percentage of the transaction value or they can also be established as a fixed amount of money.

Example

Big Men Tools Co. is a hardware store that sells machinery and equipment for domestic uses. The company is currently reviewing its marketing strategies and the owners decided to establish a rebate program for loyal customers. In order to do so, they registered clients through a VIP Card system to have all their contact information.

After registering, clients are able to enjoy 10% rebates on all their purchases of $100 or more. In order to get the rebate, they must go online, register on the website with their VIP Cards and complete a brief survey. After the survey is completed an instant 10% percent-off coupon will be issued, which can be used to buy new items from the store. This strategy yielded great results for Big Men Tools and clients were also satisfied with the new benefits of the VIP Card.