6 Best Types of Rebates & Incentives

If there’s one thing customers love when shopping, it’s saving money and paying less. For businesses, different types of rebates are a great way to incentivize customer loyalty and increased sales. 

But, what’s the difference between a rebate vs. discount and how do product rebates work? We’re going to answer all this, as we uncover how a finance automation solution can help track and execute rebates effectively.

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What Is a Rebate?

A rebate is a credit that is provided back to a customer or investor after a transaction has taken place. Businesses and financial institutions utilize rebates to boost sales, retain customers, and promote certain behaviors. 

Rebates come in various forms– they can be offered as cashback on a product purchase, a refund of dividends or interest, or lower prices on products and services. 

The process for rebates typically goes like this:

• A customer makes a purchase for a product at its full listed price 
• The manufacturer or retail provides a rebate 
• The customer sends in proof of purchase and a rebate form to receive the payment return (check or electronic transfer)

What is a Discount?

A discount is another great method to incentivize customer behavior and prompt purchases to be made. While a rebate takes place after the purchase has already been made, a customer receives a discount at the point of purchase. 

From a business’ perspective, a discount is offered to move outdated stock, reward long-time customers, and increase short-term sales. 

While both rebates and discounts are great options, businesses tend not to want to discount items on a continuous basis as it can affect brand reputation. 

What is the Purpose of Rebates?

As alluded to earlier, rebates intend to encourage sales and reward customer loyalty. Depending on the type of rebates in use, it can also help to move certain items out of inventory or product mixes. 

What are the Types of Rebate Deals?

Rebates are a versatile tool in any business strategy, offering a variety of ways to engage customers and achieve specific goals. Whether designed to boost sales, encourage loyalty, or clear inventory, rebates come in many forms tailored to different objectives.

For customers, rebates present an opportunity to save money—if they meet the requirements and submit the proper documentation. On the business side, however, managing rebates is no small task. Companies must process a high volume of submissions efficiently, ensure accuracy, and comply with the promised terms—all while maintaining a seamless customer experience.

To streamline this complex process, many businesses rely on finance automation software for rebate management. These systems handle calculations faster, offer real-time insights, and enforce standardized rules, ultimately enhancing control and efficiency.

Let’s take a look at some of the types of rebates you can offer: 

1. Cash Rebate

Cash rebates are cash back to customers after the purchase has been made, granted that the customer follows the rebate protocols for submission and eligibility. While a cash back rebate delivers delayed gratification, customers still know that they are ultimately paying less for the same item, which makes them potentially more likely to make the purchase. Along with boosted sales, cash rebates can be used as a market research tool for businesses. Companies can analyze buying patterns according to rebate claims. 

2. Delivery Rebate

For purchases that include shipping costs, a delivery rebate can reduce a customer’s delivery expenses. They are either provided through online claim forms or mail-in forms. Mail-in forms have strict deadlines, so customers have to be aware of them in order to be eligible to receive the rebate back. Online claims are obviously more streamlined and immediate, but customers need to be able to upload digital copies of receipts. 

3. Flat-Rate Rebate

Flat-rate rebates are determined in advance at a set amount, no matter the price of the product or service. Flat-rate rebates are straightforward and easy-to-understand for customers because they know exactly how much money to expect back. That being said, flat-rate rebates tend to only be valid during a certain timeframe or under specific circumstances, as the company decides. 

4. Percent Rebate

Unlike a flat-rate rebate with a predetermined nominal amount, a percent rebate provides a percentage of the purchase price back to the customer. Regardless of one’s spending level, the percent rebate is a proportionate reward. Percent rebates tend to perform well for higher cost items because as a customer spends more money, the amount of the rebate increases, too. 

5. Manufacturer Rebate

Manufacturers can also provide rebates. They may do so to stimulate sales during a certain period or sell specific inventory. Manufacturer rebates can cash back rebates, loyalty rebates, or even offered for military personnel or students. 

6. Loyalty Rebate

For customers who have made repeat purchases, loyalty rebates focus on retention. They may be based on when a previous purchase was made, the volume of previous purchases, or even a minimum amount that a customer has spent. It’s a great way to promote higher-value transactions and keep a customer interested in your brand and products. 

Who Uses Rebates?

Retailers, service providers, and manufacturers can provide rebates. Most of the time, retailers may opt for discounts, whereas manufacturers lean towards rebates. But, depending on business goals and sales, either can support rebates. 

When are Rebates Used?

Rebates can be used at any point in time. They tend to be introduced in companies as part of their marketing strategy. The goals of rebates are to boost sales and promote customer loyalty. 

Are Rebate Contracts Needed?

Rebates require contracts due to the proof of purchase required. A discount does not require paperwork because it happens at the time of purchase. 

How Complex are Rebates?

Rebates don’t have to be complex. Naturally, they are more complex than discounts, but with proper management, it can be as easy to execute as discounts are. There’s more steps involved with rebates because it depends on the customer providing the right information and paperwork, as well as the company following through. 

Thats why finance teams rely on rebate management software to remove this complexity. It provides users with automated data collection, customizable dashboards, secure data management, integration with other systems, and real-time reporting and analytics. 

What is a Rebate Example?

To exemplify one of the types of rebates in action, let’s consider a flat-rate rebate, provided by an electronics manufacturer. The cost of a laptop is $1,000, but there’s a rebate for $100. A customer will pay the $1,000 to buy the laptop, and then mail in the necessary forms to receive $100 back, if approved. 

What are the Considerations for Using Rebates?

For retailers, manufacturers, and customers alike, rebates are an upside. Yet, rebates may end up being even more beneficial to the provider than the receiver. 

Here’s why: in many instances, customers will complete the purchase, but then fail to submit the rebate form due to the time-consuming aspect. While the idea of getting money back draws them in in the first place, they may never end up fulfilling the desire. 

On the other end, the supplier of the rebate has still made the sale. 

If you’re looking to execute successful rebate programs, consider the following:

1. Make it Simple

Make the conditions simple, straightforward, and easily communicable. 

2. Offer Options

Provide the option for mail-in rebates or online rebate options. 

3. Test it Out

Try different rebate amounts to see what ends up being most impactful. 

4. Leverage Automation

Utilize automation technology and rebate management software to standardize and secure your rebate contracts, connect data, provide reports, and automatically process rebates. This way, your accounting team doesn't have to deal with another time-consuming, manual, and data-heavy process. 

Wrap Up

Given the many types of rebates your business can offer, it’s no wonder why so many retailers, manufacturers, and service providers make use of this helpful marketing and sales tactic. 

Just remember, as soon as you decide to offer a rebate, it’s up to your processes and people to execute it accordingly and as promised, so you don’t damage your business’ reputation and can maintain customer loyalty over time. 

Rebate management software takes the hassle out of rebate management, so you never have to second guess your actions.