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Cash Management Techniques: Discuss the concept of cash rebates and their effect on business; are they ethical?

Among the cash management techniques used by most businesses are those that slow down their bill payments. A good example for this is the concept of cash rebates. Cash rebates are most commonly offered on household items like computers and other electronics.

Research "cash rebates" and other similar cash management techniques. Answer the following questions:

Are these practices sound business decisions? Are they ethical? Explain.
What percentage of the rebates offered are actually paid?

Select a business of which you are familiar, and answer the following question:

Would you recommend that this business use cash rebates?

Solution Preview

You have been asked to research cash rebates and other similar cash management techniques and state whether these practices are sound business decisions. At a glance, cash rebates (also termed as a refund) are a popular tool widely used by businesses to promote their goods or services and/or attract buyers. Note the following excerpt below which gives further information on rebates:

"Rebating evolved in the latter half of the 20th century from the marketing technique of offering coupons, which had proved broadly successful. Rebates were initially offered by producers of grocery-store goods and subsequently by manufacturers of nonfood items. Currently, businesses making use of rebates are diverse and include the manufacturers of health and beauty aids, household supplies, and small and large appliances, as well as automakers, wine and liquor manufacturers, and segments of the computer industry. The cash amounts these companies offer their customers is similarly wide-ranging; some rebates of less than a dollar are offered, while other rebates on "big ticket" items such as automobiles have reached several thousand dollars. The size of the rebate offered depends on the base retail price, the nature of the product being promoted, and the number of goods backed up in the production pipeline."

You will realize from the excerpt that coupons are similar to cash rebates; however, there is one important difference between the two. Before I highlight this difference you may note the definition of coupons:

"Coupons are certificates that provide consumers with discounts on goods or services when they are redeemed with retailers or manufacturers. Offered mainly by retailers and manufacturers as sales promotion tools to accomplish specific sales and marketing goals, they are very popular with small business owners because they are so inexpensive to disseminate and because of their historical effectiveness. Consumers are attracted to coupons because they offer immediate value and savings."

From reading, what causes rebates to be distinct from coupons and other forms of discounting is that, with rebates a customer is reimbursed for part of the purchase price of an item some time after, rather than at the time of sale. With coupons, an instant reduction in the price of an item is received at the time of purchase. You may want to note further that similar to coupons are 'discount sales.' With discount sales, reductions are made from the regular price of a product or service. That is, the consumer gets the product at a lower price than normal and this discount is also received ...

Solution Summary

This solution provides detailed information on cash management techniques - in particularly on rebates and why offering them may be considered a sound business practice. Information is also given to help you decide on whether such a business practice is considered ethical. An example is given in the solution for a business that you could recommend to offer rebates. This solution is approximately 1600 words.