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Week 7 Discussion Thread: The Great Rebate Runaround Lydie Ondende 1. This article describes one reason manufacturers might want to offer rebates rather than decrease wholesale prices. Explain why this can be viewed as an example of customized pricing. Customized pricing is defined as a pricing strategy that is based on individualized estimates where each customer is presented with an individualized price. Rebates are a great example of customized pricing because they draw in customers and increase the chances of making a sale (Dey et al., 2018; 2019). Giving rebates to a customer has a lot of detailed information before the conclusion to do so. The company has to have enough data and detailed knowledge of the market and of its customer to measure variables in pricing and product to make sure that both parties get a fair deal (Ha et al., 2017). With customized pricing being the act of altering the price of goods or services based on the customer's factors, it can be viewed as giving rebates. Receiving a rebate depends on the customer response and becomes customizable as each customer's needs are being dealt with. It would be in the seller's interest to issue rebates because most of the time, customers need to go and register online for their rebate to be sent to them in form of a check weeks later. Customers tend to forget to finalize the process in order to receive the rebate and as a result, no rebate is issued for the transaction, which means that the product was sold at full price. If the company offers to decrease the wholesale price, it is an automatic decrease in payment and those costs have to be taken up by the supplier but are usually unaccounted for. 2.Even if all rebates were redeemed, why might manufacturers still want to offer rebates rather than decrease wholesale prices? A rebate is a purchasing discount and a company would be compelled to offer rebates to increase sales and maintain their business with long-term customers (Simchi-Levi et al., 2021). Rebates are also used to entice the price-sensitive customers who are apprehensive about spending more than they had hoped to spend. Rebates are often used to promote sales at retail establishments and utilizing rebates gets more sales. Retailers who are under pressure to move inventory can utilize rebates to maximize revenue and this strategy combined with the dynamic pricing of limited inventory can yield great returns for the supplier (Hu et al., 2017). For the supplier offering rebates, they are able to record products sold at full price in their books. This reflects as an increase in cash flow due to higher sales prices since rebates are recorded as expenses for the organization.3.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? Big suppliers such as Sony and Panasonic tend to have the same price for their products across the board. Best Buy is considering eliminating rebates because their rebate price often matches or beats the price of the same product from other retailers. The rebate turns out to be a money loss avenue for Sony and Panasonic items for Best Buy. There are also associated costs of rebates that Best Buy has to incur and as a result, the profit margin is lower than anticipated with the utilization of rebates. Supplier optional prices and rebate decisions critically depend on both reviews and moral costs and can affect the overall decision on eliminating rebates (Chen et al., 2022;2021). References Chen, J., Guo, Z., & Huang, J. (2022;2021;). An economic analysis of rebates conditional on positive reviews. Information Systems Research, 33(1), 224 243. https://doi.org/10.1287/isre.2021.1048 Dey, K., Chatterjee, D., Saha, S., & Moon, I. (2018;2019;). Dynamic versus static rebates: An investigation on price, displayed stock level, and rebate-induced demand using a hybrid bat algorithm. Annals of Operations Research, 279(1-2), 187- 219. https://doi.org/10.1007/s10479-018-3110-x Ha, A. Y., Shang, W., & Wang, Y. (2017). Manufacturer rebate competition in a supply chain with a common retailer. Production and Operations Management, 26(11), 2122- 2136. https://doi.org/10.1111/poms.12749 Hu, S., Hu, X., & Ye, Q. (2017). Optimal rebate strategies under dynamic pricing. Operations Research, 65(6), 1546-1561. https://doi.org/10.1287/opre.2017.1642 Simchi-Levi, D., Kaminsky, P., & Simchi-Levi, E. (2021). Designing and managing the supply chain: Concepts, strategies, and case studies (4 ed.). McGraw-Hill