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Difference between Rebate and Discount

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Difference between Rebate and Discount
Stechies

Discount and Rebate – a lot of confusion exists when it comes to these terms. Because the former is a lot more common, the latter is often confused with it. This article aims to throw light on the major differences between a Discount and Rebate, what is discount, what is the rebate and critical differences between both of them in the simplest of ways. We first start with a Comparison Chart between Discount and Rebate

Read on for more

Discount vs Rebate: Comparison Chart

Basis of comparison

Discount

Rebate

Definition

It is a reduction in the original amount of a product or service given to the buyer by the seller.

It is the purchase price amount refunded to the buyer by the seller, based on certain conditions.

Strategy

It is an important tool for marketing strategies.

It is an important tool for sales promotion strategies.

Time of provision

It is provided to the buyer at the time of purchase.

It is provided to the buyer at a specific time of payment under the approval of the seller or manufacturer.

Availability

It will be available to all the customers.

It will be available to specific customers.

With respect to external factors

On the basis of customer demands and market requirements, the discount is offered on the spot during payment.

It is favour provided to the buyer from the seller and is not affected by external factors such as market demands.

Applicability

This deduction is applicable to any sort of marketing.

This is applicable only under specific conditions and terms.

Preference

It is more preferred by people as buyers want to pay less during purchase.

It is not preferred by most people as paying less during purchasing anything is more convenient.

What is Discount? 

A discount is a concession in the actual price of a product or service. It is a strategy used by the seller of the product to lure the customers to buy the product. Giving discounts will make the customers visit the seller again in future that in turn will benefit the seller.

It can be strategically utilized by the seller to earn more profit as the actual amount of the product or service can be increased and then a discount can be provided on that amount. There are two types of discount - cash discount and trade discount.

Formula to Calculate Discount

The most common formulas for calculating the discount percentage are:

  • Discount amount= MRP-Selling Price
  • Rate of Discount = Discount % = Discount/MRP × 100

What is Rebate?

A Rebate is a special kind of discount that is paid to the buyer by the seller or manufacturer. In this case, a partial refund of the original amount is paid back to the customer. Customers whose purchases reach a certain quantity or amount are eligible for a rebate.

 Key Differences between Rebate and Discount

  • Paperwork is required in case of rebate but there is no such need in discounts.
  • Rebates are offered in the form of cash, other products, or gift cards. There are no such returns in discounts.
  • Rebate is provided to the customers when the complete payment is made. Discount is provided to customers so that they do not have to pay the full amount.
  • Rebate is provided for encouraging customers to make full payment. Discount is usually used for clearing the seller’s existing stock.
  • A rebate is not a reduction in the original amount. A discount is a deduction of the original amount of the product or service.
  • Rebate is a partial repayment, whereas a refund is a repayment of the total purchase price Discount is a reduction in Price
  • The discount means ...it happens on a single purchase...when comes to rebate .....it happens on only after some particular period of time. Rebates are retrospective in nature with a specific time frame or other conditions like Sales Volume, Sales Quantity attached to it.
  • Rebate: an incentive to be given to a customer .clubbed with qty purchased by a customer within the period specified (say one month)-conditional. Discount: unconditional, to be given to a customer on account of heavy purchase by one single billing.-From the price List(Base price).
  • Rebate is a discount which is settled at the end of a period of a contract or an agreement. Discounts are normally given anytime.
  • Rebate is basically Discount on turnover, means if you buy 3 shirts you will get a discount of 20%, whereas if the no. of shirts has reduced the discount will get reduced. Discount doesn't depend upon the turnover, it is fixed.and can only differ from customer to customer.
  • Rebate is a retroactive agreement.it is given to a partial payment to the particular scheduled time. (1yr or 3 Yr). Discount is given at a time to the customer.
  • Rebate is given for the purchase of specified quantity or on the volume of the sales over a given period of time. Discount is given on every good purchased by the customer

 Conclusion

Therefore, it has been understood that both rebate and discount are tools used by sellers or manufacturers for targeting their customers. As discount aims to gather more and more customers, the rebate is used to target certain customers and increase the sales of the company.


Comments

  • 09 Feb 2012 8:39 pm Helpful Answer
    Hi,
    The difference between Rebate and Discount is as follows,
    Rebate: Incentive to be given to a Customer clubbed with Quantity Purchased by a Customer within the Period Specified(Say One Month Conditional)
    Discount: Unconditional to be given to a Customer on Account of Heavy Purchase by One Single billing from the Price List(i.e., Base Price)
  • 15 May 2013 10:35 am Helpful Answer
    Rebate is final discount that after deducting rent, promotion cost etc.. and discount is deduct amount from purchase cost. Exampl: total sale is 1000 $
    rent is 200 , promotion fee is 300 than remaining amount is 500 so deduct rebate from 500 as per contract %. but discount means deduct % from 1000.
    This is what i study from university.