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.
Difference between Rebate and Discount: 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 essential tool for marketing strategies.||It is an essential 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.|
|For external factors||Based on customer demands and market requirements, the discount is offered on the spot during payment.||It is a favour provided to the buyer from the seller and is not affected by external factors such as market demands.|
|Applicability||This deduction applies to any 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.||Most people do not prefer it as paying less while 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 into buying the product. Giving discounts will make the customers revisit the seller 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 a 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 a 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 offered 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 initial 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 it comes to rebate it happens on only after some particular time. Rebates are retrospective 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 massive 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 typically given anytime.
- Rebate is Discount on turnover, means if you buy three 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, and 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 provided 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 time. Discount is given on every good purchased by the customer
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 specific customers and increase the sales of the company.