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
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 specific customers and increase the sales of the company.
FAQs
What is the difference between discounts and rebates? With a discount, the customer does not have the option to receive the cash and the seller is actually taking a loss. With a rebate, the amount is given to the customer to be used as a part of the sale or to take as cash. The seller does not take a loss.
Is a rebate equal to a discount? ›
Discounts vs rebates have many distinct attributes. Discounts involve an immediate reduction in the purchase price, which results in the seller incurring a loss. Rebates, on the other hand, involve a partial refund after the sale, requiring customers to meet specific conditions to receive the rebate.
What is an example of a rebate? ›
For example, a rebate agreement states if a customer purchases 1,000 units of product, then they can claim a 5% rebate. Each unit is $100, so if the buyer purchases 1,000 units, the buyer can claim a rebate reward of $5,000.
What is sales rebate and sales discount? ›
A rebate is different to a discount as a rebate assumes that an amount has been paid and part of it will be returned or provided as a credit. Conversely, a discount is applied at the time of payment resulting in a lower price paid. A discount may be off an entire price, or off an outstanding amount.
What is the difference between rebate and discount in SAP? ›
Rebate: it is an incentive to be given to a customer . clubbed with qty purchased by a customer within the period specified (say one month)-conditional. Discount:It is unconditional,to be given to a customer on account of heavy purchase by one single billing. -From the price List(Base price).
Is a rebate the same as a discount? ›
Rebates are collected after payment, while discounts are taken before purchase. Discounts are more likely to be offered by retailers, while rebates are more likely to be offered by manufacturers, such as automakers. Reduced interest rates, by contrast, lower the monthly payments on large purchases such as vehicles.
Why do companies do rebates instead of discounts? ›
Rebate marketing increases sales without forcing the seller to drop their price (in the form of a discount). Rebates have proven to convince customers to buy more products. And because rebates are conditional (meaning they have to claim it), not everyone does. This keeps margins high while boosting sales.
What is a disadvantage of using a rebate? ›
Another potential disadvantage to receiving a rebate is that the rebate does not refund any of the sales tax charged at the time of purchase. Thus the consumer will pay more in tax than if the price had simply been lowered at the time of purchase.
What is the rebate rule? ›
The prescription drug law requires drug companies to pay a rebate if they raise their prices for certain drugs faster than the rate of inflation. This rebate is paid to Medicare and will be calculated and invoiced by the Centers for Medicare & Medicaid Services (CMS).
Why is it called a rebate? ›
Rebate comes from the Old French word rabattre, meaning "beat down, drive back." Rebate can also be used as a verb that refers to giving a reduction in price during a sale.
Angie's List says that unlike a discount, which indicates a percentage off, rebates are typically expressed as a cash amount. Because rebates are offered at the manufacturer level rather than the dealer level, you can go to any dealer that sells that type of car to take advantage of a rebate offer.
What is the difference between a Refund and a discount? ›
A Discount is when you want to reduce a family's amount owing to you, but you haven't received any form of money. A Refund is when you physically give money back to a family.
What do you mean by discount? ›
: a reduction made from the gross amount or value of something: as. a. : a reduction made from a regular or list price or a proportionate deduction from a debt account usually made for prompt payment or for payment in cash.
What does rebate mean on a sale? ›
A rebate is a refund offered to a customer by a manufacturer, distributor or retailer when a customer makes a purchase. Sometimes referred to as a retroactive discount, rebates are often used as an incentive or marketing tactic to attract customers.
What is the difference between a rebate and an offer? ›
Rebate pricing implies a partial refund or cashback offered to a customer after a purchase is made, typically as a way to incentivize buying or to promote customer loyalty. Once again, while discounts reduce the price at the moment of purchase, rebates involve a postponed reimbursem*nt.
What is rebate on discounted? ›
Rebate on bills discounted is also known as discount received in advance i.e. discount received but not earned. In such a situation, the rebate on bills discounts will be deducted from interest and discount in profit & loss account and shown as liability in the balance sheet. Was this answer helpful?
Is rebate on bills discounted? ›
Rebate on bill discounted is nothing but unearned portion of discount a discount which is not received but making provision for same because certain bills are not matured on a particular period on which discount is not earned . and for this period discount is to be computed and provision is to be made .
