Micro Rebates versus Lump Sum Discounts: Channel Profit Implications in Consumer Electronics Supply Chains

Abstract

This article explores, how micro rebates and lumpsum discounts have had an uncertain impact on profit generation in regard to the channel distribution in the consumer electronics business. The two pricing methods have been found to be used extensively, and hence they can have a different impact on profits, consumers and channel operations. The research question which seeks to be answered is the pricing strategy that can assist manufacturers, retailers and distributors in maximizing their profits. The research is carried out using a vast amount of data consisting of multiple companies in the consumer electronics industry over a period of three years, and it implements a quantitative strategy to investigate the financial effect of micro rebate versus lumpsum discount at various supply stations in the long run. The research question revolves around the manner in which the micro rebates and lumpsum discounts influence the channel in consumer electronic supply chain profits. To find out the effects of the pricing strategies on the earnings, the difference-in-differences (DiD) design is employed, using the data obtained and summarized on the basis of the sales reports and pricing strategies applied by the electronics manufacturers, retailers and distributors. The three years were used to analyze 150 products where some of the key variables included sales volume, inventory turnover and price sensitivity. The results indicate that using micro rebates causes a greater increase in the volume of sales when compared to lumpsum discount, whereas a lumpsum discount enhances the margins of the retailer. Interaction effect implies that the best profit maximizing strategy differs with the supply chain position of the retailer and consumer engagement strategy. The paper comes to the conclusion that micro rebates should be used when it is directed to obtaining a market share and lumpsum discounts should be used by retailers that want boost their margins. More studies are required regarding long term consumer preferences and consumer brand loyalty. The conclusion points to an incremental discount being used to allow retailers and manufacturers to maximize their profits within a certain channel. The research has been a pioneer, in that it compared micro rebates to lumpsum discounts in the supply chain of consumer electronics.