Alliance Business School

MARKETING RESEARCH PROJECT

“A Study on the factors influencing
common rebate perceptions”
Marketing Section ‘B’

TERM III

PGP 2008-10

SUBMITTED TO: SUBMITTED BY:

Prof. SATHYAPRIYA ADITHYA RAJ (08PG144)

GAURAV KUMAR (08PG304)

NISHANT CHOUBISA (08PG108)

SURBHI AGARWAL (08PG201)

URPREET KAUR SONI (08PG209)

VIPUL GUPTA (08PG141)

DATE OF SUBMISSION: 4th March 2009

GROUP 3
 Alliance Business School

Acknowledgement

We are extremely thankful to our faculty Dr. P. Sathyapriya,

Alliance Business School, who have guided us throughout the
project on analyzing the ‘Common Rebate Perceptions’ and
helped us in all possible ways to successfully complete it.

GROUP 3
 Alliance Business School

EXECUTIVE SUMMARY

Our Research intends to provide managerial insights that can be gained by

examining the influence of rebate characteristics on purchase behaviour and
redemption rates. We present data on industry practice, review behavioural
literatures that can comment on the appropriateness of industry practice, and
highlight differences between industry practice and the predictions of
behavioural theory. This report should provide insight into how to manage
rebate promotions and how to develop tests of consumer sensitivity to changes
in rebate offer characteristics.

Rebates serve many important functions in overcoming market barriers

typically targeted by market transformation programs including:
1) Reducing risk for market actors,
2) Creating a marketing impact to consumers.

Despite their potential benefits, rebates may also have drawbacks that actually
inhibit or delay market transformation, including:
1) Interfering with market signals,
2) Causing a marketing effect that is detrimental to long-term sales.

This research paper hence lays out a comprehensive, theoretical and

analytical framework based on the research and analysis we have conducted in
the course of our work for a variety of rebates that are used as market
transformation programs.

GROUP 3
 Alliance Business School

Table of Contents

Particulars Page no.

CHAPTER ONE: INTRODUCTION 4

1.1 Background of the research 4

1.2 Need for the research 4

1.3 Research problem 5

CHAPTER TWO: AN INSIGHT OF THE RESEARCH 6

2.1 Identification of the problem 6

2.2 Scope of the research 6

2.3 Research Methodology 6

2.3.1 Type Of research

2.3.2 Sources and tools for data collection

2.3.3 Sampling technique

2.3.4 Sample Size

2.3.5 Scale used in questionnaire

GROUP 3
 Alliance Business School

CHAPTER THREE: DATA ANALYSIS AND RESULTS 9

CHAPTER FOUR: FINDINGS 16

CHAPTER FIVE: CONCLUSIONS 17

CHAPTER SIX: LIMITATIONS 18

CHAPTER SEVEN: SCOPE FOR FURTHER RESEARCH 19

REFERENCES 20

APPENDIX 21

Survey questionnaires

GROUP 3
 Alliance Business School

CHAPTER ONE: INTRODUCTION

1.1 Background to the research:

Manufacturers and retailers have a long history of using promotional tactics to

increase unit sales and discriminate among consumers who vary in their price
sensitivity. Rebates are among the most popular of these tactics. Rebates offer
consumers an opportunity to receive a monetary reward for buying a promoted
product, provided they expend some effort to receive the reward.

Rebates are distinct from coupons because the effort required obtaining the cost
savings and the receipt of the cost savings both occur after rather than at or before
purchase. Next to coupons, rebates are the most popular promotion tactic used by
consumer goods companies and are the most common promotion strategy used by
technology retailers. Rebates are popular because they can be used to achieve key
price points and drive demand, while limiting the number of consumers that purchase
at the discounted price. As explained by one retailer, “Manufacturers love rebates
because redemption rates are close to none. They get people into stores, but when it
comes time to collect, few people follow through. And this is just what the
manufacturer has in mind”. Rebates are effective in:

• obtaining new users

• brand switching

• repeat purchases among current users

Despite the attention rebates have received in the business news and popular press,
research on consumer responses to rebate offers is limited.

1.2Need for Research

GROUP 3
 Alliance Business School

Most rebate research has relied on consumer surveys and economic models to address
issues other than the trade-off between increased demand and redemption rates. For
example, rebate research has examined optimum rebate reward amounts consumer
perceptions of manufacturers’ motives for offering rebates, consumer attributions of
satisfaction with rebate shopping experiences, consumer perceptions of the
redemption process, and consumer motives toward rebate redemption. What is
missing is a program of research that addresses the net effectiveness of a rebate offer.
More specifically, how do characteristics of a rebate offer influence the propensity of
the consumer to purchase the product and the likelihood that the consumer will
redeem the rebate.

This research attempts to address this gap in the rebate literature by discussing
managerial insights that can be gained by examining the behavioural literature
pertinent to rebate-induced purchases and rebate redemption.

1.3Research Problem

The primary purpose of this research is to gain an insight on “common rebate

perceptions”. The research problem will measure how rebates are effective in
obtaining new users, brand switching and repeat purchases among current users.

GROUP 3
 Alliance Business School

CHAPTER TWO: AN INSIGHT OF THE RESEARCH

2.1 Identification of the Problem

This research looks to understand psyche that drives consumers to react in a certain
way when faced with a rebate in the marketplace. It looks to understand who the
rebate is targeted at, and how they react to the offer. The analysis is conducted to
determine the factors underlying consumer perception of rebates.

2.2 Scope of the Research

The respondents would be restricted to Alliance Business School only and the study
would focus on respondents whose age groups are between 20 the 30 years.

2.3Research Methodology

This section describes the design of research methodology and aims to improve
assurance that appropriate procedures were followed. This research seeks to examine
the perceptions of consumer factors on consumer proneness while availing Rebates.

2.3.1 Type of Research

The research design of the project is identified as a descriptive research; this is

because the research looks to identify the factors underlying consumers’ perception of
rebates. How consumers perceive the marketers offerings and their reactions to the
same. This research looks to understand psyche that drives consumers to react in a
certain way when faced with a rebate in the marketplace. It looks to understand who
the rebate is targeted at, and how they react to the offer. Descriptive research, also

GROUP 3
 Alliance Business School

known as statistical research, describes data and characteristics about the population
or phenomenon being studied. Descriptive research answers the questions who, what,
where, when and how.

2.3.2 Sources & Tools of Data Collection

(a) Primary data: The data is gathered through a survey based research approach

with the help of a questionnaire. The respondents lie within the age group of 20
to 30 years. Questionnaires have some pertinent advantage over some other
types of surveys which is why it was selected as a research tool. They are
economical, do not require as much effort from the questioner as verbal or
telephone survey and often have standardized answer that make it simple to
compile data. It is also easy for the respondents to fill the questionnaire rather
than think extensively and answer to in depth interview questions.

(b)Secondary data: These sources are Business journals, articles on the internet,

retail magazines etc.

2.3.3 Sampling Techniques

Random sampling method and convenience sampling techniques were used to collect
the data as the questionnaire was distributed to the people who make bulk purchases.
The targeted respondents ranged from the age group of 20-30 years.

Simple random sampling is used because each individual is chosen randomly and
entirely by chance, such that each individual has the same probability of being chosen
at any stage during the sampling process, and each subset of k individuals has the
same probability of being chosen for the sample as any other subset of k individuals.

2.3.4 Sample Size

GROUP 3
 Alliance Business School

About 60 questionnaires were distributed uniformly among the people who used to
shop through the retail stores often. 50 samples units were chosen after the exclusion
of those questionnaires that were in-completed.

2.3.5 Scale used in questionnaire

Nine different questions were asked in order to know the respondents perception
regarding various aspects which come into play at the time when rebates are offered
by manufacturers, the scale looked to quantify ease of purchase, understanding of
rebates, reasons for offer, perception of benefits derived and manufacturer’s sincerity.
A FIVE POINT LIKERT SCALE was used and respondents were asked to rate where
1 represents “STRONGLY AGREE” and 5 represents “STRONGLY DISAGREE”

GROUP 3
 Alliance Business School

CHAPTER THREE: DATA ANALYSIS AND RESULTS

Data Analysis

The population for this study encompassed only students of a management college.
The purpose to involve students included to get an idea about the perceptions of
“Youth” on Rebates provided by manufacturers and retailers. The results of surveying
this population produced an effective sample size of 50 respondents.

In the assessment, 9 course topic areas that were used in a prior gap analysis and
hence a factor analysis. These 9 variables, which assess abilities and understandings,
were measured using a five-point Likert scale in which respondents were asked to
indicate their perceptions about Rebates. The respondents were asked to fill a
questionnaire mentioning the factors measuring their perceptions. In this research 60
shoppers were intercepted and asked to participate in the survey. Among these
shoppers, we accepted 50 responses of the survey and rejected 10 because of
incomplete questionnaire.

Total shoppers intercepted 60

Incomplete questionnaires 10
Total questionnaires retained 50
Response rate 83.33%

GROUP 3
 Alliance Business School

Hence the response rate was 83.33%. Among these respondents nearly 54% were
females. And remaining 46% respondents were male. All the respondents were
between the age group 20-30 years.

Factor Analysis:

There are a number of different varieties of factor analysis: the discussion here is
limited to principal axis factor analysis and factor solutions in which the common
factors are uncorrelated with each other. It is also assumed that the observed variables
are standardized (mean zero, standard deviation of one) and that the factor analysis is
based on the correlation matrix of the observed variables.

Why carry out factor analyses? If we can summarize a multitude of measurements

with a smaller number of factors without losing too much information, we have
achieved some economy of description, which is one of the goals of scientific
investigation. It is also possible that factor analysis will allow us to test theories
involving variables which are hard to measure directly. Finally, at a more prosaic
level, factor analysis can help us establish that sets of questionnaire items (observed
variables) are in fact all measuring the same underlying factor (perhaps with varying
reliability) and so can be combined to form a more reliable measure of that factor.

This study demonstrates the role of a principal components factor analysis in

conducting an analysis to determine the factors underlying consumer perception of
rebates. A set of 9 items measuring consumer perceptions of rebates was constructed.

Interpreting Output from SPSS:

Preliminary Analysis:

GROUP 3
 Alliance Business School

Figure 1: KMO and Bartlett’s Test

Figure 1 shows several very important parts of the output: the Kaiser-Meyer-Olkin
measure of sampling adequacy and Bartlett's test of sphericity. The KMO statistic
varies between 0 and 1. A value of 0 indicates that the sum of partial correlations is
large relative to the sum of correlations, indicating diffusion in the pattern of
correlations (hence, factor analysis is likely to be inappropriate). A value close to 1
indicates that patterns of correlations are relatively compact and so factor analysis
should yield distinct and reliable factors. Kaiser (1974) recommends accepting values
greater than 0.5 as acceptable (values below this should lead you to either collect more
data or rethink which variables to include). Furthermore, values between 0.5 and 0.7
are mediocre, values between 0.7 and 0.8 are good, values between 0.8 and 0.9 are
great and values above 0.9 are superb. For these data the value is 0.501, which falls
into the range of being satisfactory: so, we should be confident that factor analysis is
appropriate for these data. Bartlett's measure tests the null hypothesis that the original
correlation matrix is an identity matrix. For factor analysis to work we need some
relationships between variables and if the Rmatrix were an identity matrix then all
correlation coefficients would be zero. Therefore, we want this test to be significant
(i.e. have a significance value less than 0.05). A significant test tells us that the R-
matrix is not an identity matrix; therefore, there are some relationships between the
variables we hope to include in the analysis. For these data, Bartlett's test is highly
significant (p < 0.001), and therefore factor analysis is appropriate.

Communalities Analysis:

GROUP 3
 Alliance Business School

Figure 2: Communalities

Figure 2 shows the table of communalities before and after extraction. Principal
component analysis works on the initial assumption that all variance is common;
therefore, before extraction the communalities are all 1. The communalities in the
column labelled Extraction reflect the common variance in the data structure. So, for
example, we can say that 62.3% of the variance associated with question 1 is
common, or shared variance. Another way to look at these communalities is in terms
of the proportion of variance explained by the underlying factors. After extraction
some of the factors are discarded and so some information is lost. The amount of
variance in each variable that can be explained by the retained factors is represented
by the communalities after extraction.

Factor Extraction:

Figure 3: Total Variance Explained

GROUP 3
 Alliance Business School

Figure 3 lists the Eigen values associated with each linear component (factor) before
extraction, after extraction and after rotation. Before extraction, SPSS has identified 9
linear components within the data set (we know that there should be as many
eigenvectors as there are variables and so there will be as many factors as variables).
The Eigen values associated with each factor represent the variance explained by that
particular linear component and SPSS also displays the Eigen value in terms of the
percentage of variance explained (so, factor 1 explains 23.780% of total variance). It
should be clear that the first few factors explain relatively large amounts of variance
(especially factor 1) whereas subsequent factors explain only small amounts of
variance. SPSS then extracts all factors with Eigen values greater than 1, which leaves
us with three factors. The Eigen values associated with these factors are again
displayed (and the percentage of variance explained) in the columns labelled
Extraction Sums of Squared Loadings. The values in this part of the table are the same
as the values before extraction, except that the values for the discarded factors are
ignored (hence, the table is blank after the third factor). In the final part of the table
(labelled Rotation Sums of Squared Loadings), the Eigen values of the factors after
rotation are displayed. Rotation has the effect of optimizing the factor structure and

GROUP 3
 Alliance Business School

one consequence for these data is that the relative importance of the three factors is
equalized.

Figure 4: SCREE PLOT

The Eigen values for successive factors can be displayed in a simple line plot.
Cattell (1966) proposed that this scree plot can be used to graphically determine
the optimal number of factors to retain. A scree plot shows the sorted Eigen values,
from large to small, as a function of the Eigen value index.

Another rule of thumb is to plot all the Eigen values in their decreasing order. The
plot looks like the side of a mountain, and "scree" refers to the debris fallen from a
mountain and lying at its base.

So the scree test proposes to stop analysis at the point the mountain ends and the

debris (error) begins. In this instance, that point coincides with the Eigen value
criterion. One rule is to consider only those with Eigen values over 1.

GROUP 3
 Alliance Business School

Rotated Component Matrix Analysis:

Figure 5: Rotated Component Matrix

This output also shows the component matrix after rotation. It is a matrix of factor
loadings of each variable onto each factor. This matrix contains the loadings of each
variable onto each factor. By default SPSS displays all loadings; however, we
requested that all loadings less than 0.4 be suppressed in the output and so there are
blank spaces for many of the loadings. This matrix is particularly important for
interpretation.

At this stage SPSS has extracted three factors. Factor analysis is a tool and so it should
be used to guide the researcher to make various decisions: you shouldn't leave the
computer to make them. One important decision is the number of factors to extract.
By Kaiser's criterion we should extract three factors and this is what SPSS has done.
However, this criterion is accurate when there are less than 30 variables and
communalities after extraction are greater than 0.7 or when the sample size exceeds
250 and the average communality is greater than 0.6. The communalities are shown in

GROUP 3
 Alliance Business School

SPSS Output 3, and none exceed 0.7. So, on both grounds Kaiser's rule may not be
accurate.

However, you should consider the huge sample that we have, because the research
into Kaiser's criterion gives recommendations for much smaller samples.

CHAPTER FOUR: FINDINGS

The 9 items measuring perceptions of rebates were analyzed using common factor
analysis. This solution yielded three interpretable factors. The factor loadings and the
reliability coefficients are used to interpret the factors. The three factors contained
four, three, and two items, respectively.

GROUP 3
 Alliance Business School

Complicated_proc Pursuade_custo Consumer_dema

ess mers nd

Could_be_easier slowmoving_item Consumer_welfa

s re
Consumer_benefit
Buy_more
Sincere_manufact

Hence:

• Factor 1 seemed to capture the consumers' perceptions of the efforts and

difficulties associated with rebate redemption (Efforts).

• Factor 2 was defined as a representation of consumers' faith in the rebate

system (Faith).
• Factor 3 represented consumers' perceptions of the manufacturers' motives for
offering rebates (Motives).

CHAPTER FIVE: CONCLUSION AND RECOMMENDATIONS

Rebates are effective in obtaining new users, brand switching, and repeat purchases
among current users. Rebates can play an important role in market transformation,
essentially acting as a catalyst to jump-start markets and overcome initial barriers.
However, they also have drawbacks that can actually inhibit market transformation. In
particular, they can interfere with market signals between customers and
manufacturers, so that markets respond sluggishly. This can delay the broad-based
acceptance of new products.

Thus the Recommendations are:

• Manufacturers give rebates usually on products that are less used by consumers
hence they should take care to give rebates on fast moving goods.

GROUP 3
 Alliance Business School

• Manufacturers should give rebates which are not only beneficial to them but
also helpful to customers.

• Rebates sometimes seem to be very useful but there is not as much profit as it
seems so that we can consider them.

• Manufacturers should offer rebate that are beneficial to consumers, they should
offer differential rebates.

• Make sure that manufacturers provide quality products with rebate offers; they
should not be eye washers.

• Rebates should be given based on the time factor of the underlying goods so
differential rebate is a good option.

• Business exists due to customers, but customers’ welfare is not the primary
motive of business.

• Todays manufacturers are very shrewd in designing the rebate, they very well
take into consideration the need of the consumers.

• Shop keepers should give more money rebates as consumers can perceive true
value of money given.

CHAPTER SIX: LIMITATIONS

1. The first limitation was that due to geographical constraints the samples size
was restricted to Bangalore city, where covering larger geographical area would
have given better results.

2. The next limitation was the sample size. Sample size of 55 was considered for
the research which cannot be generalised to larger population very effectively.

GROUP 3
 Alliance Business School

3. The third limitation was the time availability to conduct the research was
limited.

4. The responses of the respondents may have been biased to some extent due to
their busy schedule or some other reasons.

CHAPTER SEVEN: SCOPE OF FURTHER RESEARCH

The limitations discussed above suggest several areas for future researches.

Firstly, similar research could be conducted for diverse geographical area. This could
increase credibility and generalisation in the findings.

Secondly, further research should be carried on to examine the impact of

demographics on perception of rebates. This approach can help reveal how these
factors may change in the evolution of the rebates success.

GROUP 3
 Alliance Business School

Thirdly, similar researches should be carried out separately for different product
categories to examine whether the perception of consumer on rebates have different
patterns in other contexts.

REFERENCES

1. Cotter ill, R.W., Putris, W.P.J, and Dhar, R (2000).Assessing the competitive

interaction of rebates. The journal of Business (73), 109-137.

2. www2.acnielson.com/reports/document nets /2005_rebates.pdf

GROUP 3
 Alliance Business School

3. Ali, Abdul, Marvin A. Jolson, and Rena Y. Darmon (1994), “A Model for

Optimizing the Refund Value in Rebate Promotions,” Journal of Business

Research, 29 (March), 239- 245.

4. Avila, Ramon A., Joseph D. Chapman, and Teresa K. Avila (1989), “An
Exploratory Study on Consumer’s Attitudes Toward Rebates,” in
Developments in Marketing Science, 12, 273-277.

5. Philip kotler & Kevin lane Keller. (2006). Marketing Management Delhi:
Pearson education

APPENDIX
QUESTIONNAIRE

MARKETING RESEARCH

GROUP 3
 Alliance Business School

Dear Sir/Madam,

Rebates are effective in obtaining new users, brand switching, and repeat purchases
among current users. We are conducting a survey to determine the factors underlying
consumer perception of rebates. We need your help to assess this topic more deeply and
kindly provide your valuable feedback and suggestions to successfully conduct our research.

Rate these variables as per their impact on your perception on Rebates.

Strongly Agree Neither Disagree Strongly

Agree Agree Disagree
Variables nor
Disagree
(1) Manufacturers make the
rebate process too
complicated

(2) Manufacturers could do

more to make rebates
easier to use

(3) Manufacturers offer

rebates because consumers
want them

(4) Today's manufacturers take

real interest in consumer
welfare

(5) Consumer benefit is

usually the primary
consideration in rebate
offers

(6) In general, manufacturers

are sincere in their rebate
offers to consumers

(7) Manufacturers offer

rebates to get consumers to
buy something they don't
really need

(8) Manufacturers use rebate

offers to induce consumers

GROUP 3
 Alliance Business School

to buy slow-moving items

(9) Rebate offers require you

to buy more of a product
than you need

Other Recommendations if any-

----------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------

Name:

Section:

Thank you for your support

GROUP 3