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.

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,

GROUP 3
 Alliance Business School

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.

Table of Contents

Particulars
Page no.

CHAPTER ONE: INTRODUCTION

4

1.1 Background of the research

4

GROUP 3
 Alliance Business School

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

CHAPTER THREE: DATA ANALYSIS AND RESULTS 9

GROUP 3
 Alliance Business School

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

CHAPTER ONE: INTRODUCTION

1.1 Background to the research:

GROUP 3
 Alliance Business School

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. 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

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

GROUP 3
 Alliance Business School

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.

2.2Scope 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 ecause 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 known as statistical research, describes data and

GROUP 3
 Alliance Business School

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.

GROUP 3
 Alliance Business School

Factor Extraction:

Figure 3: Total Variance Explained

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

GROUP 3
 Alliance Business School

of Squared Loadings), the Eigen values of the factors after rotation are
displayed. Rotation has the effect of optimizing the factor structure and
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.

GROUP 3
 Alliance Business School

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.

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

GROUP 3
 Alliance Business School

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 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 three, two and one items respectively.

GROUP 3
 Alliance Business School

Complicated_proc Slowmoving_ite Consumer_welfa

ess ms re

Could_be_easier 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

GROUP 3
 Alliance Business School

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.

• 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.

GROUP 3
 Alliance Business School

2. The next limitation was the sample size. Sample size of 60 was
considered for the research which cannot be generalised to larger
population very effectively.

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.

GROUP 3
 Alliance Business School

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.

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.

GROUP 3
 Alliance Business School

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

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.

Strong Agree Neithe Disagr Strong

ly r ee ly
Variables
Agree Agree Disagr
nor ee
Disagr
ee

(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

GROUP 3
 Alliance Business School

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
to buy slow-moving
items

(9)Rebate offers
require you to buy
more of a product
than you need

Other Recommendations if any-

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

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

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

GROUP 3
 Alliance Business School

Name:

Section:

Thank you for your support

GROUP 3