Push money
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The Push Money is a money given to retail merchants by a producers for stimulating the sale of the manufacturer's offering to clients. Another term for push money is - Spiffs.
For instance, a producer can offer $10 for every entity of product the merchant is able to sell out. Push money, or stiffs, on the whole, refers to motivation to sellers to advertise an item over competitive companies. These encouragements also take the form of offering, vacations and other kind of non-pecuniary reinforcement [1].
One gamble with encouraging program for the dealing is that merchants can be too much motivated to prevail a reward or additional push money that they might try to flock the brand to each client, whatsoever it suits that client's necessities or not. For that matter, a company have to manage carefully such enterprises to minimize ethical predicaments. An incentive technique might look like a bribe if it is not carried out in an eminently structured and open fashion [2].
The IRS and Push Money
The Internal Revenue Service (IRS) originally stated in Revenue Ruling that when push money is paid by the producer, the remittances are considered as being paid a unit other than an employer and such quantities are not object to suppressing and employment taxes, though they are entirely object to federal income taxes. The IRS also held in this decision that this equal rule can apply when the remittance is made through the employer. Under such a determination, the producer authorizes the employer to make the push money remittances and then covers the costs the employer [3].
Afterwards, in the two private letter ruling, the IRS took a changed position, holding that push money was paid for services realized [4]:
- One rule focalised on self-employment taxation, remarking that push money paid by an automobile producer was not self-employment income, because the payment may be an object to income tax withholding and Federal Insurance Contributions Act (FICA) and Federal Unemployment Tax (FUTA) taxes.
- The second rule focused merely on the FICA taxation of push money payments made by a merchant. The IRS held that the push money was reparation for services accorded and was an object to FICA taxes. The same actions would concern to federal income tax deduction and FUTA.
Employers are precautionary to treat as attributed income object to federal income tax, federal income tax withholding, Social Security, Medicare and FUTA all push money that is paid immediately to employees by a third party. Prospectively, third-party paymaster of push money could be asked to make the remittance immediately to the employer for apportionment to employees. Under the subsequent coming, the employer can withhold federal income, Social Security and Medicare taxes from the push money at this time it is paid to employees [5].
Examples of Push money
- Retailers may be given Push money to give away free samples of the product to their customers.
- Manufacturers may offer Push money to retailers to place their product in a more visible location such as at the front of the store or in the checkout line.
- Manufacturers may also offer Push money to retailers who agree to carry a larger quantity of their product in the store.
- Retailers may receive Push money when they agree to feature a manufacturer's product in a special promotion or sale.
- Retailers may be offered Push money for displaying the manufacturer's product in their window or for advertising the product in their local newspaper.
Advantages of Push money
Push money is a form of incentive used by manufacturers to encourage retail merchants to sell their products to customers. The following are some of the advantages of using push money:
- Push money can be a great motivator for retail merchants to increase sales of a specific product. By providing push money, manufacturers can incentivize retailers to prioritize the sale of their offerings.
- Push money helps to build relationships between manufacturers and retailers. By offering incentives, manufacturers can show retailers that they value their efforts to market their products.
- Push money can help manufacturers to gain market share and increase their profits. By incentivizing retailers to prioritize their products over those of their competitors, manufacturers can increase the sales of their offerings.
- Push money can help manufacturers to stay ahead of the competition by offering valuable incentives to retailers. This can help manufacturers to remain competitive in the market and maintain their sales.
Limitations of Push money
Push money is a form of incentive used by producers to stimulate the sales of their products to retail merchants. However, it comes with certain limitations:
- It may create an imbalance between the prices charged by different retailers. As merchants are incentivized to sell the product at a lower price, they may not be able to make a profit on the sale, leading to reduced revenue for retailers.
- Push money can also lead to an erosion of brand loyalty as customers are more likely to shop at the store offering the best deals.
- Push money can incentivize retailers to push a particular product, even if it is not the best choice for the customer. This can lead to a conflict of interest between the retailer and the customer.
- Push money can also lead to a lack of transparency in pricing for customers, as the retailers may not clearly advertise the incentives they receive from producers.
Introduction: Push money is a payment made by producers to retail merchants to stimulate sales of their products. Here are other approaches related to Push Money:
- Price Protection: Price protection is a form of rebate given to retailers to reimburse them for the cost of goods that have dropped in price.
- Slotting Fees: Slotting fees are payments made by manufacturers to retailers in order to secure prime shelf space for their products.
- Co-op Advertising: Co-op advertising is an arrangement between a manufacturer and a retailer to share the cost of advertising.
- Promotional Allowances: Promotional allowances are payments made by manufacturers to retailers to fund promotional activities such as store displays and customer incentives.
In summary, Push Money is just one of many approaches used by manufacturers to stimulate sales. Other approaches include Price Protection, Slotting Fees, Co-op Advertising, and Promotional Allowances.
Footnotes
References
- Boatright R. G, (2011), Interest Groups and Campaign Finance Reform in the United States and Canada, The University of Michigan Press
- Clemente M. N, (2002), The Marketing Glossary: Key Terms, Concepts and Applications, Clemente Books
- Lamb C. W, Hair J. F, McDaniel C, (2009), Essentials of Marketing, South- Western Cengage Learning, Cincinnati, Ohio
- O’Guinn T, Allen C, Semenik R. J, (2009), Advertising and Integrated Brand Promotion, South- Western Cengage Learning
- Timberlake D. E, McKenna P, (2019), Payroll Answer Book, Wolters Kluwer, New York
Author: Paulina Matysiewicz
