How to use rebates to outperform your supply chain competition

How to use rebates to outperform your supply chain competition

Amid the COVID-19 crisis, companies have faced more complexity, risks and unpredictable situations, it's now not only about making inventory readily available to the end customer. They need to evolve and reinvent their supply chains. From start to finish, your supply chain offers opportunities to spearhead innovation, maximize savings, increase the bottom line, and improve your customers’ experience with your brand.

To do all this and become a successful business, you need to find ways to stay a step ahead of your supply chain competition. Otherwise without competition, growth and improvement are impossible. Those organizations that are successful in the long run know how to compete in their markets. However, what could you be doing to differentiate yourself from the competition? This is where rebates come in.

Three principal methods of supply chain competition:

Supply chain competition exists when a company has a product or service that is perceived by its target market customers as better than that of its competitors. This advantage is gained by offering consumers greater value, either by means of lower prices or by providing greater benefits and service that justifies higher prices.

1. Price - Offering an equivalent product or service at lower price. Customers can affect pricing depending on how many customers purchase a product or service, how significant each customer is to a company, and the perceived cost to a customer of switching from one business to another. If a company has a limited but powerful client base purchasing its product, they can often dictate their terms and drive prices down. Similarly, if a company has a broad client base with multiple industry options, they may be able to focus on price and quality of service to attract a niche audience within the market.

Where customer behaviour can drive prices down, suppliers can drive their prices up. This force is driven by the number of suppliers, the uniqueness of the supplier’s product, and how much it would cost a company to switch from one supplier to another. If a company has few suppliers, it becomes dependent on them, giving the suppliers the power to raise their prices.

By negotiating rebates with your suppliers, you can lower your costs, allowing you to price more competitively. If these rebates are too generic and your supply chain competition can also get them, they may also lower their prices thus creating a downward spiralling price war, threatening your margins.

2. Quality - Customer expectations are rising, and to remain one step ahead of the supply chain competition, manufacturers need to create higher quality products to give to their suppliers. Quality represents perhaps the key non-price consideration that determines whether consumers will purchase a product. If a company has produced a quality product and has marketed it effectively, it's time to see if you can cut costs without sacrificing quality.

Manufacturers should consider other supply chain competitors when developing their product. What are they doing that you aren't (and vice versa)? How are their products performing? What works for them and why? Answering these questions will put you in a better position to compete with similar businesses in the market.

3. Service - Providing a “better” customer experience for buyers. Great customer service has the potential to convince your existing customers to stay and to expand your customer base. Customer service done right has the power to increase brand loyalty, customer advocacy, and increased revenue. 81% of companies view customer service as a competitive differentiator in the supply chain.

Unless there is a strong incentive, satisfied customers are unlikely to switch suppliers. If your supply chain competition wants to capture your satisfied customers, it must provide significantly better value than you. Either by lowering prices for the same level of performance or by increasing performance levels at the same price. The larger the satisfied customer base you own, the greater the amount of entry barriers for your competitor.

Out of the three, rebates can directly impact price and service.

Rebates can incentivize loyalty

Rebates can be a way to reward loyalty, helping your regular or large customers feel valued.
Offering rebates to your customers can also be a great way to incentivise loyalty, sell specific products within a specific time and encourage greater purchasing volumes. Even if this results in a lower margin on each sale, you can still make more profit overall.

An example of generating loyalty is with incentive rebates like volume rebates, value rebate and growth rebates which encourage purchases across a specified group of products. The more you trade with this partner over the course of the deal, the better the rebate rates you receive. This helps to promote loyalty with certain trading partners and protects the supplier from the risk of their trading partners engaging with the supply chain competition about similar products while decreasing costs for the purchaser. Obviously, suppliers also benefit from the larger quantities purchased which help them to leverage economies of scale and increase their presence in the marketplace.

How can I get my rebate to perform better?

If your rebate data is generated and stored in multiple places, different teams end up with their own version of the truth. This makes data less actionable, teams less collaborative and businesses less flexible to market changes. On the other hand, rebate data that accurately reflects the agreements in place and that is visible to all key stakeholders can be your strongest asset in reducing your time to market. Reliable and accurate rebate data helps you make informed decisions, respond quickly to market shifts and stay one step ahead of the supply chain competition. This can all be achieved with a rebate management system.

Elizabeth Lavelle

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