Rebates Challenges in the Electrical Industry
Manufacturers have long served the electrical industry with rebate programs, rewarding distributor partners with earnings in return for favourable purchasing behaviour to drive loyalty and market share. These programs have proven to be very beneficial for three good reasons:
1. Rebates drive behavior: Rebate earnings are like “money pills.” The more we take, the better we feel. They steer our purchase and selling decisions, and focus marketing departments to promote manufacturer products that are well supported by incentive programs.
2. Rebates secure bottom line earnings: Rebate earnings can make up 100%+ of a company’s bottom line. Companies treat their earnings in different ways. They are either treated as behind the scenes earnings “for the house” or shared on the front line to promote more competitive pricing. Either way, the additional earnings are necessary, as most distributors operate with razor thin margins. Just take a look at the NAED PAR report for proof. By the time a distributor sets up shop to manage several manufacturer products with buildings, people, capital for operations and services to support every single manufacturer, there isn’t much left to appreciate after all is said and done.
3. Rebates can prevent product discounts: It makes better sense to provide an incentive for performance rather than locking in product discounts that you might not even need. Assuming a discount off list is needed to compete in the market is not always necessary. Committing to a higher price strengthens the value of the product and allows for more margin opportunity.
Why Are Rebate Programs Challenging?
So, if rebate programs are so important, why are they so challenging for the electrical industry?
No visibility between trading partners
Many electrical distributors run on blind faith that manufacturers are computing their earnings correctly. Buying groups play an important role in this, as they scrutinize program deals on behalf of their members to ensure earnings are calculated and paid accordingly. However, that doesn’t help distributors with rebate programs outside of buying groups.
They are dependent on the manufacturer to provide (at least) quarterly reports to track their performance because their ERP doesn’t have a solution and spreadsheets can’t be trusted. This report summarizes a value for each dimension of the rebate program. But electrical distributors are left with many unanswered questions: how do they know those values are accurate? Why can’t they see the exact calculations against products that are producing earnings? Why would they have to recreate the program and run it standalone to the manufacturer’s interpretation of the program only to product disparate results?
Misunderstood terms and conditions
All rebate programs come with terms and conditions (T&Cs). These statements explain the details of the program, how earnings are calculated, inclusions, exclusions and more. Many of these programs are negotiated by people who lead with revenue-based initiatives, which is great, but too many times surprises are found by others who have to deal with the true outcome of the program earnings. These more financially focused personas are left with final clarification, accrual adjustments, negotiations for settlement, etc. Wouldn’t it be nice to eliminate these surprises? That brings us to the next point.
Reliance on 1-2 specialized individuals
What would we do without spreadsheets? Spreadsheets allows us to be mathematician whips (these folks used to be called “computers” back in the day). We have people working on spreadsheets for hours, every day, to manage and analyze the data needed to manually calculate rebate earnings either due to be paid (a liability for a manufacturer) or due for payment (a manufacturer receivable for distributors).
What will we do without those folks who manage rebate programs in spreadsheets? What happens when they decide to retire? Someone will have to take over and learn how to setup new spreadsheets to compute complex program deals with, “if that, then this, but wait, what about this, and then this” scenarios. Rebate programs are full of fun performance challenges that include tiers in value, in weights and measures, including some locations, excluding others, including some products, excluding others. In all, it is very scary to think only a few key individuals possess this tribal knowledge. The thought of losing this intelligence is oftentimes frightening.
There are many types of rebates that you can use, from simple volume discounts with fixed rates all the way to tiered volume incentives to special price agreements. Processing the transactional data in all these different calculations into interpretable and actionable insights is incredibly complex. If managed manually, with limited and specialized administrators, it is nearly impossible to get a clear picture of how rebates are impacting profitability in any granular detail – and definitely not in real-time.
The focus on rebates to stay competitive is even more critical now with the increased pressure on the economy with high global inflation and the economy moving into a recession. You need full datasets for real-time visibility to negotiate smarter, better deals. Ultimately, to be successful, you need to be in control of your rebate world. The good news is that this just got really easy. It’s time for IDEA and Enable to get on stage and take the mic.
Enable + IDEA Connector - A Single Source of Data Truth
In summary, the volume and complexity of rebate programs are increasing at an incredible pace. This underscores the need to deploy scalable, digital solutions to optimize your rebate strategy. Many organizations still depend on spreadsheets containing inconsistent, manually manipulated data. This process breeds inaccuracy and is risky, as it is highly dependent on a small number of specialized employees.
As more of the electrical industry moves towards supply chain digitization, the need for harmonized data that is accurate, comprehensive and automated is increasingly important. The end goal is for trading partners to speak the same language, eliminate errors, save time and drive profitable growth for manufacturers and distributors alike. The only way this can happen is by combining the data power of a data syndication platform like IDEA with a rebate management solution like Enable.
The IDEA Connector allows trading partners in the electrical industry to securely share accurate and harmonized product data from a single source. By using the integration between IDEA Connector and Enable, manufacturers and distributors can now build and represent their rebate agreements digitally leveraging the rich source of product information already present in IDEA Connector.
By using Enable and IDEA Connector integration, you can:
- Create, track and execute rebate agreements instantly with no data migration
- Drive efficiency with access to manufacturer-authorized product data within the Enable platform, and
- Ensure clean and accurate rebate management and execution by eliminating data disparity.
Discover how the integration works below or get in touch to experience a live demo.