Top 5 Types of Rebate Deals and Incentive Programs
If you’ve decided to begin using rebates to build your business, you’ve taken a critical first step towards a more strategic approach to marketing your products. Incentive programs like rebates can offer myriad benefits for businesses on both sides of the trading agreement by giving customers better deals and helping businesses achieve a wider range of goals. But with so many different types of rebates and incentive programs to choose from, knowing where to start – let alone how to use them – can be a challenge. In this blog, we’ll be covering some of the most useful types of rebate deals you could be using to boost your sales and build stronger strategic relationships.
1. Volume Rebates
Volume rebates are the most popular type of incentive program. Currently used by a whopping 90% of distributors, they are one of the most essential deals in a business’ incentive toolkit. At a basic level, volume rebates are incentive programs structured around tiered thresholds. If you buy enough of a specified product to reach each increasing purchase threshold, you earn a higher rebate rate.
There are two main types of volume rebates: retrospective and non-retrospective. To demonstrate the difference, consider this example of a typical volume rebate structure:
If you buy between 1-10,000 units of a certain SKU, you’ll earn a $1 rebate that you can claim back. If you purchase over 10,000 units, you’ll earn a $4 rebate. If you purchase more than 20,000, you’ll earn a $10 rebate.
In a retrospective volume rebate, the highest rebate rate earned (in this case, $10) is applied to the entire order, not just the units purchased within that tier. This means that customers who reach higher tiers (or “bands”) get a better deal on the whole purchase. In a non-retrospective volume rebate, each rebate rate applies only to the units purchased within that tier. If you reach the highest tier, the $10 rebate is not retrospectively applied to units in lower tiers – only to those over the 20,000-unit threshold.
Retrospective rebates are usually more attractive to customers, as they often yield better deals for them; however, while non-retrospective deals may not excel at turning small sales into big sales, they can incentivize those purchasing high volumes to maximize their rebate amount by purchasing more units within a higher tier.
2. Product Mix Incentives
Products with the highest margins can sometimes be the hardest to sell. Instead of doubling down on low-margin products, some sellers offer rebates for purchasing specific mixes of products, allowing them to bundle products that have a higher margin with more popular low-margin SKUs.
For example, a construction supply distributor may find that while low-margin gravel is flying off the shelves, higher-margin flagstones are much slower to sell. In this case, they could design an incentive program that rewards distributors for buying a more beneficial mix of both low-margin gravel and high-margin flagstones.
In some cases, this approach can be even more effective than offering a volume rebate on high-margin products because mix incentives have the added benefit of giving customers a better deal on the low-margin products they’re already buying – but only if they purchase the mix.
Promotions are often simple deals created for simple goals. A common structure for a promotional incentive rewards customers with a rebate for every additional unit of a certain SKU that they purchase. These deals can help you clear excess or leftover stock from the shelves in a timely manner to make room for new product ranges.
If you ever find yourself stuck with stock that you’re struggling to move, consider designing a promotion to give your sales a boost.
4. Logistics Rebates for Bulk Purchases
Many businesses find it beneficial to sell and ship their products in bulk, but that’s not always how customers want to buy them. However, a well-designed incentive program can sway a trading partner’s purchasing strategy. Logistics rebates can be used to reward customers with additional rebates for purchasing whole pallets of a product as opposed to just individual units.
Many manufacturers work with multiple factories to produce the same product but can face logistics challenges if customers favor one factory over others. With logistics rebates, you can also incentivize the purchase of entire lots from specific factories, allowing you to maintain consistency and take control of your logistics.
5. Stocking Incentives
Many businesses prefer their product to be sold by accredited retailers. If you’re looking to keep your products on the right shelves, stocking incentives can be a uniquely attractive benefit for your trading partners. In these programs, retailers agree to hold a minimum amount or percentage of stock to earn an additional rebate on top of what they may already be receiving from you.
One attractive benefit of stocking incentives is the relative lack of risk. Many stocking incentives include a buyback program that allows retailers to sell stock back to the manufacturer; this means that even if customers don’t sell through all the product they’ve agreed to stock, the business can still benefit from the program and doesn’t lose any money.
Managing Different Types of Rebate Deals
Navigating the sea of rebate deals to find the right type for your business’ needs is not as hard as it might seem. In most cases, making the right choice is simply a matter of deciding what you want to accomplish and choosing a deal (from the list above) best suited to that goal.
However, managing incentive programs of many different types can become a challenge – especially if you’re using spreadsheets to track your deals’ progress, including earnings, due dates and performance. Rebate management software such as Enable can help you manage rebate deals of almost any type, with customizable trading programs that can capture every detail of your unique deals. With informed businesses utilizing innovative tools, the new era of rebate strategy has begun.
Are you ready to take control of a wide range of rebate deals? Schedule a demo to see what Enable can do.