Who Should Implement a Rebate Management Strategy?
For the right business, rebates can be a powerful and versatile tool for boosting sales and building stronger trading relationships – but how do you know if rebates are a good fit for your company?
The question of whether or not a business should use rebates (and, if so, how to use them) involves a number of different factors. The decision-making process begins with a thorough assessment of your business: what are your goals? Where do you fit into the supply chain? How many customers do you have? These circumstances play a significant role in shaping a company’s incentive strategy.
Making a final decision on whether rebates fit your business strategy can be a challenge, but it doesn’t have to be. In this blog, we’ll be covering the benefits and uses of rebates for businesses at every stage of the supply chain.
Rebates are a common growth strategy among manufacturers. In fact, our recent report found that 2 in 3 manufacturers offer annual rebate programs to influence long-term behavioral changes in their trading partners. This means that, for manufacturers, rebates aren’t just a helpful tool, they’re the norm, making them an essential part of a manufacturer’s competitive strategy.
Unlike most other types of companies on this list, manufacturers are always on the supplier (or “paying”) side of rebates as opposed to the customer (or “receiving”) side. This means that, depending on the number of contracts they have, manufacturers typically have fewer responsibilities than businesses (such as distributors) that manage both sides of rebates. With fewer admin headaches to deal with, rebates make a great choice for manufacturers with busy finance teams.
With an efficient management process or system in place, there is little risk and high reward for a manufacturer choosing to leverage rebates. As long as you can keep your contracts and payments in order, rebates can be a powerful strategy for manufacturers to grow their business.
Rebates play a key role in many distributors’ collaborative trading strategy. On average, distributors have rebate programs with 2 out of 3 of their top manufacturers, representing an incredible 60-100% of their net profit. If you’re a distributor who isn’t using rebates, you may be missing out on a significant source of revenue for your business.
Distributors (and other businesses at this stage of the supply chain) have the unique privilege of benefitting from both sides of rebates. Distributors may have customer rebates with manufacturers while simultaneously offering supplier rebates to retailers. While this can make for significant pricing and margin advantages, allowing businesses to tailor each opportunity to maximize their strategic benefits, it can also result in time-consuming admin work. Distributors hoping to make full use of their incentive programs need an efficient system for managing them.
Rebates benefit retailers in a big way, allowing them to improve their margins on products that otherwise might be too costly to keep in stock. With rebates, retailers don’t have to charge exorbitant prices or settle for cheaper alternatives that they can squeeze a few extra cents per sale out of. Rebates help retailers take control of their sales and pricing strategy, driving consistency and volume of sales.
For helping the vendor to achieve their strategic goals, retailers are rewarded with a better margin on the products they would usually have to pay full price for (without retroactive compensation). This pricing advantage also builds loyalty on the part of the retailer, making for a stronger strategic relationship on both sides.
Any Business Seeking Strategic Growth
While it’s clear that manufacturers, distributors and retailers can benefit from a rebate strategy, we want to emphasize that most any business that creates, sells or distributes products can leverage rebates for strategic growth. Rebates are an incredibly versatile tool that can be tailored to help you achieve specific strategic goals and targeted growth, no matter the industry or sector your business operates in.
In fact, rebates can be more useful for certain companies than other pricing-based incentives such as discounts or coupons, especially when a brand’s image or reputation must be preserved. Whereas discounts or temporary price cuts can be associated with a perceived drop in quality, rebates allow you to maintain your brand’s reputation and keep your price floor at a sustainable point.
If your business is working towards any of the following goals, rebates may be able to help:
- Increase Consistency and Volume of Sales
- Build Stronger Trading Partnerships
- Drive Customer Loyalty
- Improve Margins
- Boost New, Out-of-Date or Underperforming Products
- Expand into New Verticals or Product Lines
While rebates can be complicated, you shouldn’t let the challenges and complexities of rebate management prevent you from bringing their benefits to your business. Consider automating your rebate management processes with a comprehensive and collaborative system such as Enable to expand your team’s capabilities and discover the true strategic potential of rebates.
Are you ready to bring the benefits of rebates to your business? Learn how to take the next step in our new blog, How to Implement a Rebate Strategy at Your Company.