Why Rebates are Vital to Rebuilding Loyalty and Trust
It’s no surprise that successful supply chain performance is based on a high level of trust and strong commitment among supply chain partners. In fact, an academic study on factors affecting the level of trust and commitment in supply chain relationships observed that “Trust is a critical factor fostering commitment among supply chain partners. The presence of trust improves measurably the chance of successful supply chain performance.” So what role do rebates play in rebuilding loyalty and trust in the supply chain? And why have these been broken in the first place? This article reveals why rebates are vital to rebuilding loyalty and trust.
Leveraging loyalty and incentives
Fundamentally, rebates exist as a measure to help improve loyalty. Loyalty programs provide sales incentives to partners and reward them for their efforts. When done right, effectively-managed loyalty programs with associated rebates provide clarity to partners on where to cooperate, where to engage with customers, and how to grow sales and profits.
In an ideal world, loyalty programs help build and maintain connections between trading partners and connected entities; they improve profitability and scalability. Loyalty programs reimburse those selling a product to gain trust, mutual respect, and loyalty. Rebate programs interface manufacturers, distributors, buying groups, suppliers, retailers, and consumers. When rebates are managed effectively, they help focus all parties on improving customer satisfaction.
Unfortunately, trusted supply chain relationships are often a pipe dream.
Why is there a lack of trust in the supply chain?
In an article on Orkestra, Jonas Mehrhoff says, “Without a doubt, business survival relies on customer loyalty, and the only way to earn that loyalty is to earn customers’ trust.” But when trust is broken, loyalty declines, if not ending entirely. “Transparency is ultimately key to establishing customer trust in the supply chain,” continues Jonas, “but the problem is that, traditionally, supply chains were not designed to be transparent.”
Historically, trading partners have operated in the dark. In a world where rebates are opaque, trading partners don’t know whether rebates will be reimbursed appropriately or on time. Sellers don’t know whether they are meeting tier requirements until reimbursements arrive. And suppliers pay on faith, trusting that the amounts they are being invoiced are accurate.
Often, the amounts do not add up. When this happens, parties blame each other for mistakes, inaccuracy proliferates, and the consequences can be severe. In addition to a loss of income or excessive payouts, inaccurate rebates can create uncertain financial forecasting and may even result in reputational damage.
How can trust be improved across the supply chain?
Over time, however, as all members involved in rebate management have come to realize the benefits of improved visibility, openness, and collaboration, the tide has turned. Today there is an increasing awareness that “Gaining competitive advantage by means of supply chain management means sharing the information which is perceived as the evidence of trust between partners,” as Katarazyna Nowicka from the Warsaw School of Economics says in her paper on Trust in Digital Supply Chain Management.
Trust improves when communication, collaboration, and information-sharing improve. How can trading partners make this happen? Orkestra lists these five helpful ways of improving trust in the supply chain.
1) Use the right (helpful) tone of voice
2) Create visibility to identify risks and opportunities
3) Analyse risks and work towards managing them
4) Make necessary change happen (don’t avoid it)
5) Communicate clearly (about changes, expectations, and successes)
These tips seem simple and easy to apply. Unfortunately, the journey to rebuild loyalty and trust can be tricky without the right tools. However, the benefits of building supplier relationships based on mutual interest are worth it.
How rebates can secure customer loyalty and repeat business
Recent research shows that “…Close cooperation amongst the chain members allowed a competitive advantage over other competitors. Collaborative activities of the chain members included information sharing, decision synchronization, and incentive alignment.”
Aligning incentives through effective rebate management improves visibility. Then, when information is fed back into the supply chain, this allows those trading partners who deal directly with customers to tailor their offerings which, in turn, improves customer satisfaction and incentivizes repeat business.
As a result of better information sharing and incentive alignment, trading partners typically find the following benefits:
- Better planning
- Improved focus on goals
- Better brand awareness
- Greater customer retention
- Better sales
- Smoother collaboration & feedback, which helps all parties understand consumers’ needs better.
Better partnerships with distributors and chain suppliers, as well as end-users or customers, help all partners focus on what customers really need, making it easier to give it to them. This results in improved customer loyalty which enhances repeat business.
How well-managed rebate programs allow trading partners to come together around joint goals
When trading partners shift their attention from bickering about rebate disputes to focusing on customer needs, something almost magical happens: partnerships flourish based on a mutual desire to help the customer. With the right, trusted information at their fingertips, employees can also make better use of their time. Instead of agonizing over differences and disputes, they can put effort into incentivizing mutually-beneficial behaviors.
Enable’s customer, Bob Gay, Customer Profitability Manager at AAP, explains how managing their rebate program more effectively helped them come together with their partners to reach joint goals.
“By centralizing our information and making it available to partners in easy-to-digest reports, we can drive decisions where customers obtain products, how quickly they obtain them, and the assurance they are paid both timely and accurately.”
- Bob Gay, Customer Profitability Manager at AAP
In addition, he explains, “employees once responsible for sifting through spreadsheets are now helping analyze which rebates programs work best and how to optimize these programs for mutual growth.”
He’s not the only Enable customer to have benefited from leveraging the power of rebate management software to rebuild loyalty and trust. Tom Gittins, Managing Director of the groceries buying group, Confex, says, “We wanted a solution that didn't just tell our members what rebate they're earned, but gave them an incentive to grow and maximize their rebates across all suppliers.” They found it with Enable. And John Schofield, Transition Director at MKM Building Supplies, says, “Enable’s intuitive, central repository for all our trading agreements has improved member visibility and maximized their incentives to achieve target volumes.”
How Enable brings partners together and minimizes disputes
“It only takes a small handful of mistakes… with some of your best customers to lose that faith and trust in a company,” explains Bob Gay, Customer Profitability Manager at AAP. However, since they started using rebate management software, he says, “Our primary benefit is keeping our end of the bargain with our sales team keeping that trust. We want to make sure that we are paying every single dollar that they've earned along the way that they've trusted us to supply them with.”
The knock-on benefits of better relationships based on trust include the following:
- Improved regulatory compliance
- Reduced reputational risk
- A culture of production and openness
- Better retention of productive employees
- The ability to attract skilled employees
- Quicker identification of opportunities
- Increased productivity.
Enable brings partners together to go far beyond minimizing disputes. Leveraging the data accessible to all partners helps identify growth opportunities. More importantly, being able to trust the figures and partners in the supply chain even improves business decision-making.
We’ll end with a story about why Travis Perkins chose Enable to help manage their rebates. Nick Rose, Enable’s CFO, worked with TP before he joined Enable. He explains why using an effective rebate management tool was so important for his business and his suppliers at TP.
“[When there was an error with payments] you could get into the nitty-gritty of what's happened, where, and why. And so, when you translate that into trust and credibility of the figures, you can then take the next step…
If the sales guys and the operators really trust the figures behind them, they can make better business decisions, and they can move forward on that basis with the confidence that they're making the right decision for the business, rather than unwittingly entering into a low-margin sale."
- Nick Rose, previous Divisional Finance Director, Programme Director, Finance Transformation Director, now CFO at Enable
Are you ready to rebuild loyalty and trust in the supply chain?
If so, you might want to start using the right tools to help you reduce disputes and start focusing on collaboration for the benefit of all parties in the supply chain. Find out more about how to remove the administrative burden of rebates and their strategic potential with rebate management software. Schedule an Enable demo or try Enable now for free.