Rebate Management is the process of recording what rebate method applies to a customer or product (usually called a trade agreement).
Each purchase or sale is then tracked against the trade agreement so an accrual can be made, which then gets claimed or paid.
Now let’s quickly review why there is a need for rebates, and why companies don't just give higher discounts in the first place.
Rebates act as an incentive if they are stepped or increased based on reaching higher volume targets. They also act as a loyalty incentive as usually they run over a time period incentivising the buyer to stay loyal in order to reach their target and get the rebate they are owed.
If you chose to give a bigger off invoice discount in lieu of a rebate, the buyer may choose to pass that on to the customer and end up eroding the value and price point the brand is trying to maintain. Rebates protect the sell price. More discount does not always translate into loyalty. Rebates encourage loyalty.
Many companies have their own customer rebate programs that they need to run and administer.
Some start out using spreadsheets to manage their rebates, quickly finding out that this is not a safe or scalable solution.
Many companies also manage supplier rebates, or vendor rebates as they are also called.
Simple – rebate management software will prevent running blanket rebate programs across all products (although you can if you want).
Instead, you can choose to offer rebates on higher value SKU’s and exclude the price fighter low margin products - we call these inclusions and exclusions.
Same goes for customers. This means you don’t reduce margin on already ‘skinny’ product lines with an additional rebate.
If you wish, you can also exclude a rebate accruing from any trade promotion you run that increases the off invoice discount.
Easy – have rebates that increase based on volume targets reached, but you need software to track this.
Offer double the rebate percentage on new items to help them gain distribution without incentivising the customer to discount them.
Paying the rebates quarterly will keep them top of mind and that loyalty switch activated for your customers.
Lastly, when you have rebate management software that accrues on each and every transaction that qualifies, you have the flexibility to accrue a %, a flat $ amount, a loyalty point etc. All of these tactics can help grow volume in different ways.
Imagine the luxury of knowing at any point what you are owed and what you owe in terms of rebate dollars!
For many businesses in the distribution space, rebates are the lifeblood of the trade, and are the difference between profit and loss.
Go on - take control of your rebate management challenges!