Managing rebates can be a real pain point for companies with multiple rebate agreements in place. Nonetheless, it is absolutely imperative that rebates are managed accurately as the income received can often be the difference between profit and loss.
Rebates are a powerful tool for Vendors to use to boost sales, lock in buyers for the long term, encourage incremental growth in order volumes and increase repeat purchases.
Naturally, discounts of any kind affect profit – and rebates are no exception. And so, rebate structure is paramount to ensuring your vendor rebate management programme is profitable.
As a vendor, a good rebate programme can spur sales, encourage buyers to choose your organisation over a competitor, make additional unplanned purchases, increase repeat purchases and cement relationships for the long-term. In addition, a well-managed rebate programme also ensures that you only honour special purchase price agreements based on “actual” rather than “promised” buyer behaviour.
As a buyer, accurate management of your supplier rebates can be an exceedingly complex affair. In the B2B world, your suppliers will offer rebates as a means of incentivising you to purchase more volume and lock you in for the long term. The rebate offered is essentially a discount – though one that is only paid once you as a buyer, meets a set of previously agreed conditions.
In the B2B world, effective pricing strategies are paramount to cementing a large and loyal customer base. Discounts are frequently offered as part of promotional strategies and sales incentives and will often represent a large percentage of a company’s marketing investment. However, all incentives need to be made strategically and offering discounts on things like volume-based purchases is risky and will often fail to create the long-term value you’re looking for.
Increasing profit margin is the ongoing goal of all businesses, including those in the B2B space. It’s easier said than done, of course and involves (amongst other things) a fine balancing act of managing expenses against income; maximising productivity; developing winning pricing strategies; negotiating good deals with suppliers and creating attractive yet viable sales incentives for buyers.
B2B rebates are one of the most useful pricing tactics organisations have at their disposal. Rather than relying on risky up-front discounts – for example a buyer may negotiate a special price based on purchasing 5,000 units over a 12-month time period, but end up only buying 2,000 – B2B rebates ensure that customers only get the discount (paid back as a rebate)after purchasing the agreed volume.
Purchasing teams today are faced with multiple pressures: Reducing and managing costs and negotiate the best pricing agreements with suppliers. Many suppliers now offer vendor rebates as sales incentives to encourage buyers to purchase more and cement long-term relationships.
Rebates are used to drive sales, essentially providing customers with incentives that encourage them to purchase more. In the B2B world, they present a fantastic opportunity to drive loyalty, brand affinity and help to build long standing relationships between buyers and suppliers.