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.
There are, however, many different types of rebate you, as a vendor, can offer as part of a sales promotion – each with the aim of achieving specific business objectives. But what are they? In today’s post, we’re taking a look at seven of the most popular rebate examples used frequently by the most successful B2B organisations today – all of which can be tracked and calculated in real-time using e-bate’s rebate management software.
1. Volume Incentive Rebate Example
Volume rebates are perhaps the most common rebate example, designed to incentivise higher order volumes, while protecting you, as a vendor, from buyers over-promising during purchase price negotiations. With volume rebate agreements, your buyers earn rebates only when volume-based turnover targets have been reached.
For example, a volume deal could have incentive targets of 100 units, 500 units and 1,000 units where the invoice price for each unit is £100. Here, each tier of this volume deal equates to buyers earning incremental per-unit rebate rates:
In all cases, you would invoice the buyer £100 per unit. Then, at the end of the agreed time period, you measure the buyer’s actual purchases and issue a rebate to the calculation based on volume as outlined in the table above. So, if the total quantity of sales was 750 units, the rebate would be 750 x £4.00 = £3,000.
2. Value Incentive Rebate Example
As well as volume incentive rebates there are value incentive rebates. Rather than being based on volume-based turnover targets, your buyers can earn rebates when value-based turnover targets are reached. For example:
So here, if total sales were £7,500, then the rebate would be £7,500 x 4.0% = £300.
3. Growth Incentive Rebate Example
As the name implies, growth incentive rebates are issued when buyers meet certain growth targets, such as when their spend has grown by a certain volume, value or percentage above a specified baseline.
% Growth Value Over Previous Year
4. Product Mix Incentive Rebate Example
As a vendor, you may wish to encourage your buyers and distributors to make purchases across a wider range of products than they currently do. The strategy here is to try and win the buyer’s custom from other suppliers for other product lines.
For example, let’s say you supply tyres for all types of vehicles, but a buyer only buys car tyres from you and tends to get their motorcycle tyres from a different supplier. Here, a product mix incentive rebate can be applied to their regular order of car tyres on the condition that they buy motorcycle tyres from you as well.
Again, pricing can be tiered to encourage greater volume or value of purchases. For example:
Sales of Product X
|Rebate on Product Y|
5. Product Level FOC Rebate Example
Rebates don’t necessarily have to be issued in cash. Depending on your marketing strategy and the needs of the buyer, you can also offer products free of charge (FOC) instead. For example, if the buyer buys X number of units, they get Y number of the same unit for free.
Of course, product level FOC rebates can also be tiered to encourage greater purchases. For example:
So, if total sales were 750, FOC is calculated as 10% of 750 units, i.e. 75 units are given as FOC on top of the 750.
6. Buy X, Get Y Free Rebate Example
This is a variation on the product level FOC rebate, which you may, for instance, find useful for end-of-life sales promotions – for example, if an old version of a product is being phased out to be replaced by a new version. Though you may of course try to use extra volume-based rebates to ship as much of your remaining stock to your usual buyers as possible, you could also use buy X get Y free rebates as a strategy to ship your surplus to other buyers who wouldn’t normally have bought the product line.
However you choose to use them, buy X get Y free rebates can be tiered.
Sales of Product X
|Product Y Free|
Here, if total sales of product X were 300, then the buyer would get 300 x 5% of product Y for free – so 15 units of product Y are given free of charge.
7. Standard Percentage of Turnover Rebates, and Standard Value Per Unit Rebates
Sometimes the best sales promotion is the simplest. For example, if you’re trying to attract new customers, then offering standard rebate rates can be useful in your marketing strategy. These will generally take one of two forms – standard percentage of turnover rebates, or standard value per unit rebates. These rebates are not in any way based on incremental growth in orders – instead, a standard rebate is issued no matter the volume purchased.
- Standard % of Turnover – Basic % rebate calculation, e.g. £1,000 x 2.5% = £25 rebate
- Standard Value Per Unit – Basic £ rebate per item purchased, e.g. 5 x £2.50 = £12.50 rebate
There you have seven of the best rebate examples in frequent use today by B2B organisations of all sizes and in all industries. In reality, there are many, many more different types of rebate deals – and multiple rebate types may be offered on different products to different buyers. As such, the process of managing rebates is inherently complex – which is precisely why you need powerful and robust rebate management software at the helm.
e-bate’s intuitive rebate management solution is a purpose-built platform delivered as a SaaS, designed to help companies optimise their rebate management processes and overcome the complexities of managing their rebate and pricing schemes.
Our rebate management software comes with a built-in calculation engine that will help you calculate all types of rebates while allowing you to track and analyse all data against your agreements in real time. In addition, our robust deal modelling features allow you to make rapid assessments of the benefits of any deals you are negotiating. e-bate is your single source of all rebate information, providing you with the insights you need to make proactive decisions that drive business value.
Request a demo or get in touch today to find out more about how e-bate can simplify and improve your rebate management.