Businesses use rebates for a variety of reasons. Typically, rebate agreements are structured to offer one or a combination of rebate types to encourage certain buying behaviours. Rebate agreements could include:
> Volume incentives to encourage higher sales order volume
> Performance incentives tied to sales targets and growth metrics
> Product mix incentive to promote the sales of new products or higher margin products
> Channel incentives to dictate where you want products to be sold, whether it’s online or in-store, or regionally
>End-of-life incentives to clear products that are reaching their end-of-life cycle
The challenge is that very often multiple rebate agreements are active but there isn’t a complete view of the consequences of the buying behaviour being encouraged.
For example, a manufacturer may incentivise volume to achieve economies of scale. But depending on how that agreement is structured, they may run into a fulfilment issue if, at the end of the rebate period, a big order is placed to achieve the payment threshold. However, if this agreement was carefully structured and managed, it could result in a more mutually beneficial contract between stakeholders.
The reasons why businesses don’t derive the full benefit out of rebates vary and are usually hidden from view. In some cases, rebate deals are not fully executed because they are too difficult to track and manage. In other cases, it’s impossible to know with any certainty whether all rebate deals work for the business or not. And in many instances, sales teams are running rebates separately from procurement teams running procurement rebates so the commercial values are not connected.
At face value, these challenges differ but at the root of underperforming rebate systems are three commonalities:
- Use of inefficient manual systems, often Excel spreadsheet-based.
- Reliable data is not readily available to know whether rebate strategies are helping businesses achieve their objectives.
- Cross-functional teams and stakeholders can’t effectively collaborate to positively impact pricing strategies.
These factors are well-known and widespread resulting in wasted rebate payments, missed opportunities to grow accounts and build customer relationships, as well as increased cost of inefficiencies. So, if rebates can help businesses gain a strategic competitive advantage in the market, why are they not tackling the problem of inefficient rebate management head-on? Possible reasons include:
- The problem is not fully understood, with hidden losses and bottlenecks only sometimes revealed in retrospective audits.
- Effective rebate management hinges on the active participation of cross-functional teams. Commercial, financial, operational, and management teams must collaborate to optimise pricing and rebate programmes. However, rarely is there clear ownership of rebate programmes and their management. This lack of ownership stunts rebate ROI.
- Operational headaches and poor administration such as unclear trade agreements or, as often is the case, unsigned agreements make it difficult to make improvements or fix individual rebate challenges within a business.
The reality is that teams spend considerable time and resources negotiating and managing contracts but it’s all for nothing if these agreements don’t deliver the desired outcome/s.
If you recognise these problems in your current rebate management process, talk to us about how our fully automated platform can help you get control of the process and transform your rebates to deliver better returns and improve relationships.
Book your demo here for the start of your transformation journey.
