How to Help Your Distribution Organization Understand Rebates
March 23rd, 2021 | 8 min. read
By Radha Patel
How to Help Your Distribution Organization Understand Rebates
It’s no secret that customers love a discount. It’s in the sales 101 handbook that discounts encourage new customers, get rid of old stock and increase sales across the board.
But while discounting a product is standard practice, something that isn’t being utilized enough is rebates.
Mail-in rebates were once a popular incentive for customers to purchase a product and then receive a partial payment back in the form of a rebate check. This method didn’t live long, as businesses and customers alike experienced the rebate process to be inconsistent, time consuming and, in general, a hassle to manage.
However, using the right technology, customers can still be attracted to the rebate process, so long as your sales team has all the information in front of them to make the process as smooth as possible.
Sales Aren’t Making the Most of Rebates
Businesses of all shapes and sizes face communication problems. Oftentimes, the larger an organization, the more space for problems to grow. As rebates can become complicated if ill-managed, it is especially crucial that sales teams understand how they work.
Rebates are a large part of distribution, with incoming and outgoing rebates on a consistent and complex level. When sales head to the table without the full picture, they can’t possibly be offering the right incentives for that customer. Not to mention taking advantage of offerings from manufacturers and merchants.
Defining the purpose of the rebate is a good place to begin. Many companies implement this strategy to either convert an enquiry into a sale or to maximize loyalty among existing customers.
For instance, a B2B might offer customers who purchase six times a year a rebate of x amount, encouraging them to make a minimum of six purchases. Without this offer, the risk is that they won’t make as many purchases that year. Your sales team must also decide whether to run the rebate strategy as an ongoing campaign or a limited exercise. You can experiment with different rebate amounts and deals, measuring each one against the other and deciding which rebate marketing strategy works best.
Keeping software aligned is also important during this process. When organizations are using different systems across different departments, confusion ensues.
Your Excel spreadsheet, no matter how well organized, does little to help your colleagues. When your business is not aligned and your pricing is not receiving the attention it needs, your business goals fall further out of reach.
Making Rebates Modern
Everything is now online. We live in a contactless society where cinema tickets, return labels and shopping vouchers are digitized. This traditional rebate system is dead. But a modernized version can still thrive.
Rakuten Rewards is a good example of how rebates can be delivered digitally. Depending on your target market, this might well be a preferred and more popular way for customers to see rebates as incentives.
The other thing to remember is that consumers are not as patient as they used to be. Millennials – who pretty much invented social media – and Gen Z – who have grown up with it – are both more likely to want instant gratification or, at best, a very short waiting time to get a reward. Otherwise, it’s more likely they’ll lose interest. So, whatever rebate offer you decide on, if your target market falls anywhere within these two generations, your offer is better off being short and sweet.
Achieving Visibility in Your Systems for Rebates
The far-off dream of integrated systems where your entire business can work with the same data isn’t actually that far off. Integrated pricing systems allow you to bring your business onto the same page at every level. To paint a picture, imagine you as a distributor are speaking with a sales team.
Where before they would have to enter the meeting with information they were given some time prior, they can now pull up exact and current data right there and then. When you, the distributor, offer a rebate, the sales team can see in real-time how pricing would be affected if they took the rebate, far into the future.
All discounts and rebates sound good on paper. But the hard facts and data tell a different story. Now, empowered with this information, they can make much more powerful and informed decisions.
The Confidence to Offer or Decline Rebates
It’s common knowledge that sales representatives want as many bullets in their guns as possible. When a customer has an objection, a competent salesperson has a number of offers, deals, or incentives they can fire off in order to secure the sale. But, when a sales rep enters a meeting with little to no knowledge, they are not going to know exactly when to fire those bullets.
Or they may offer incentives such as rebates to customers already benefiting from them. What’s more, armed with more information, sales representatives can explain in greater detail and with higher confidence why a price is set a certain way. When price increases roll around, many customers begin to question the reason. After all, if a product was $8 per unit last year, how can you justify a $2 increase?
With all the information at their disposal, your sales representatives can explain it in a way that doesn’t risk losing face in front of customers. The more aligned your business and employees are with one another, the stronger the front you present and the greater the results and rewards.
Who Does Pricing Affect?
Who decides how much something costs? How do we determine the need for price increases and the opportunity for discounts? Pricing can sometimes feel like one of the understated and unsung heroes of a business. Like the marketing department, but without some of the public-facing glamour. If you were to ask the person-on-the-street about pricing, they’d most likely say that pricing is mostly guesswork.
Without knowing the complexity behind the scenes, it’s hard to imagine the role of a Pricing Analyst and the sheer amount of information that passes through the pricing function of a business. But it’s there. Complex systems are analyzing products, sometimes across the globe, to decide exactly how much to charge for any given item. So, who does pricing affect in a business?
The short answer is everyone.
Starting with the sales representatives who use price as a negotiation tool. Across to the operation team who make critical decisions on predicted income reported via pricing systems. Up to directors who action top-level plans with the full picture laid out for them. All the way down to the customer who chooses whether or not to take your business by justifying the cost of your product.
Don’t Forget About Marketing Using Rebates
Whereas your sales reps are using rebates in a reactionary manner to the information and situation laid before them, marketing takes a different stance. While there are reactionary elements of marketing, campaigns are planned in advance to ensure everything runs smoothly. When it comes to marketing incentives, the department needs to be highly informed well ahead of time. By giving marketing visibility to your pricing systems, they are able to creatively apply incentives to their content and channels.
It all comes back full circle to visibility and access, moving away from Excel spreadsheets and closed documents.
Pricing and Rebates – The Bottom Line
Now your sales team has all the information they need to act in the best interests of your business in meetings. The marketing department is fully loaded and can do what they do well. Your pricing team has had a weight lifted off their shoulders and is working more efficiently than ever before.
Integrated pricing systems change the way your entire business runs. But what does this actually mean for the bottom line?
How does understanding rebates help your sales team make more money for the business? Say your product sells for $15 and your customer would prefer to pay $10. You could offer a $5 discount, of course. Perhaps they’ll order 300 units and sell most of them. Maybe they’ll return to use you again. Or maybe they will look elsewhere for a larger discount.
Instead, you could offer a rebate. The product may be $15 now per item. But if they purchase and sell 500 units, they’ll receive that $5 back as a rebate. Your customer makes more money because they’re more motivated to sell, to get the rebate and to increase revenue. You sell more products than planned and can easily afford to repay the rebate.
What’s more, your customer is highly engaged and far more likely to return to use you in the future. After all, you just helped them to sell 500 products.
It’s a win-win strategy. But only when implemented with care. Your business type, your customer, whether you are B2C or B2B, your sales and marketing alignment and your software all have to marry up to create the best possible rebate deal.