As competition intensifies for distributors, the successful management and profitability of vendor rebates can be the difference between reaping financial rewards or missing out on claims that are rightfully theirs.
NB: This is an excerpt from our latest eBook. Click here to download the full eBook.
There are two sides to every purchasing decision
One side hoping to build a loyal, repeat customer while maximizing margins; the other hoping to negotiate pricing terms that deliver the best pricing possible for quicker, more profitable purchasing decisions.
Managing this balance is really the art and science behind a rebates program.
Today’s companies face intense competitive pressures to reduce costs and build collaborative relationships with their suppliers, many of which use rebates as key components of their pricing strategy and structure. As competition intensifies for distributors, the successful management and profitability of vendor rebates can be the difference between reaping financial rewards or missing out on claims that are rightfully theirs.
Distributors recognize the inherent value in data. It’s why they invest significant resources into a single source of truth, a business intelligence (BI) solution that integrates software, systems and sensors. It’s why they turn to aggregated data from across their operations to produce insights that improve every aspect of their business from purchasing and inventory management, to finance and marketing. With information, companies can better track key performance indicators to help manage costs and maximize the earning potential for all products and services. With accurate, accessible information, distributors can effectively manage complex rebates programs across a variety of products with multiple vendors.
For decades, manufacturers have used rebates to drive sell-through of specific products while providing incentives to value-oriented customers. Strategies behind the use of rebates have also evolved from an attempt to quickly boost sales to more long-term tactics focused on driving customer loyalty and brand affinity. For some distributors, rebates are a bonus on top of good pricing, while others treat rebates as part of their overall revenue. At their core, distribution operations involve some of the most complex management challenges. The large number of SKUs, customers, suppliers and transactions is only made more complicated when you include a variety of rebate programs. In fact, the challenge of managing rebates is why some distributors may not engage with certain suppliers, or will negotiate pricing strategies that simply avoid rebates altogether.
Devil in the details
Without a doubt, rebate programs are successful.
Some experts say that rebates are a pricing best practice, and if suppliers are not using them they are likely giving customers larger discounts than they deserve.
Distributors certainly value the opportunity to earn the rebates and ultimately save money. Where the challenges reside for purchasing and accounting teams (that are responsible for capitalizing on the rebates) is building understanding with suppliers while managing multiple rebates terms and claiming requirements. For rebate programs to be successful on the receivables side, distributors need to not only track purchases from suppliers, they need to know what they should claim and how. The devil is in the details, and it’s the details that cause distributors to stumble.
This was an excerpt from our latest eBook 'Receivable rebates: How to maximize strategic purchasing decisions with rebates'. Click the button below to download the full eBook.