As unpredictable market forces and rapid-fire changes in the supply chain are turning longtime trading relationships on their heads, vendors are looking for a more strategic approach to marketing their products: one that affords them the flexibility, consistency and reliability they need in such a volatile market.
Many vendors have turned to rebates, finding these unique incentives to be helpful in achieving a wide range of goals – but some are hesitant to take on new and unfamiliar programs with complex and time-consuming processes, leaving curious-but-conflicted businesses to wonder: are vendor rebates worth it?
To get to the bottom of this question, we’ll need to start at the beginning.
What Are Vendor Rebates?
A vendor rebate is an incentive program in which vendors or manufacturers (but sometimes distributors) offer customers (usually distributors or retailers) a monetary reward for reaching designated purchasing goals. After the target specified in the agreement is met, customers can claim a percentage of the purchase price back for a better deal on their order.
This is where vendor rebates fundamentally differ from discounts or coupons: purchases are made at full price, and the savings occur only after the target is met. This strategy allows you to avoid any of the negative associations of a price cut (whether temporary or permanent) while still reaping the benefits of increased sales.
When to Use Vendor Rebates
Deciding if and when you should use vendor rebates begins with understanding your goals. Are you attempting to gain market share in a competitive environment? No problem! Designing tailor-made vendor rebates can give you a unique edge even in the most intense market conditions. Need to boost an underperforming SKU with higher profit margins than your top sellers? Vendor rebates are the way to go, giving your customers a better reason than ever to expand their purchasing strategy and grow your trading partnership.
Vendor rebates are a great tool for vendors, be they manufacturers or distributors, looking to increase their profit margins, gain market share in a competitive environment, improve specific SKUs or product ranges, build stronger trading relationships or market their products more strategically.
Managing Vendor Rebates
We’ll be the first to admit that vendor rebates can get pretty complex. However, with the advent of new automated software platforms, this difficulty has become more a matter of approach than necessity. We’ve found that vendors using a dedicated software solution to manage their rebates typically spend 40% less time on month-end activities. It seems that, at long last, the tedious days of managing rebates on spreadsheets are finally coming to an end.
If you decide that a rebate management system (RMS) is right for your business, the next step is to decide which RMS is right for your business. To help you get started, we’ve created a handy guide outlining some of our top priorities in choosing a capable rebate management system:
What to Look for in a Vendor Rebate Management System
- Automation
Automation is one of the most important tools for a modern rebate management system to have. Automating features such as tracking, reporting and calculating rebate performance and payment data is the #1 way for vendors to save time on their rebate processes. With these responsibilities taken over by an automated system, your team saves critical time while reducing the risk of human error.
- Granularity
A capable rebate management system can present your data at multiple levels of detail. Do you need a thorough, in-depth look at all your deals? Granular views can take you down to the nitty gritty of your vendor rebates, capturing every detail. On the other hand, if you need an at-a-glance overview of your data for a quick check-up on performance, an RMS should be able to zoom both in and out to provide you with the most useful view.
- Flexibility
One of the troubles with spreadsheets is their lack of flexibility. They simply weren’t designed to handle the complexities of rebates and incentive programs, and trying to stuff your sheets full of more data than they can handle will quickly render them unreadable and impossible to navigate (sometimes even to those who created them). An adequate rebate management system should be easy to customize, navigate and extract the information you need from.
- Transparency
An RMS should make it simple to view and share your data with relevant trading partners. A centralized place for your data creates a single source of truth that all parties can trust. In an age of increased strain on supply chain relationships, this level of transparency and collaboration is a must-have for businesses.
When it comes to using rebates to their full potential, choosing the right rebate management system can make all the difference. If vendor rebates play a big role in your business (or if you’re just getting started with incentive programs), platforms such as Enable can give you an unprecedented level of control over your deals. With the right automated software, you never have to feel left behind on your vendor rebates again.
Getting Started with Vendor Rebate Agreements
To get started with vendor rebates, review supplier agreements for rebate opportunities, track eligible purchases and sales, and take advantage of rebate management software. Monitor performance regularly and adjust strategies to maximize earnings and strengthen supplier relationships.
Check out our whitepaper, Rebate Management Basics: Understanding Which Incentive Type is Right for Your Business, for a deeper look at these powerful incentive programs.
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