Impact Pricing Blog

How To Structure B2B Rebate Programs

Question: Hi Mark, I hope all’s well! I have an exercise I’m working on which is to develop a B2B rebate program. Aside from your blog article several years ago on this topic (Rebates in the B2B World), are there any other sources (aside from the internet) you can suggest?
I understand the basic different types i.e. volume, growth, mix, ship/debit rebates, etc. But, I’m looking for an example or two of a rebate framework, as well as policy guidelines. Thanks! P.

Answer: Hi P,
I don’t know of any good resources on this. Just experience, which I’m happy to share.

The Rebate Exchange May Not Be Ideal

Rebates feel like a great solution because buyers make promises like “I’ll buy a million pieces” in order to get a big discount. They get the discount, but don’t buy the volume. A rebate allows the manufacturer to say, “Sure, once you buy a million pieces I will retroactively give you this aggressive price.” It sounds ideal. Only it’s not.

Two Key Things to Consider When Establishing a Rebate Program

    1. Strict Adherence to the Rules
      Many B2B companies create rebate programs, then they just award the rebate even though the customer didn’t earn it. This is another time salespeople have to get lower prices for their customers. If you put together a program, make sure everyone knows there are rules and they must follow them!
    2. How It Impacts the Buyer’s Decision
      Manufacturers think of rebates as an earned discount. However, unless someone at the buyer gets “credit” it doesn’t impact any decisions. Procurement often doesn’t get to consider rebates as part of their negotiating scorecard. Economic buyers might not actually care. The buying company has to allocate the “rebate” to someone. Does it go back to the department whose budget was spent? If nobody inside the buyer’s company gets “credit” for the rebate, then it doesn’t work as a discounting or negotiating tool.

FYI, In semiconductors, we used ship and debit a lot, but I didn’t consider that a rebate. These were distributors asking for discounts on specific deals and the manufacturer granted them.

I hope that helps.

Tags: ask a pricing expert, discounts

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