I recently interviewed Mark Gilham for the Impact Pricing podcast and had a huge aha! moment. Mark’s an expert on rebates. I hadn’t spent much time thinking about rebates because they seemed like just another way to give a discount. Boy was I wrong.
Sure, you can use rebates to boost demand in the same way you can use price discounts. But the real power of rebates is to reduce your costs.
Face it, customers do things we don’t like. They always buy at the end of the month. They wait until the last minute. They don’t provide POS data or good forecasting information. They order in small lots. Each of these can be solved with a rebate.
The power of rebates is they can motivate customers to behave in ways that reduce our costs. Think about all of the ways customers do things that make your life more difficult. You can offer a rebate if they behave differently. Assuming the cost saved is larger than the rebate, your company is now more profitable. And it had nothing to do with pricing.
If you find this intriguing, listen to the podcast. Mark does a much better job of explaining the power of rebates. I was blown away by what rebates can accomplish. Hopefully, you will be too.
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