B2B Volume Rebates: A Guide to Excellence
Optimizing B2B Channel Rebates Programs for Success: A Guide to Excellence
Effective management of B2B incentives and rebates is crucial for the success of any business, regardless of its size or industry. Mishandled incentive programs could determine whether an organization makes a profit or experiences a loss. These programs play a vital role in driving sales and increasing revenue for businesses that rely on third-party distribution channels. In this blog, we will delve into the world of B2B channel rebate programs, providing you with insights on how to excel in this area of your business.
High-performing indirect channel organizations often boost sales by rewarding their partners with rebates based on their performance. Vendors provide discounted prices for bulk and/or specific deals, aiming to find a middle ground between investing in initiatives that boost sales performance of indirect partners while avoiding unnecessary costs. A rebate, functioning as a post-purchase discount, serves as a financial incentive to drive partner behavior towards increased sales volumes, tracking and realizing growth over time, to then assess the advantages of scaling up, and the return on investment.
Rebates are incentives at the partner-company level, granted once partners meet specific targets. Upon achieving these goals within set timeframes, partners receive rebate payments. Typically reserved for top-tier partners, rebates average around two to three percent of sales, while volume incentives can escalate to five percent based on the attained objectives.
Today’s intricate channel ecosystems demand a more intuitive user experience that seamlessly connects business users to the necessary people, information, tools, applications, and system resources without any obstacles. Partners now expect vendor-provided tools to be as user-friendly as online retailers or social apps, offering features like dashboards, tiles, shopping carts, and reviews.Channel Incentive Management (CIM) solutions automate incentive programs, like Rebates, which were traditionally handled manually or in isolated on-premises systems. These solutions evolved into intelligent cloud-based tools that strategically deploy the optimal mix, level, and timing of incentives to enhance revenue and profitability from the indirect channel.
Cloud-based CIM Rebate management software provides vendors with an opportunity to rethink how rebate programs are designed with enhanced visibility as a key advantage:
- Simplifying and automating the process for vendors and partners with transparency and valuable insights.
- Ensuring partner engagement through program performance visualizations depicting threshold achievement, hypothetical scenarios, and payouts.
- Granting easy access to real-time data, covering contract terms to program targets, thereby influencing partner behavior.
- Moving from a transaction-based to a subscription/consumption-based model.
However, channel leaders I engage with often ponder whether their rebate strategies effectively motivate the right partners in the right manner. They also inquire about the challenges faced by other vendors in similar situations.
Vendors are grappling with key concerns such as:
- Is my rebate program effectively incentivizing desired behaviors?
- Why is partner participation below my expectations?
- Is my rebate system too rigid or intricate?
- Are my rebate initiatives yielding measurable ROI?
Similarly, channel partners share similar concerns and seek answers to questions like:
- Do vendors’ rebate programs align with my business requirements?
- Are vendors’ rebates simple to enroll in, manage, and achieve?
- Can I influence and customize the vendor’s program to suit my business needs?
- Will vendors provide timely results and insightful dashboards?
For channel incentives to be successful, they need to be simple, easily defined, clearly communicated, and effectively managed, with straightforward support for channel partners. To achieve this level of partner experience, channel sales data and incentive program data need to be integrated to fully automate calculations, ensuring that programs calculations and payouts are error-free with a flexible data model.
Let’s look at some rebate best practices.
Best Practice #1: Shift Focus from Revenue-Based Rebates
Modern rebate programs extend beyond mere revenue incentivization. They now encompass setting ambitious targets, incorporating diverse layers of attached services, acquiring new clients and business lines, monitoring consumption, subscriptions, and renewals. These layered incentives prove highly effective. Additional illustrations encompass:
- Business Expansion: Rebate payments oriented towards generating fresh business rather than repetitive orders from existing clientele (averaging 2 to 6 percent of sales).
- Market Diversification: Targeting the establishment of new business in specified vertical markets (averaging 3 to 6 percent of sales).
- Client Acquisition: Incentives tied to achieving revenue targets for new clientele (averaging 5 to 8 percent of sales).
- Value Addition: Attaining set attach-rate objectives for services (e.g., a specific percentage of services sold or a service revenue target).
Best Practice #2: Clearly Defining Objectives and Benefits
For a channel incentive program to succeed, vendors and partners need a shared understanding of its objectives and benefits. It’s crucial to provide partners with easy access to incentive details and terms. While using clear incentive language is vital, equally important is articulating objectives and benefits effectively.
- Before each quarter begins, consistent communication is key to engaging partners and ensuring program adherence.
- This involves briefing partners on their targets, engagement rules, promotional periods, and potential earnings all in HALF A PAGE! Avoid lengthy 15-page PDFs.
- Make sure partners can access rules and terms easily via a click-through method. Document partners’ acceptance of these terms to safeguard their targets and payouts.
- Interactive dashboards, along with monthly account statements, help partners track progress towards goals.
Vendors who strategically align incentive types, goals, and objectives will optimize their funds and effectively engage with partners.
Best Practice #3: Rethink Your Rebate Strategy – Cash Isn’t the Only Option
In today’s business landscape, the focus has shifted from simple cash rebates to fostering vendor support and collaboration. Not all rebates have to be monetary. While cash is preferred by many partners, non-cash rewards can also hold significant value. Cash alone may not be the most effective way to build loyalty within a company.
Non-monetary programs can be directed towards promoting your products and solutions at the company level. By encouraging partners to invest in generating demand, you steer behavior in a positive direction. Motivating specific company actions can give you a competitive edge. While cash remains crucial, consider allocating a portion of cash rebates towards non-monetary rewards like pre-packaged marketing initiatives.
Best Practice #4: Integrate Individual and Company Incentives
Within channel incentives, it’s crucial to distinguish between company, team, and individual incentive schemes, each contributing distinct results towards enhancing business performance. By harmonizing these incentives towards a common objective, stronger partner bonds are formed, enhancing the overall program effectiveness. Implementing a blend of individual, team, and company incentives will:
- Align partners’ rebate objectives with those of their sales representatives.
- Minimize conflicts between individual/team incentives and company initiatives.
- Ensure alignment of all partner-level stakeholders.
- Guarantee that stakeholders reap tangible benefits from earning and redeeming options.
Key takeaway: Merely running a basic rebate program from the start and rewarding based on revenue achievement is no longer effective. Vendors need to revamp rebate initiatives to align with the channel’s shift from transactional to subscription-based models. Customizing rebates based on partner categories, prioritizing incentives for new customers, consumption, subscriptions, and establishing growth rebate targets are crucial adjustments.
