Get More for Your Money: Rebates 101

In both my personal and professional life, there has been one phrase I have repeatedly heard for ages: Rebates are simply a cost of doing business. Nowadays, nothing sells for full price. Whether you receive a discount at the time of purchase or sometime after the sale, there is the expectation that list price is just the starting point. Personally, I have certain retailers I will not purchase from unless they have a sale. I will even wait a few days until I get that coupon in the mail (do people really clip and carry physical coupons other than me?) or a sale notice in my email inbox since I know it’s on the way. There are so many sales and discounts running at any given time, what’s to be excited about? They have lost their impact.

In speaking to customers and prospects, they know that they must run promotions and deliver rebates. They have already factored this in as part of their net cost. And truthfully, they are all okay with that. Companies go into a sale knowing that anywhere from five to 25 percent of the price will be refunded back to the customer. The only complaint that I get is that they want to make sure that they are getting something for their money.

Is a customer getting a discount because that discount has always been there? Is a rebate just the cost of doing business? Companies are willing to pay more money if they know they are getting value with increased sales or desired behavior. For example, which rebate would have a better return on investment: one automatically paid at the end of the month or one with tiered payouts based on volume targets? A rebate based on purchases from a channel partner is not as favorable as one based on sales to their end customer. Even tying it to year-over-year growth or increased market share gives some incentive to the customer to improve their behavior. Choosing metrics like a two-percent rebate on all sell-through data submitted or an additional one percent for carrying a certain level of inventory help as well.

It’s time to make rebates work for you instead of your customer. Get past the discussion of “but it’s always been done that way.” Rethink your programs and concretely measure their direct impact to sales. You can still give them the same percent off – or even more – but just make sure that you’re getting something in return.