Understanding Discounts
Simplicity is often the key to success. When it comes to setting up a rebate program, it’s all about having a clear vision and distinct goals. Whether it’s about increasing sales, retaining customers or introducing new products, a rebate program can help you achieve several goals at once, just as long as you know what you are measuring, and how to validate successful implementation.
Complexity is the enemy of progress, it creates confusion and makes it hard for customers to understand and participate in the program. And that’s not what we want… We want to make it easy for our customers to understand and participate.
Now, let’s talk about measuring success. It’s important to test, tweak and change your goals regularly. At Celerity, we believe the best way to do that is by keeping the time-frame of the rebate short, and the results measurable. The longer the time-frame, the more extraneous variables come into play. Special Pricing and rebate programs need to be as simple, measurable, and effective as possible.
Software has an adage that that “simplicity is the ultimate sophistication.” That is what you should remember when it comes to setting up a rebate program. Keep it simple, focus on one or two goals at a time and measure success regularly. With this approach, you’ll be able to achieve your goals and make it an exciting experience for your customers and improve the bottom line for you as well.
Value-Based Rebates
The smartest companies use a special way of giving discounts called value-based discounting. This means they plan how to give discounts to customers in a way that helps the company reach its goals. The discounts are different for different people, places, or groups of customers, and are chosen based on how well they have done in the past and what is happening in the market now.
One really good way to use value-based discounting is to give customers money back if they reach certain targets. Another good way is to work out special deals with suppliers called ship & debit, where the supplier is paid less for products if they are sold for less than the usual price. Both of these methods can be used to help the company succeed.
When businesses want to make their customers happy and reach their goals, they use something called “value-based discounting.” This means that they give discounts to different customers, groups, or places in a thoughtful way that helps them reach their goals. A lot of rules of engagement go into this model, and typically they grow more complex over time.
Rebates are a great way to make customers happy and help them save money. Ship & debits are special agreements that businesses use to make sure they’re getting a good price for what they’re buying and can be tweaked as needed.
It can be hard to keep track of all the discounts and agreements that businesses use, especially when they’re done by hand. Software and dynamic validations are being implemented across the industry to make sure money is not left on the table, or to reduce the amount of surprise rebates being submitted any given month.
Even though rebate management and ship & debit management are similar, they are still different in implementation. By understanding the differences, businesses can use discounts more effectively, win business, and get more money back. Just remember, discounts are a good thing when they’re used in the right way!
The Challenges we see in Fixed Discounts
Many B2B businesses use a fixed discount model where they offer the same discounts to all of their customers. However, this model doesn’t take into account the different willingness and ability to pay of each customer. Some customers would be willing to pay full price, but with a blanket discount, it’s hard to know who they are.
Also, when your competition finds out about your discounting strategy, they may lower their prices as well, which creates a competition that is bad for businesses. Over time, customers start to expect these discounts and it becomes difficult to stop offering them. Instead, businesses should consider testing the assumption that bigger orders are always better, and consider the impact on staff and inventory. Each business is different, so it’s important to ask these questions and find a strategy that works for you.
What is Ship and Debit?
Ship & debit is a way for suppliers and distributors to work together in order to lower prices for customers. It’s a form of off-invoice allowance that allows distributors to lower prices for certain customers or products without losing all of their own margin. This is done by debiting the supplier for the shortfall.
The process begins with the distributor seeking approval from the supplier for discounts on specific products or customers. The supplier then approves or rejects the new discounted prices. Once approved, the distributor then has to gather all the necessary documentation related to the discounted sale and the supplier has to process the claim in a timely and accurate manner. This type of pricing strategy can be very effective in retaining customers, enticing new ones, or clearing slow-moving stock. It’s a great way for suppliers and distributors to work together to react to market conditions and make sure everyone benefits.
Contact us sales@celerityenterprises.com if you would like to hear how we create 90% added value to SPA programs.