During the holiday shopping season, retailers offer their customers a large variety of promotions. From free shipping to coupon codes, giveaways and gift cards, rebates–the list goes on and on.
But retailers aren’t the only ones who get to have all the promotional fun. Manufacturers across all industries can share in the holiday promo-spirit by offering their buyers various types of rebates and incentives.
Year-round, manufacturers use rebates and incentives to promote a desired consumer behavior. This behavior can be encouraging customer retention, driving sales of a certain product(s), or boosting profitability. It’s pretty well known among manufacturers that a successful rebate program leads to positive profits. In fact, for a high-tech manufacturer’s top-line revenue it can add anywhere from one to three percent!
This is no different during the holiday season. If anything, there’s more of an opportunity for you as a manufacturer to profit with the season’s inherently high demand.
Below we’ve listed the most common types of manufacturer rebates and incentives you’re likely to see this holiday season and for seasons to come. Then, we’ll break them down into detail.
- Product Launch Rebates
- Volume Rebates
- Growth Rebates
- End-of-Life Incentives
- Product Mix Incentives
- Retention Rebates
Types of Manufacturer Rebates and Incentives You’ll See This Holiday Season
1. Product Launch Rebates
When introducing new products, it is common for manufacturers to link spend on the new product (or line) to discounts on regular purchases with a product launch rebate.
For example, let’s say a manufacturer of jingle bells offers a 1% discount on a jingle bell distributor’s entire purchase. In exchange for this, the manufacturer receives a certain spend on the distributor’s new jingle jangle jingle bell product. Therefore enticing the distributor to purchase the new product with a product launch rebate.
This product launch rebate is a way for the jingle bell manufacturer to spread awareness about their new product. However, it’s also a way for the manufacturer to keep their regular jingle bell customers from placing the same order every month.
Jingle bell distributors and retailers will be looking to stock the latest in a manufacturer’s products during the holiday season so a product launch rebate will be enticing.
2. Volume Rebates
To curb overpromising, manufacturers use volume-based rebates in their price quotation to buyers. A manufacturer can use a tiered price quotation to offer their buyers a specific price per unit when they purchase a specific number of units.
To explain, take a candy cane manufacturer. A candy cane manufacturer may offer a volume rebate to their candy cane purchasing customers that looks like this:
“Buy 1-100 units of candy canes for $100 per unit, 101-500 units for $97 per unit” and so on.
As a candy cane manufacturer you know your buyers are always looking for a deal. By offering a volume rebate you can incentivize your buyers to order more for a better price. And more often than not, they will. Why? See the psychology behind a discount.
During the holiday season when your customer likely has a higher than normal demand for candy canes. That’s why it’s important to express the benefits they get from ordering a higher volume for a lesser price.
3. Growth Rebates
When a manufacturer has a goal to increase their total order volume, a rebate based on incremental growth in an individual’s order is often used.
While growth incentives are similar to volume incentives there is one difference. Growth rebates are paid on incremental growth in volume, whereas volume rebates are paid on all revenue or total volume.
With a growth rebate, a condition is attached. For example, if buyers purchase certain products besides or in addition to their normal order, they get a predetermined price cut.
A manufacturer or producer of ham looking to encourage their buyer to purchase more ham (not just during the holidays, but year-round) may offer a growth rebate to further incentivize an incremental increase in ham orders.
In preparation for the holiday shopping season, your buyers may be looking to incrementally increase their order volume to “stock up”. It’s highly likely that if incentivized with a growth rebate they would be more inclined to do so.
4. End-of-life Incentives
Naturally, as new products hit the market, “old” or “outdated” versions of that product phase-out. Think, iPhone. iPhone 3G, iPhone 3GS, iPhone 4, iPhone 4S, iPhone5, iPhone5c, iPhone5s.
In anticipation of a new nutcracker model being released, a nutcracker manufacturer will offer extra volume discounts for buyers who increase their orders for last year’s nutcracker model. This allows the manufacturer to make room and prepare for the new nutcracker model while still making a profit on the old nutcracker.
We see this type of manufacturer incentive quite frequently during the holiday season as the timing correlates well with when many new products are being released.
5. Product Mix Incentives
Product mix incentives are used by manufacturers to encourage buyers to make purchases across a range of products. This type of rebate can get a buyer who typically only buys from a few (or the same) lines to consider other products you offer.
Suppose you manufacture and sell holiday decorations. You have a customer who only buys their holiday lights from you. When it comes to tinsel, ribbon, bulbs and other types of holiday decor they buy from a different manufacturer. Since that customer’s demand for holiday lights doesn’t fluctuate much, the type of incentive you can offer them is limited. Through a product mix incentive, you can offer a price reduction to that buyer if they include tinsel, ribbon, and/or bulbs in their order.
Mix rebates incorporate best practices in pricing where price cuts are specific to product lines. This allows manufacturers to leverage pricing in a way that drives the growth of a wide range of products.
The holiday season is a stressful time for anyone in the retail industry. By offering your buyers a monetary incentive to order something they wouldn’t normally order from you, you can potentially relieve some of that stress. And who knows? Maybe they’ll continue to use you for that product in the future.
6. Retention Rebates
As a manufacturer, you can offer a type of incentive that rewards your loyal customers and encourages business continuity–a retention rebate.
As a holiday bow manufacturer, you may offer a retention rebate to customers who continue to order a specified number of bows from you each holiday season–your loyal customers. Not only is this a nice gesture on your part, it’s also a great way to guarantee your customer’s business for many holiday seasons to come.
While the end of the year is often when manufacturers pay out their buyer’s retention rebates, the holidays are a good time to prime your customers with a retention rebate they will receive next year.
What A Rebate Fulfillment Service Could Do For Your Manud
Whatever rebate or incentive program you decide best aligns with yours and your customers’ interests, know that it is your brand and company’s reputation that is on the line if something goes wrong.
If internally you can’t guarantee an organized and reliable system for processing and fulfilling your customer’s rebates and incentives, you’ll want to consider outsourcing to someone who can.
At Incentive Insights, we partner with manufacturers just like you to design, plan and execute successful rebate and sales incentive programs. We provide custom rebate processing, fulfillment, and reporting solutions to fully optimize on your businesses goals.
And from everyone on the Incentive Insights team, we hope your holiday season is nothing short of merry, bright and profitable!