There are several ways to increase sales while providing customers with an incentive to purchase your product or increase the amount they buy. Discount prices are one option, but other ways are to give the merchants a reduced price point. One such option is known as vendor rebate agreements. But what are vendor rebate agreements, and how can they be used by a vendor when selling to a merchant? Here are the ins and outs of what goes into such an agreement and how it can benefit a manufacturer or supplier.
What are Vendor Rebate Agreements?
Unlike sales prices or offered discounts, a vendor rebate agreement is an incentive designed to increase sales while, eventually, giving a merchant a reduced price.
Instead of directly slashing the price of a given product, the agreement stipulates what a merchant must do to get the rebate for their orders. The rebate agreement can be for any combination of requirements. It may require a merchant to buy a set number of products. This can be done all at once or spread out over time. This agreement can require the merchant to purchase products from a primary supplier and then place a second order from the supplier’s new satellite location.
Once the merchant has held up their end of the agreement, the merchant/supplier will honor the rebate agreement. The incentive might be in the form of a rebate check, or it might be for a discount on future purchases. All of this goes into the rebate agreement and is clearly defined, so all parties understand their roles and responsibilities and what type of rebate will be given when the agreement is done.
The Main Difference Between a Rebate and a Discount
The purpose of a rebate is the same as a discount. To generate sales for the supplier and to reduce expenses for a merchant. However, the main difference is how the means are obtained. An established price point is set with a discount, and a merchant buys the products at this discount. While they are incentivized to purchase the product to save money, there isn’t necessarily an incentive to increase their order size. There is a hope that merchants will increase their orders due to the temporary discount, it isn’t guaranteed.
With a rebate, all of that is different. To achieve the rebate and receive the discounted price, the merchant must make a stipulated set of purchases. They may even need to buy a product they don’t usually buy to receive the rebate. Again, the eventual goal of both rebates and discounts is the same, and the road traveled to achieve these goals is different.
When to Consider a Vendor Rebate Agreement
Creating a sale (and to be clear, vendor rebate agreements increase wholesale or B2B sales instead of direct B2C sales) or discount is a straightforward, easy approach to boosting sales. However, this approach doesn’t always work for suppliers. It may have a temporary boost in sales or simply eat away at a supplier’s net profit and not generate the kind of sales growth the supplier was interested in.
A vendor rebate agreement may be the best method to experiment with if the sales and discounts fail to generate the desired B2B sales growth. Because a vendor rebate agreement can be customized with any requirements, it will help suppliers generate sales in various ways. It can help boost overall sales, or it may target specific products that are new or are not selling as well. There’s no limit to what may go into a rebate agreement, which is what makes it so versatile.
Advice for Creating Your Rebate Agreements
As is the case with any promotion, it is important to analyze your sales information before creating the rebate agreements closely. You need to know what you can sustain and still make a profit. You also need to consider what products sell during various times of the year and how you can promote and increase the sale of certain products that may not move as quickly during off-seasons. There’s a considerable amount of data you need to pour through before crafting a rebate agreement.
Discover How To Generate New Growth With Incentive Management
Pinpointing the best way to execute vendor rebate agreements can be challenging for any seasoned or new manufacturer. A good deal of information and analysis needs to go into this process instead of just picking products and price points at random. By going over current sales trends and analyzing profit margins and what customers buy at different times of the year, you can create rebate agreements that deliver maximum impact. If you’d like to learn more about the services offered and discover how Incentive Insights can improve your own company’s sales growth, there’s never been a better time to contact Incentive Insights than right now. Whether you send us an email or call, this one move is the start of maximizing your sales potential.