Resources > Articles

B2B Rebates: How They’re Different from B2C

Post Author
B2B Rebates: How They’re Different from B2C

In B2C transactions, mail in rebates are profitable largely because the consumer uses them when making their purchase decision but then often doesn’t send in the forms to receive the rebate. This is free money to the company offering the rebate. For example, nearly half of the 100,000 new TiVo subscribers in 2005 did not redeem their $100 rebates, allowing the company to keep $5,000,000 in additional profit.

However, B2B companies don’t offer mail in rebates. Rather, they typically offer rebates when their customers achieve some threshold. It could be total spend, a specific number of units, purchasing a collection of products or even a marketing objective like a published referral. In these cases, the B2B vendor calculates which customers earned the rebate and automatically send it out. There is no free money here (at least not for the vendor).

In fact, often it’s worse than simply not collecting free money. Many B2B companies who offer rebates find that these rebates simply become expected discounts given out year after year because they gave it out the year before. They stop checking if the customer reached the necessary threshold. This is the opposite of free money. This is lost money. The main cause for this is not having systems in place to methodically check on who deserves the rebate. Rebate programs are easy to talk about but much harder to implement well.

B2C rebates work because the same buyer who makes the decision also receives the rebate. This is often not true in B2B. A purchasing agent is typically evaluated and compensated based on the discount she negotiates for any item. Rebates are typically not calculated into these discounts because they are not certain. Hence, rebates are nice for the receiving company, but they don’t incentivize the decision maker to decide in your favor.

However, when these two negative effects are accounted for, B2B rebates have a powerful purpose. They can hide your best prices from your distribution channel.

The problem is distributors have so much information about your past pricing behavior that if you offer a discount to a strategic customer through a distributor, that distributor now knows how low you are willing to go. When the next semi-strategic customer comes along, the distributor will ask you for your best price, which they know because of past discounting behavior. What’s really frustrating though is that sometimes the distributor doesn’t even give that best price to the customer. They pocket the extra margin themselves.

Rebates can stop this. When you need to give a lower price to a strategic customer who’s buying through distribution, consider offering the customer a rebate. That way the distributor never sees the lower price and the customer gets the benefit.

My advice though, enter into a rebate program very carefully. Be clear about what to expect. Don’t just give away the discounts, validate that they are earned. Know what benefit you will get from the program and monitor it. If you aren’t getting the benefit, kill the program. Rebate programs are a hassle to implement and execute.

Be careful.

Author

Author:

Other Resources in this Series

Most Recent

PowerPoint is used by a man on a laptop
Article

A Path to Designing a More Accessible Presentation

An inclusive researcher shares her journey to making one presentation more accessible along with accessibility resources and takeaways for other designers.
working on a wireframe
Article

Designing for Business Value: How Understanding Strategy Unlocks Success

This article shares insights from a recent Design Chats conversation with Jane Austin, Chief Experience Officer at Digitas UK, on how designers can collaborate with their colleagues to create products and services that align with the company's objectives.
Category: Design
Woman Celebrating Great Customer Experience
Article

Create Data-Driven Emotional Connections with Customers to Drive Revenue

By leveraging data, businesses can create emotional connections with their customers that drive revenue and build loyalty. In this article, we'll explore some real-world examples of how data is being used to create emotional connections with customers. 
Category: Data Science
Article

What is Product Management?

Product management oversees a product's development and life cycle. The ultimate goal is to create and deliver a product that meets customers' needs and generates revenue for the company.
Analyzing electronic document
Article

The Future of Finance: How Data Analytics is Unlocking New Opportunities

According to a recent PwC report, “About 60% of respondents to the PwC and ACCA research believe self-service reporting and automation will free up business partner time, taking transactional and compliance responsibilities off their hands

OTHER ArticleS

PowerPoint is used by a man on a laptop
Article

A Path to Designing a More Accessible Presentation

An inclusive researcher shares her journey to making one presentation more accessible along with accessibility resources and takeaways for other designers.
working on a wireframe
Article

Designing for Business Value: How Understanding Strategy Unlocks Success

This article shares insights from a recent Design Chats conversation with Jane Austin, Chief Experience Officer at Digitas UK, on how designers can collaborate with their colleagues to create products and services that align with the company's objectives.
Category: Design

Sign up to stay up to date on the latest industry best practices.

Sign up to received invites to upcoming webinars, updates on our recent podcast episodes and the latest on industry best practices.

Training on Your Schedule

Fill out the form today and our sales team will help you schedule your private Pragmatic training today.

Subscribe

Subscribe

Training on Your Schedule

Fill out the form today and our sales team will help you schedule your private Pragmatic training today.