Is your rebate program draining your profits? Chris Kennedy-Sloane, Business Consultant at Vendavo, breaks down five key takeaways from the 2024-2025 Top Growth Drivers Report for Manufacturing and Distribution. Discover how the economy influences financial strategies, whether rebate programs are truly effective, and the potential impact of AI on pricing, selling, and rebate management in manufacturing and distribution.
We know the global economy is all over the place. Some areas are thriving, others not so much. So, we went straight to the source.
Vendavo surveyed more than 300 finance leaders in the manufacturing and distribution space to find out what’s driving growth in their organizations – and, perhaps more importantly, what isn’t.
The result is the 2024-2025 Top Growth Drivers Report for Manufacturing and Distribution, a distillation of industry knowledge on how to improve growth and profitability in the years to come.
There are tons of findings and statistics within its pages. Let’s look at the five key takeaways that are most important for readers.
Download your full copy of the report here
Key Takeaway #1
A mix of financial strategies is needed in a volatile global economy.
The last few years have been really challenging for businesses used to a slow and steady pace. Managing customer behavior, especially in B2B, is kind of an arms race. We all know the power of discounting, but consumers and customers are getting wise to the concept. They’re expecting discounts and artificially high list prices – and the consequent discount chain reductions.
We know lots of procurement departments are compensated on the value of percentage and absolute discounts that they actually receive or negotiate with their suppliers, so this is happening at both ends.
That’s why businesses are moving more towards controlled, regulated customer behavior enhancers like rebate programs and partner optimization programs to manage this volatility. In this environment, behavior is rewarded after the fact. This reduces that upfront discount economy and improves the ability of businesses to incentivize the style of business that works best for them.
Driving growth involves not only selling effectively through partners and incentivizing the right behaviors, but also setting the right prices. According to the report, the leading financial strategies for growth currently emphasize:
- Enhancing channel/partner programs: 60%
- Improving rebate programs: 56%
- Optimizing pricing: 54%
- Implementing advanced RevOps tools and processes: 54%
Which financial strategies does your organization use to boost revenue, margins, and profitability?
Key Takeaway #2
Rebate programs drive revenue.
The fact of the matter is that rebate programs just work better. 82% of survey respondents said their rebate programs drive revenue improvements. Not to mention, 85% say their customers love the programs too.
The after-the-fact rewarding of behavior prevents that classic “We promise we’ll buy 1 million units in a year, but we need that discount upfront for this thousand-unit order.”
Early payment incentives only pay out if that customer actually pays early. And stocking rebates only pay out if the distributor actually holds the stock they say they will. So, the efficiency of these programs is hugely improved versus your standard 20%, 30%, or even 50% off discounts.
Learn about Vendavo’s Rebate & Channel Manager
Key Takeaway #3
Rebate programs are painfully inefficient.
60% of respondents in North America and 70% in Europe admit rebate programs are costly and operationally challenging, highlighting the critical need for more efficient management solutions.
Let’s be honest here. Rebate programs are not easy to do.
Take the stock holding or stocking rebates mentioned above. For that to work in a system, you can’t just operate on the honor code. You need to be able to receive, review, and report on distributor- or customer-stock levels to actually ensure that the program terms are being met.
The same is true with growth rebates or early payment rebates. Suddenly, there’s a huge workload which is generally put onto the finance organization. And what that means is that their implementation is limited. The business says, “Okay, yes. We accept that rebates are great, but you can’t use them everywhere.” And so that limits rebate implementation in a good way.
How Genpak Improves Customer Satisfaction with Systematic Rebates and Accurals – read the full case study here
Key Takeaway #4
Error-prone manual processes perpetuate inefficiency and increase risk.
Doing any sort of tracking manually is just frankly inefficient. And yet, 51% of respondents indicate they depend on either in-house applications or manual methods like spreadsheets or emails to run their rebate programs.
Primary rebate and incentive program tool
Discounting and rebates can also be audit nightmares. You don’t want to fall on the wrong side of accruals, financial reporting around liabilities, or even worse, competition commissions.
Most businesses are doing this in Excel, and even the best manual entry for data gets to, say, 98% or 99% accuracy. If that means 1% of your programs are paid out incorrectly or miscalculated, that can be a huge risk. Some of the largest businesses in the world have paid big fines due to misreporting financial liabilities around rebates, so management is naturally really cautious here.
Key Takeaway #5
AI implementation is challenge number one.
Over the past year or two, we’ve seen that using AI successfully in business can be challenging, particularly as you begin initially implementing it. But taking rebates to the next level could really be smoothed by the pattern matching and data management offered by AI and machine learning.
AI was the challenge selected by most respondents when asked about what was coming in the next 12 months.
Respondents’ main challenge in the next 12 months
There are undoubtedly huge opportunities out there for businesses to commercialize the improvement and acceleration of rebate processes. This would allow them to do more rebate and channel programs, reaching down the long tail too.
It will also help them target these rebate and channel programs to the places that, unless a human had unlimited time, they just wouldn’t be able to see the potential. I can envisage a rebate management system highlighting customers with lagging growth and suggesting additional incentives, as well as calculating potential costs and incremental revenue and margin available as a result.
That’s where rebate management with AI will really take off.
If you want to know more about how leading manufacturers and distributors are scaling their rebate management strategies and growing more profitably, download your copy of the 2024-2025 Top Growth Drivers Report for Manufacturing and Distribution to find out.
How Vendavo Can Help
If you only take one thing away from the report, it should be this: the advanced pricing, selling, and rebate strategies manufacturers and distributors use to boost growth today are making an impact. However, while each is formidable individually, they can be profitability powerhouses when unified.
Vendavo has been powering the profit transformations of global manufacturers and distributors for more than 25 years. A successful profit transformation requires unified pricing, selling, and rebate management – and that’s what Vendavo does best.
Ready to start your profit transformation? Reach out today to request a demo or speak with an expert about your business needs.