Rebate Pricing Strategy: Expert Guide & Best Practices

Offering a rebate can be a great way to boost sales, increase customer loyalty, and maximize your bottom line. A rebate pricing strategy can go a long way when done right. With that in mind, it’s imperative to properly set up and track rebates, which is where finance automation software can help. 

We’ll take a look at different types of rebates, a good price rebate example, and how automation software like SolveXia can streamline your rebate processing.

Coming Up

What is a Rebate?

What are the Types of Rebate Deals?

What makes a Rebate Pricing Strategy Effective?

Why do Companies Offer Rebates?

What are Advantages of a Rebate Pricing Strategy?

What are the Disadvantages of a Rebate Pricing Strategy?

What Impacts Pricing and Rebates?

What are Common Problems with Rebates?

How to Increase Sales with a Rebate Pricing Strategy?

What are Common Pricing Strategies?

Why Use Rebate Management Software?

Wrap Up

What is a Rebate?

A rebate is a refund that’s provided to a customer after a purchase of a good or service has been made that qualifies for the rebate. It’s a type of incentive to either grow sales volume, sales value, or promote long-term loyalty. A seller or a manufacturer can offer a rebate. 

What are the Types of Rebate Deals?

There are different types of rebate programs that can be designed and offered. 

No matter the type, rebates must be adequately monitored and paid out on time to sustain happy customers and vendors. A finance automation solution like SolveXia helps to manage rebates by performing calculations, tracking, and providing reports. 

Here’s a look at types of rebates, so you can design a program that makes the most sense for your business and its goals:

1. Retention Rebates

Retention rebates are intended to promote customer loyalty. A retention rebate is set to be paid out after a customer has accrued a specific set volume or value amount in goods purchased. 

2. Mix Rebates

Mix rebates are meant to incentivize a B2C business or distributor to purchase a higher volume of products with a greater profit margin from a manufacturer or supplier. 

3. Volume Rebates

Volume rebates are paid out when a customer reaches a volume-based turnover target, meaning that they’ve bought a set amount of product units. They may be tiered, which means that the rebate amount will vary based on the volume. 

What makes a Rebate Pricing Strategy Effective?

The most successful rebate programs achieve their intended goal of increasing sales. To make a rebate pricing strategy effective, it’s critical to follow these steps:

1. Purchase Made: the rebate program is advertised and marketed, and customers make a qualifying purchase. 

2. Rebate Offered: The rebate for the eligible purchase is offered to the customer. 

3. Submission Process: A customer fulfills the necessary steps to request the promised money back. 

4. Rebate Issued: On the seller side, the rebate and transaction goes through the necessary steps to be approved to pay out in a timely manner. This is what can be time-consuming and a drag on the finance team. The aid of a solution like SolveXia takes the hassle out of rebate management by calculating rebates, offering immediate insights, and standardizes rules and controls. 

Why do Companies Offer Rebates?

Rebates are a win-win for everyone involved. Customers like to receive money back and businesses like to boost their income. Companies offer rebates to:

1. Increase Revenue

When the price of a good or service is lowered, customers are motivated to make a purchase, which leads to greater revenues on the business side. 

2. Build Loyalty

Through retention rebates, companies can use a rebate pricing strategy to improve retention. 

While discounts could arguably achieve the same outcomes, rebates are often preferred because they don’t dilute the market value of a good or service or negatively affect a company’s reputation at all. 

What are Advantages of a Rebate Pricing Strategy?

If you’ve tried or are considering implementing a rebate pricing strategy, you may be wondering, “Is it worth it?” Here are some of the advantages of rebates:

1. Direct Customer Motivation

When a customer feels like they are getting a good deal or value for their money, they are more likely to make a purchase. 

2. Influence Customer Behavior

Customers may perform research on various suppliers or businesses before buying a product, and if there is a rebate offered, they may feel swayed to purchase for the money back. 

3. Boost Customer Retention

When customers feel like pricing strategies are in support of their needs, they are more likely to remain loyal to the business that offered the rebate. 

What are the Disadvantages of a Rebate Pricing Strategy?

A rebate pricing strategy is a great asset, but it can be cumbersome to oversee due to the following challenges: 

1. Complicated Processes

A successful rebate program is only effective if it runs through all the necessary processes from transaction confirmation to payout. An automation solution like SolveXia takes out the tedious nature of transaction tracking, calculations, and moving through approval processes. 

2. Management Issues

With complex rebate programs, internal operations may take a hit if the rebate processes are expected to be managed manually. Delays for payouts can create customer dissatisfaction and even churn. As such, it’s useful to utilize automated rebate management tools to streamline the processes. 

What Impacts Pricing and Rebates?

Pricing and rebates can be affected by:

1. Market Demand

When demand falls, many companies seek ways to make up for the shortfalls, which is where rebates and discounts can come in. But, you don’t want to be stuck overly discounting products because it can affect future demand and sales. 

2. Economic Conditions

Overall economic variables like interest rates and inflation affect pricing strategies. For example, when in a recession, rebates are a common tool to incentivize trade with partners. 

3. Competition

When competitors are keen on offering rebates, it will inherently affect your own pricing and rebate strategies so that they don’t overtake the market share. 

4. Consumer Behaviors

It’s also useful to understand how pricing affects customer behavior and decision-making. Rebates can prompt customers to keep coming back for more, as an example. 

What are Common Problems with Rebates?

As repeatedly mentioned, rebates have to be carefully structured, focused, and overseen to be effective. 

Rebates can be problematic when they are:

• Poorly structured 
• Miscalculated 
• Quantity that’s calculator in absolute terms rather than measured against margin changes 

Rebate software like SolveXia automates and administers the relationship between the rebate provider and customer. The tool helps to manage negotiations, pricing, contracts, and reporting. 

As a result, businesses can eliminate the need for spreadsheets, offer better customer service, save time, and accurately control the rebate pricing strategy. 

How to Increase Sales with a Rebate Pricing Strategy?

To drive sales through the use of a rebate pricing strategy, consider:

1. Allowing the Rebate to Run Its Course 

Give your rebates enough time to run so that you can not only drive sales, but also be able to solicit feedback from your customers. 

2. Including an Expiration Date 

With the above recommendation in mind, it’s also imperative to balance it out and set expiration dates so that customers feel a sense of urgency to fill out the rebate request. 

3. Monitoring Spending Habits

If a customer doesn’t pay you on time historically, then it may not be a good idea to offer them rebates. 

What are Common Pricing Strategies?

Whether you wish to design a rebate pricing strategy or utilize different pricing strategies within your business to promote sales, here are a few ideas to keep in mind:

1. Price Skimming

Price skimming means that you set the initial price of a product or service at the highest level, and then reduce it over time as competition grows. This way, you have the chance to maximize the highest profit at the start. 

2. Cost-Plus Pricing

Cost-plus pricing is mark-up pricing in which businesses calculate the cost of producing a unit and set its sales price based on adding fixed percentage, which is considered its profit margin.  

3. Competitive Pricing

Competitive pricing bases a product’s price according to competitor’s pricing. 

4. Value-Based Pricing 

Value-based pricing determines the price of a good according to its perceived value. 

5. Penetration Strategy

Penetration pricing introduces a new good or service into the market at its lowest possible price to garner attention and capture market share. 

Why Use Rebate Management Software?

Rebate management software takes the pain out of devising, overseeing, and executing a rebate pricing strategy. It can be used to model the potential outcome of a rebate before advertising it to customers, remove spreadsheet dependence, calculate rebates automatically, and analyze the overall performance of a rebate program. 

A rebate management solution like SolveXia automates spreadsheet-driven data preparation and manual processes. Its low-code rebate solution handles rebate calculations, reconciliation, and reporting so you can easily stay on top of your most complex rebate programs. 

A tool like SolveXia integrates with existing technologies and legacy systems, removes key person dependencies, and once set-up, doesn’t require any further assistance from IT teams. With drag-and-drop functionality, anyone can use SolveXia to complete processes 100x faster with 90% fewer errors.  

Wrap Up

A rebate pricing strategy is a great way to direct customer behavior, increase sales, and remain competitive. However, rebate management can turn into a time-consuming and tedious to-do when done manually. That’s why it’s so vital to deploy a finance automation solution like SolveXia to reduce errors, maintain accuracy, and ensure the timely payout of rebates. 

At the same time, you can use SolveXia to automate regulatory reporting, reconciliation, expense analytics, and more. 

See how it works in action by requesting a demo.