Rebate Program Examples, Tips & Benefits

Promoting a desired customer behavior relies on proper planning, understanding, and monitoring. One way that companies can encourage customers to buy more in general or buy more of a specific product is through the use of different types of rebates. 

We’re going to look at various rebate program examples, as well as uncover the best tips to be prepared for the required accounting practices that come along with initiating them. 

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What is a Rebate?

A rebate is a financial incentive that provides a customer with money back after they have purchased a designated good or service. It is only granted once the company offering the rebate has reviewed and approved that the eligibility requirements of the rebate have been met 

A rebate passes the risk of non-compliance to the buyer, rather than taking it on as a seller since the money back offer is only provided after the fact of the sale. 

What is the Difference Between Rebates vs Discounts?

A rebate sounds similar to a discount because both effectively lower the purchase price of a good or service, but there are a few differences you’ll notice when comparing a rebate vs. discount. 

Let’s see what they are:

1. How They Work

• A rebate is offered after the sale has been made, thus, it is a retroactive return of funds. 
• A discount is offered at the point of sale, so the customer pays less on the spot. 

2. Who Offers Them

• A rebate is provided mostly by manufacturers, but they can also be presented by retailers. 
• A discount is provided by retailers and service providers. 

3. Required Paperwork

• A rebate requires paperwork to prove the purchase has been made. It may be submitted to the offering company via email or regular mail, depending on how the company has set up the rebate submission flow. 
• A discount does not require a contract. Instead, it happens on the spot, whether it be in person or online at checkout. 

4. Relative Complexity

• When comparing the two, a rebate tends to have more complexities associated with it because of the paperwork and eligibility requirements. 
• A discount is more direct. 

All of this being said, both rebates and discounts have to be properly accounted for so a company’s financial books are in order. As sales transactions grow and more items are added into the mix for rebates, it becomes more complex to manually track. 

Finance automation software with rebate management takes the hassle and complexity out of the process by automating it all for you. This means that business personnel, from sales to marketing to finance, have more time to spend on strategy and customer relationships, rather than having to be burdened by data entry and tracking. 

Who Uses Rebates?

Rebate programs are most often offered by manufacturers. Along with boosting sales, they can be initiated in order to support customer loyalty. 

Distributors get to take advantage of manufacturer rebates because they essentially reduce their costs. As a result, they can increase their profits. Again, as helpful as rebates can be, they have to be properly managed on both parties’ end. 

With rebate management software, your team can calculate rebates faster, improve vendor relationships, standardize rebate rules, and improve internal control all within a centralized and easy-to-use system. You no longer have to worry about manually tracking rebates and delivering on owed promises. 

What are Rebate Incentives?

Rebate incentives can be for a specific good or service, as well as a specific group of goods or services. 

Many rebates to promote customer loyalty and long-term partnerships are based on quantities or set amounts over a specific course of time. Ultimately, this means that the more you trade with a certain partner, the more you can save. 

By lowering costs for buyers and distributors, manufacturers can decrease the risk of a competitor poaching a customer from them. 

What are the Types of B2B Rebate Examples?

Below, we’ve compiled a list of rebate program examples to inspire your next rebate program decision. Each one serves its own purpose, so before moving forward with any, consider your business goals. 

Then, you can plan to implement a rebate incentive and track its success. 

1. Volume Incentive

A volume incentive rebate is one of the simplest types of rebate. It provides a customer with a rebate based on the quantity that they purchase from a manufacturer within a specific time period. 

As the volume grows, so does the rebate amount. By formulating the rebate this way, manufacturers can incentivize their buyers to buy more of a product or service. 

2. Value Incentive

Value rebate incentives are focused on rebates for higher-priced items or product lines. A value rebate can be structured in a few different ways, namely:

• Premium Product Line: A set percentage rebate on luxury and higher margin goods 
• Solution Bundles: A set percentage rebate based on a packaged purchase 
• Strategic Products: A set percentage rebate for newly released products or specific categories in focus 

3. Growth Incentive

Growth rebate is a type of volume incentive. It is intended to drive the sale in greater volume of a specific product group. In this case, the rebate is paid on the condition of hitting a targeted percentage in volume. The rebate is paid on incremental volume as opposed to total volume. 

4. Product Mix Incentive

A product mix incentive combines low-volume products and high-volume products together in a bundle so that manufacturers can help to clear out the low-volume products that tend to sell less. 

By combining product types, manufacturers can influence customers to explore new options. It may result in customers not having to look elsewhere to other suppliers/competition for those products. 

5. Product Line Free of Charge

A product line free of charge (FOC) rebate is when a supplier will provide certain products for free given that a customer has bought a specific volume or mix of products in the designated product line. Again, this is a way to encourage diversification and promote bulk buying. 

7. Standard Percentage of Turnover Rebates

A standard percentage of turnover rebate is a fixed percentage of the total sales that is provided back to the customer based on the overall turnover they have generated. It does not depend on product type or quantity. It only depends on total sales in a specific period (a.k.a. The turnover the customer has generated). 

8. Standard Unit Per Value Rebates

Another fairly simple rebate to enact is a standard unit per value rebate. In this setup, the buyer receives a fixed amount of money back for each unit they have purchased. Again, it does not depend on the total value of the purchase– it is simply linked to the item that has been sold. 

Whether you choose to initiate one or many of these types of rebates, you can see how it can become complex to manage very quickly, especially as transaction volume grows.

Rebate management software combines data across your existing systems, applies bespoke rules, and calculates, reports, and reconciles rebates. As a result, you can calculate rebates in minutes rather than days, scale rebate programs, and focus your team’s energy on client relationships rather than manual, data-heavy tasks. 

What is an Example of a Rebate?

With all the various rebate program examples listed above, let’s dive into one more concretely to understand how it works. 

We’ll take a volume incentive rebate as our example:

A manufacturer offers a $5 rebate per unit when the customer has purchased at least 10,000 units. The customer buys 11,000 units, so the rebate will be 11,000x$5, or $55,000 worth. 

As you can see, rebates offer a hearty incentive to buy more and stick with the same supplier to fulfill inventory needs. 

What to Consider When Using Rebates?

Rebates are a great way to support customer loyalty and spending. However, they only work and matter if a company is prepared to follow through. Otherwise, it’s like a false promise. 

Customers may experience what’s known as “breakage,” which means they don’t redeem the rebate because the process is too difficult or time-consuming. 

To support your customer’s experience and design a smooth running rebate program, follow these recommendations:

• Make the process for submission simple and offer the option for mail-in rebates or online forms 
• Create submission deadlines that align with your business’ cash flow needs 
• Test out different rebate program examples to see what works best 
• Utilize rebate management software to help streamline the process: create contracts, collect data, approve submissions, and pay out customers on a timely basis. Your team can say goodbye to disparate spreadsheets that are hard to track, save time on calculating rebates, improve vendor and customer relationships, and eliminate errors. Plus, rebate management software makes it possible to scale rebate programs and maintain internal control. 

Closing Words

When you’re equipped with knowledge about the variety of rebate program examples that exist, you can make an informed decision to support your business’ goals. Whether you’re looking to improve customer loyalty, boost sales, sell a specific product, or something else, there is a type of rebate that can work in your favor. 

Remember, you don’t have to manually track rebates and add more work to your accounting team’s to-do lists. Rebate management software is a must-have for any business looking to maximize the outcome of their rebate programs, save time, reduce errors, and streamline key finance functions.