Decoding the rebate myth and navigating the pros and cons for the Building Materials Industry
Keith Wright
I work with business owners, leaders and entrepreneurs to SAVE or MAKE them more MONEY from STRATEGIC PROCUREMENT
Introduction
In the world of building materials, rebates play a huge role across the industry yet can be a mixed bag. So my question is this...are they helpful or harmful?
In this article I'm going to explore the ins and outs of rebates, focusing on how factors like complexity, size, transparency, and strategy play out for both suppliers and customers. Crucially, well also touch on the impact on cash flow.
Are rebates helpful or harmful?
Cracking the Rebate Code
Put simply, rebates offer financial incentives, some guaranteed and some leveraged for growth, yet their complexity can be a headache.
For suppliers, managing complex rebate programs can be time-consuming and impact operations, whilst customers may find it tricky to fully benefit from these programs due to confusing terms, especially if they don’t actually know what they are paying for something!
Simplifying rebate structures can make them more effective for everyone.
Size Matters - Finding the Sweet Spot
While offering sizable rebates can attract customers, suppliers need to balance this with profitability and return on investment. Oversized rebates may strain cash flow and hurt the bottom line. On the flip side, customers should weigh up the size of rebates against their buying habits, the long-term health of supplier relationships and the balance between invoice and net costs.
Transparency Builds Trust
Clear communication is key to a healthy rebate system. Suppliers should be transparent about rebate terms, building trust with customers. This also means working together to deliver profitable growth and hitting those agreed incentive targets.
Likewise, transparent rebates help customers know exactly what theyre getting and the true profitability of their sales. This clarity supports a strong, trust-filled partnership and aids cash flow planning.
Customers should weigh up the size of rebates against their buying habits, the long-term health of supplier relationships and the balance between invoice and net costs
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Focus on What Matters
Rebates can turn toxic if they distract from core business goals, a great example being how easy it is to make a clear commercial decision.
Suppliers should consider aligning rebate programs with their broader strategy, ensuring that they drive the right behaviour.
Customers should ensure rebate-driven decisions align with their procurement strategy and don't jeopardise critical aspects, including good profitable sales and cash flow.
Strategic Thinking
The toxicity of rebates often comes down to strategy. Suppliers should view rebates as tools to achieve specific goals, not just stand-alone deals.
Customers benefit from a strategic approach that considers rebates within the bigger picture, factoring in their impact on category sales and margins and how operations and sales teams are aligned to make great decisions day in day out.
Customers should ensure rebate-driven decisions align with their procurement strategy and don't jeopardise critical aspects, including good profitable sales and cash flow
Conclusion
Are rebates a help or hindrance? Well, that depends on how you navigate their complexity, size, transparency, and strategy.
For building materials businesses, smart rebate management can and absolutely should support growth. By keeping them simple, transparent, and aligned with overall strategy, businesses can ensure rebates positively impact both sides of the supplier-customer relationship and contribute to healthy cash flow and profitable growth.
About Keith
Keith Wright is an entrepreneur on a mission to positively impact the world of procurement.
Renowned for his strategic approach, he has saved companies millions of pounds during his 30+ year career as a procurement expert.
Keith's focus on value creation has also created significant growth opportunities for his clients. As a trusted business consultant, he has collaborated with many market-leading companies, developing tailor-made procurement solutions aligned with their unique needs and goals.
Having founded K Wright Consultancy in 2021, Keith now works directly with business owners, leaders, entrepreneurs, and investors serious about taking their business to the next level.
In May 2024 he published his first book, The Power of Professional Procurement, a crucial tool for business leaders aiming to overhaul their supply chain and transform their business.
I work with business owners, leaders and entrepreneurs to SAVE or MAKE them more MONEY from STRATEGIC PROCUREMENT
3 个月Thanks for the quality comments to this post - some brilliant takeaways and strong views on the topic of rebates! Much work for the building industry to do but what an opportunity
Commercially and operationally focused with a wide range of experience across a variety of sectors
3 个月Hi Keith, having been on both sides of the rebate fence I have found that the simpler and more transparent the rebate structure the less time is spent calculating the impact so that the team are more focussed on driving business profitability. As the complexity grows, exponentially more time is spent on creating IT solutions to calculate the likely impact on the bottom line, thus reducing focus on the rest of the business. Then there’s the cash flow impact especially with annual rebates which often hit the business in January/February when incoming cash is likely at a lower level. And for those using an invoice discounting model for cash flow funding, likely customer rebates involve an increased retained funds level by the finance provider which is often calculated on a higher expected rebate basis thus restricting funds available for growth etc.
Customer-Centric Executive Leader | Inspiring High-Performance Sales Teams to Drive Sustainable Growth and Customer Success
3 个月Keith Wright we asked a group of local executives “what their perception of a rebate was, how it was perceived in their business and fundamentally did they know what a rebate was” A) Most had come from industries that didn’t have rebates or incentives; some acknowledged they didn’t know what a rebate was or the value of using them or how it could impact results B) Those that did have experience, had faced manual ways of working that led to complexity in managing those agreements - causing challenges However, they also saw the benefits when they were managed correctly or drove loyalty/visibile growth Summary: There is a need for a re-education of “Why rebates, why now” and starting that transfer of knowledge journey. Most I’ve spoken two over the past two years genuinely didn’t really know what a rebate was (which is an opportunity to help teach, support and nurture a community that doesn’t) Mark Gilham
Project Manager at ENSEK (SaaS platform to leading Energy organisations)
3 个月Hi Keith, Ive seen first hand many companies managing rebates on spreadsheets and that can get complex! Rebates are a great tool and efficiency/ease in managing them can be tackled using software like e-bate (who I used to work for) or Enable