If you rely on rebates for your bottom line, you may want to start rethinking that part of your business. Rebates won't completely disappear anytime soon, according to Michael Workman, president of Michael E. Workman Associates LTD, in Rethinking Rebates. But many manufacturers are starting to rethink how they incentivize their distributor partners.
"It’s harder for the distributor to create demand at the level that the manufacturer would like to see demand created," Workman says. For example, many traditional models are based on volume, but that is no longer the key market driver. Instead, manufacturers are more interested in rewarding speed to market.
Or they may look at being more selective or restrictive with regard to incentives, for example, temporary rebates for new product launches rather than permanent blanket agreements.
Another potential change: Basing the incentive on growth rather than volume and focusing those rewards on your best-performing distributors rather than dividing them out across all of your distributors, says David Reisner, director, strategic design & integration for ITA Group, in the recent MDM Webcast: Moving Beyond Rebates.
The market is changing – and it's changing more rapidly than ever before. Technology is bringing the manufacturer closer to the customer and providing them more options than ever to get their products to market. The relationship between distributors and manufacturers will still be critical, but it may require more work and care on the part of the distributor.
"It has to be a real partnership, it has to have a win-win for everyone," says David Gordon, principal for Channel Marketing Group. Manufacturers may be more willing to provide incentives if distributors are willing to share point-of-sale data, for example. (And they may be willing to pay for that data, as well, he says.)
Ultimately it will come down to "how good a negotiator are you?" Gordon says. "The more you can perform, the more you can ask for. But you have to be willing to invest in market drivers."
