The traditional rebate model incentivizes distributors to be reactive to the market, rather than proactive. Distributors should change that approach if they want to maintain growth, says Michael Workman, president of Michael E. Workman Associates LTD, in Rethinking Rebates.

“The process of incentives to buy have continued to grow and be a common motivator for both parties within the channel,” Workman says. “I think that’s probably evolved to the point where it’s almost unworkable in many channels, and both manufacturers and some distributors are looking for ways to be more effective in their growth together.”

Rebates were meant to encourage more buying on the part of the distributor, because that’s how the incentive was earned. But the traditional model may be reducing a distributor’s ability to respond to market conditions, even as they remain focused on responding to customer demands.

The relationship distributors have with rebates will have to change along with the market for distributors to be successful with incentive programs, Workman says.

For example, manufacturers are now more interested in rewarding speed to market than volume. “It’s not about ‘big eat small’ anymore,” Workman says. “It’s ‘fast eat slow.’”

And with technology enabling new players to enter the market more easily – both online and offline – distributors who do not take a proactive approach may not see continued growth.

Read more about adapting to the new rebate reality in Rethinking Rebates.