Rebates are critical for improving financial outcomes across the supply chain, like increasing profits, growing sales, and aligning to better serve end customers. This is why it’s essential for trading partners to think creatively about how they can fully leverage rebates to achieve their business goals.

Read also: Why Many New Industries are Adopting Rebates

The adoption of more sophisticated and flexible rebate strategies will open up many avenues for growth. While these advanced strategies will inevitably be more complex than conventional incentives like discounts, there are powerful digital tools for handling this complexity and facilitating collaboration between trading partners. With these tools, partners can take a more innovative and strategic approach to rebates — a shift that has the potential to strengthen relationships and drastically improve business outcomes for both parties.

In other words, it’s time for a rebate reset. The traditional one-size-fits-all approach to rebate management is preventing manufacturers, distributors, and other partners from maximizing the value of their relationships and driving the right behaviors to increase margins and sales. By developing a customized, integrated, and results-oriented rebate strategy, trading partners will discover that there are far more opportunities for profitable collaboration than they realized.

Technology is driving a new era of rebate innovation

Rebate management has been stuck in the past. Managers have long relied on spreadsheets, pivot tables, and other cumbersome manual systems for developing and tracking rebates, which has prevented them from getting the most out of their relationships with trading partners.

AAH is a major UK-based distributor of healthcare products that used spreadsheets until it became clear that they were hindering efficiency and preventing the company from executing its rebate strategy. As former head of business development at AAH Michael McSorley explained: “Spreadsheets were inadequate for handling the complexity of our rebate calculations.” AAH recognized that rebates were indispensable for profitability, so the company prioritized new rebate programs that were meaningful to both their business and their customers’ businesses.

Companies like AAH are adopting modern rebate management solutions, which include agreement approval workflows, ai-powered analytics, and claims functionality for processing rebates in full and on time. This is part of a larger trend toward supply chain digitization, which is “proven to mitigate supply chain risk and optimize supply chain cost,” according to a recent Gartner report. A McKinsey survey of supply chain leaders found that 79 percent have implemented digital dashboards for end-to-end visibility — a core aspect of rebate management. The ability to incentivize desired behaviors between partners is the most important element of a rebate reset, which is why visibility and collaboration are central to rebate management innovation.

New technology won’t do much good if trading partners don’t make the necessary strategic adjustments to their rebate programs first. Now that trading partners have the digital tools, they need to develop more comprehensive, customized, and creative rebate strategies, they must focus on how to execute those strategies as effectively as possible.

Customized rebate strategies are the engines of profitable growth

The implementation of rebate management technology is only the beginning — once this technology is in place, trading partners will be able to customize rebate strategies to meet not only their own unique needs and business goals, but their partners too. When goals are shared, they can work together to build rebate programs that work for them both. Unlike basic incentives such as discounts, rebates can be negotiated, implemented, and adjusted in countless ways. They can be volume-based, seasonal, geographic, retrospective or non-retrospective, focused on meeting certain sales thresholds, designed to ensure a specific product mix, and built around logistics or stocking.

ECMD is a company that focuses on the manufacture, importation, and distribution of building materials. Steven Carlson is the vice president of professional dealer sales at ECMD, and he recently explained how customized rebates allowed the company to negotiate a $10 million deal which prioritizes high-margin product categories. Carlson observed that these rebates enabled ECMD to “assign specific rebates based on the profitability of the products or categories,” which “exemplifies how we can strategically leverage our strengths to win over key clients and solidify our position in the market through tailored, competitive offerings.”

This high degree of customization is what allows trading partners to establish a set of mutually beneficial behavioral incentives that will secure margin growth and business objectives. Carlson notes that ECMD’s “targeted sales strategy is bolstered by our ability to automate the rebate process, ensuring efficiency and accuracy in our pricing and incentives.” Customized rebate strategies allow trading partners to more effectively manage every aspect of their relationships — from negotiation to dispute resolution to performance tracking. This helps them focus on what matters: developing a strategy that protects margins and secures sustainable growth.

Now is the time for a rebate reset

Many manufacturers, distributors, and other supply chain partners are failing to fully leverage the power of rebates, which is why they’re overdue for a new approach that will help them forge stronger relationships and drive growth. Rebates are distinct from other incentives because they don’t just provide simple financial inducements — they are also invaluable strategic tools. The level of customization offered by rebates allows partners to align closer with long-term goals and market opportunities.

It’s clear that many supply chain partners need to fundamentally rethink their approach to rebates. According to a 2024 Enable report, nearly one-third of manufacturers don’t think their rebate strategy is effective, while 18 percent have no idea whether it’s effective or not. Nearly two-thirds believe better analytics will make their rebate programs more effective — a reflection of the trend toward digitization across the supply chain sector. Once trading partners move beyond outdated manual tools like Excel and restrictive ERPs (which are used by two-thirds of manufacturers), they can work with their trading partners to develop a robust rebate strategy that meets their shared strategic goals.

Different rebates encourage different behaviors from trading partners. Some facilitate sales growth, while others incentivize purchase volume or promote new product lines. ECMD negotiated a rebate program that focused on high-margin products, for instance, which allowed the company to lean into its strengths and build a healthier relationship with a critical trading partner. There are innumerable rebate success stories like this one, and they all have one thing in common: company leaders recognized that a rebate reset was necessary to turn rebates into a strategic engine for mutual success.