The Art of Building an Effective Strategy with Rebate Programs
"With products often eligible for multiple rebate and tiered programs, this can have massive ramifications on what is paid to a customer from one deal to the next. Throw in the complexity of today’s rebate programs and manual processes, it begins to become even more unmanageable. Companies struggle to get a firm grasp on setting appropriate prices, analyzing strategies, and optimizing based on real-time data. This results in rebates being seen as a burden instead of an opportunity, money being left on the table, and shrouds the very data that can lead to the deep insights you need to price more effectively. Join Ray Knight, Strategic Consultant at PROS and Case Hoogerhuis, Senior Solutions Consultant at Enable, to discover how, by utilizing an integrated solution, figures are exposed in real time meaning companies can effectively price their deals with accruals factored into the pricing structure in an automated manner. By preventing the risk of pricing yourself out of a deal, you can build comprehensive yet dynamic price strategies that have a positive impact on your bottom line.
In this session, Enable and PROS experts will show a demo of the CPQ product and discuss:
- The importance of rebates in quote generation
- Why rebates should be seen as an opportunity, not a necessary evil
- Having the right data at your fingertips and using it to price effectively"
About the Speakers
Case Hoogerhuis is a Senior Solutions Consultant at Enable International Inc. and leads the Solutions team in North America. A Bay Area native, Hoogerhuis has worked in SaaS for over 11 years, having spent over four years implementing software in a post-sales capacity at Responsys before moving to a consultative role for the last seven years at companies including Oracle and Dropbox.
Ray Knight recently joined PROS as a Strategic Consultant. He brings with him over 20 years experience in strategic pricing and analytics.
Ray Knight: Hello, everyone. My name is Ray Knight. I'm a strategic consultant here at PROS, and I'm joined today by a very special guest, Case.
Case Hoogerhuis: Thanks, Ray. My name is Case Hoogerhuis, and I'm a Senior Solutions Consultant at Enable. I'm honored and thrilled to be here to talk about the integration that we have planned to show you today....
Ray Knight: We're here today to introduce you to a truly powerful partnership of a game changing solution, encompassing our mission to help our customers outperform. PROS, the leader in AI powered omnichannel price optimization has partnered with Enable to form the seamless integration of a powerful rebate platform fully configured into the PROS Smart Configure Price Quote solution. We'll spend some time taking you through this solution with a couple of live demos to help further explain this partnership.
Case Hoogerhuis: Enable is the leading collaboration platform for boosting the performance of your rebate deals while increasing operational efficiency and mitigating business risk. We do this through four key points that we have laid out here. First, we're going to allow you to drive customer and supplier behavior through flexible incentive programs. Second, we create a high quality customer experience. The renegotiation amendments and renewing profit generating rebate programs, as well as being able to forecast the program effectiveness. You can maintain an ongoing, actionable insights through the reviewing the sales versus the program goals. As well as proactively uncovering opportunities for program improvement. Finally, mitigate business risk by making sure that all collections are payments from every program are done correctly and we ensure pure contract compliance.
Ray Knight: With the power to truly optimize every shopping and selling experience in an ever changing omnichannel sales effort, PROS has the ability to predict a customer's willingness-to -pay, which is transformational in helping our customers increase the efficiencies of their quoting process while introducing and further driving their quoting compliance. This allows a truly aligned strategic objective for the organization. Whether introducing a margin generating play or a revenue enhancement play, the different parts of the organization can harmonize their efforts utilizing the number one pricing software.
Case Hoogerhuis: Now with PROS and Enable, which are better together, you're able to enhance and optimize your pricing through sharpening margin analysis by considering all of the data across both platforms. You can leverage your investments in Enable and/or PROS to repurpose program data. And overall increase the value of your program. You can drive CPQ adoption by sellers through both easy to use platforms. And finally, you get a 360 degree view of all the data from rebates off invoice offers, deductions and other important pieces of information. Holistically, you'll understand what the profit margin of any deal is, no matter the complexity. So now that we walk through the partnership and its benefits. Let's take a look at the Enable platform and see how easy and simple it is for a sales rep to set up rebate programs for the upcoming year.
Case Hoogerhuis: What we're going to do now is walk through the Enable platform through the lens of a salesperson who's working on some rebate agreements with one of their customers for the upcoming year. Before we do that, some things I'd like to highlight to orient ourselves that enable is first and foremost a SaaS solution. So anyone can access the platform from anywhere in the world, from any device and from any browser so long as they have an internet connection. Enable is going to be the single source of truth for anyone who needs data relating to rebates. That's normally a diverse set of teams that include, but are not limited to sales, procurement, finance and accounting. Enable is the one place where everybody can go to reference the same data and understand exactly where their trading partners are with their rebate programs.
Case Hoogerhuis: So what I'm going to do now is move into my list of customers, which I've been given access to. And as a salesperson these are all the customers that are in my particular book of business. Enable allows for one place for me to go and easy organization and discovery of those customers should I need to search and I have many. But today we're going to look at Brickway foods, which is one of the customers that I have and I'm responsible for. We're going to look at some of the rebate programs that we have proposed for them for the upcoming year. We'll pretend for a moment that it's not November 2021, perhaps it's late 2020, and we're going to see some of the rebate programs that we're hoping to have signed off with them that will persist through 2021. So what we have here is that proposed annual agreement. With its own start and end date. And if we go into this agreement, what we're going to see is a number of individual rebate programs that we have set up. And these are diverse, they range everything from 2% on all products to a fixed percentage on a specific category of products all the way down to a set of a tiered incentive by volume for a category of products with exceptions. So obviously, that last deal is a little more complicated than the other ones, but we can show you right now how easy that is. And intuitive it is anyone to go ahead and set up those within the Enable platform.
Case Hoogerhuis: What's loading right now is going to be one of what we call a program lines, which is going to represent an individual rebate agreement. And what we can see is that we have automatically included the different parameters that we need for this agreement so that anyone could go ahead and set these up quickly and easily. So it's going to include everything from a reference and description. So we know where we are when we're navigating and trying to find the right rebate deal or working on a start and end date. Flags for reporting this happens to be an incentive rebate, but we could use these flags if we wanted to take a step back and look across our entire customer base for all the incentive rebates or the advertising or the guaranteed rebates. These flags, of course, are all configurable for reporting, so every customer gets to define what flags they use for reporting. There's a section for notes, payment granularity, the cash process, payment frequency. And of course, the heart of this is going to be the mechanism, what the mechanism is essentially the mathematical calculation or the algorithm that we're using to define how these rebates are going to be approved.
Case Hoogerhuis: In this case, I have a targeted percentage based off volume. However, we have a wide range of other mechanisms that we support, such as a fixed percentage or a fixed unit rate. Fixed amount. Target by unit rate amount and within those growth, volume and value. And this is just a subset of the mechanisms that we have. Every single one of these mechanisms, as you select them will dynamically produce a different set of criteria here on the right hand side. Which essentially means that we're allowing a user to create thousands, if not Tens of thousands of different deal combinations, all from one easy to use and easy to understand and learn user interface. Now, on the right hand side, since we have this targeted volume selected, let's talk about the qualifying transactions for this particular deal since it is highly targeted. We, of course, include a discount which we didn't we could separate the target and earning transactions if we needed to. And down here we have what we call our dimensions, which are used for targeting. Now, I only have one dimension in here for simplicity purposes, but we could have products, branch's, class, a lot of different categories for targeting and within products. You can see that we actually support a product hierarchy. So in this case, we kept it relatively simple with a category description and ID, and we can see all of the SKUs that are available here. However, we can also see this as this is highly targeted, not every one of these SKUs has been selected and that's been done through inclusion and exclusion rules.
Case Hoogerhuis: So if we go to Edit this inclusion rule, what this is going to bring up is how we target this particular program and what we're going to see is the category description and category ID that we use for targeting. Now, I could have made this very general and said all products. However, what I did is I use the category description to select for just pizza if I want to include other categories such as Italian seafood or frozen foods. I could easily do that through this very simple to use user interface. I do the exact same thing with exclusions as well. So if I wanted to create this deal to have all pizza except for a couple of different specific SKUs. I could go in, I could select those SKUs through these inclusion exclusion rules, and I could have this target exactly as I need it, even if it's very specific and it goes through a number of different product categories, classes or is really down to specific SKUs.
Case Hoogerhuis: Because this is a incentive rebate, we have different tiers. I can go in, I can very easily set up the target by units and the rate and here can actually very quickly understand, very easily understand how this is forecasting, even though it isn't technically a live deal yet. Now that I mentioned forecasting and we have this set up. What I can do is I can look at this deal as it's been proposed, and I can actually forecast this for the upcoming year based off historical data. So we can see the expected spend by the customer over time. The transactions they're expecting in phases and down here, we can see the different tiers and where they're due to hit those. One really nice thing about Enable is that you can actually go back and forth. And if this isn't targeting or forecasting the way that looks like, it would incentivize the right behavior by this particular customer or wasn't a good deal for us as a company. I could go back to this program line and I can make adjustments on the fly and it will automatically forecast in real time. This gives me the ability to iterate on a deal and know that when I send it out for review and approval, it's something that's going to work well for us. And it's going to work well for the customer as well.
Case Hoogerhuis: So now that I've gone through and I've looked at these program lines, I can send these out for approval, but a couple of things that are important to bear in mind is that because I have a number of different programs and I have one program on all spend, other programs that are on a particular category or class of products is it's not uncommon for a particular SKU or a set of SKUs to be eligible for multiple rebate programs all at once. What enable does is it calculates all of these rebate programs in real time as the transactional data comes in, and it applies those transactions across all the programs as needed. So therefore, what we can do is we can give an understanding of the net rebate being accrued across any of the different categories we look at. So that could be by customer, by sku, by category or any other number of variables. This is going to be very important for when we go into PROS and Ray’s sometime later in this year, as these programs are running in real time, is going to set up a deal where he needs the reference that information in order to understand the true profitability of his particular quote.
Case Hoogerhuis: Before we do that. What we can do within Enable and a very important part of the platform is we can actually send out the workflow for approvals between ourselves and this customer, and we'll generate the document that has all of the variables that go into this particular annual agreement. So all of the different tiers, percentages, discounts, deductions will all be generated in a PDF directly from the system, which reduces human time spent and reduces any chance for human error. So I can send this now out directly through enable to our customer, Nate Janssen, who can review this within the system, make notes, ask questions and eventually approve. And once this is approved, this 2021 agreement will be live. It will be running and it will be accruing in real time as we get transactional data throughout the year. Now what we'll do is we'll look later a little later in the year, and Ray is going to be setting up a specific sales transaction with Brickway Foods, and we're going to see how the data generated from enable for these particular SKUs can be sent to PROS to factor into the pricing so Ray knows exactly what the profitability of that particular proposed agreement would be. And with that, Ray, I'll kick it off to you.
Ray Knight: So we're going to take a look at an integration use case, and as we go into this use case, we'll be on the lookout for the rebate availability seamlessly integrated at the time of the quoting process. We'll watch for the potential pitfalls and get addressed with dynamic calculations and recalculations of the quote margin, including those seamless rebates, and we'll be able to see the resulting efforts through our price waterfall analysis.
Ray Knight: So now I'm going to set the stage for the demo that you're about to see, so I'm ready and I have an opportunity with my large customer Brickway Foods, I need to give them a quote for Italian products with strategic pricing and flexible rebates because my goal in my role at the company is to optimize net profitability and deliver a better customer experience. At the end of the day, this is what PROS and Enable do for our customers. So we're going to optimize their experience delivering a personalized product assortment, utilizing AI powered pricing with integrated rebates. Let's go take a look.
Ray Knight: As with any quote, we would start in Salesforce and we would go into our account and we would initialize an opportunity, and within that opportunity we would begin to build out of the quote. So you can see here that I have spring banquet quote established for my account Brickway Foods. I did this in the essence of time just to try to help us out. And you can see that I'm in progress here, which basically indicates I've already put those SKUs in. But let's go take a look at how we would do that. So in the product selection, we could go in and do this a number of ways we could actually upload our own list. We could go into the keyword search and type those items in ourselves. Or we could do what I did in this case, which is to go into the Catalog itself and we could click on the deluxe Italian entrees. We could find those pizzas and find that pasta dish that my contact and I previously agreed on, and we could select them and go ahead and put them in the cart. I've gone ahead and done that again for the sake of time. So we're going to go straight to the cart and we're going to see where all the action takes place.
Ray Knight: So now I need to go in and put my quantities in that he and I at least initially established so on the pasta dish, which was the spaghetti with white wine, cream sauce and clams. I'm going to put in 150 we talked about. And on the first pizza, which is the Romano feta, mushroom and sausage, I'm going to put in the 250, excuse me, that we talked about. And then on the Jupiter deluxe pizza with the works, I'm going to go in and put into 300 that we talked about. He seems to think this is going to be the favorite of the group. So now that we've got our quantities actually entered in, we can start taking a deeper dive into this quote. So we would expect it to come in at list price. This is coming in from Control and that list price, if we look up at the top, we have a deal score that deals score is going to be sitting at 100 and we're auto approved. Well we would expect that because it's coming in at list, but we know we're not competitive.
Ray Knight: So now we have to decide how we're going to make this quote competitive. So now we could go into the discount percentage column, we could go into the net price column and we could actually use our price guidance widget and we could determine what kind of a discount we think we need to apply. Well, in my world. I would look at this as I have the options of floor target and expert. I might start at Target just because it seems to be in the middle and it might be a great place to start. And I would apply that. I could also do the same thing on the net price, go into the widget and just choose a price and determine floor target or expert price and again, apply that price directly. But in this case, we're going to stay with the discount percentage. One of the things that's important to remember is that we've only got three SKUs in this quote. What if you had a quote that had, say, 300 SKUs or maybe even 1,000 SKUs? You wouldn't want to go in and do what I just did and apply that discount line item at a time. So you would have the availability to go in and do a mass update, and you could still use the price guidance and apply it to the entire quote at one time, and it would be done very quickly. In this case, I'm going to continue to use the widget just because I want to drive that point home, and I kind of like doing it.
Ray Knight: So after I go into each one of these and I apply the target discount now, we have a different deal score. If I go up here, I see that I have still an acceptable deal score. We're still auto approved. And so what's to prevent me from going ahead and sending this to my customer? And so now we're going to take a little bit deeper dive into this. So I'm going to explain the columns very quickly. We have the net price at unit level. We have the total net, which is obviously quantity times. We have cost at unit and we have total cost, which is again, quantity times we have the margin in percentage. But when I look at the margin percentage over here, it's sitting at around 10% that looks acceptable to me. The deal score tells me it's OK. So why would I go ahead and send it? Well, in the past, this would be about where our view would end, and this is where we would sometimes maybe make the mistake of sending it on out. Now we introduce the power of the partnership of PROS and Enable.
Ray Knight: So let's scroll to the right. After we get past the margin percentage, we can now see the rebate programs. This information is configured and stored in Enable, and it's a real time call that we make to them and bring this directly into CPQ so that it's instantaneous. You're able to see this value right inside the quote before you're actually sending this to the customer and possibly making a profitability mistake. So now we can see that these first two items actually are under the program, that the customer gets 2% on their total spend on this Jupiter deluxe pizza. We can see that it actually qualifies for multiple rebates. And so it's equaling a total value of a 10% rebate. So now we go over and we look at the net margin of this, especially this line item, and we have an oopsie. We actually have a negative net margin. So even though our deal score looks good and we would be auto approved, you might say that there's a bit of the devil in the details.
Ray Knight: So we would want to address this and hopefully move this to a positive margin. So how would we go about doing that? Well, we could go in and say, OK, I need to take a little bit deeper, dive into this and see what the terms and conditions of those rebates are. I could go into the Jupiter deluxe pizza and I could scroll over to the right and I can see the various programs that are available on that particular item. I would expect to see a 2% spend on the other items and the program ID that's associated with it. That program ID also sits down here on the Jupiter deluxe pizza, but it also qualifies for a tiered agreement which this quote would qualify for. So the customers earning an additional 8% on that item. Well, maybe I can sit down in the future with the seller and have a conversation about changing that program, but now's not the time. The customer has already come to me and we haven't had that discussion ahead of the quote. So I need to make a change to the quote to see if I can make the quote more profitable to me and worry about the tiered agreement on the rebate, on the agreement at a later time. So I'm going to go back into the pricing and I'm going to go back to the Jupiter deluxe pizza and look at my pricing guidance widget again. And this time, instead of choosing target, I'm going to move it up to expert. And when I apply that, I'm going to go over to the right and take another look at that item and see that my, my pocket margin or my net margin has now moved to almost 6%. That's acceptable. And it all took place because of the ability to bring that live rebate data in from Enable and configure it into PROS CPQ. So this is the power of this partnership and the power to see how profitable your quotes are at the point that you're actually building them out. Now the fact that we are moving our deal score up a little bit and we're now still auto approved. We can have faith now that we can send this quote to our customer, and we're competitive and we're profitable Thanks to the partnership of PROS and Enable.
Ray Knight: So we could do this a number of different ways. We could finalize this out close to quote send it on over. But before we do that, I want to take one final look. I'm going to go into my insights and I want to look at my waterfall analysis. And so now I can see my total list and my net, and I can see my total margin well in the past. This would be where my view would stop. Now because of this partnership with enable, I can see my total program dollars that are being invested in this quote, and I can also see my total net margin. So this is incredibly valuable and it's a great graphical representation of the work that we've done inside the cart. So now we do truly have confidence that we can send this quote over to our customer. So we can do it any number of ways we could go in. Close the quote, send it directly over to our customer out of CPQ or Salesforce. By generating a document, we can generate that document down here in the bottom right hand corner, send it directly to the customer, and we could wait for our phone call.
Ray Knight: So as you can see in this demo, this is a very powerful partnership between PROS and Enable, to be able to see this rebate program in action. Inside the PROS Smart Configure Price Quote solution is incredible. To be able to bring the true 360 visibility into the net profitability of your quoting solution will further enhance your sales team's efforts as they go forward. So I'd like to thank you for attending this virtual conference. I'd like to thank Case for his time and commitment into this presentation, and Case I'll turn it over to you.
Case Hoogerhuis: Thank you, Ray, and thank you all so much for joining us as we walk through how our platforms truly can work better together. If you have any questions on what we talked about today, please feel free to visit us at our virtual booth or under our sponsor page. Reach out to your PROS sales rep for more information or visit us under the pros virtual training rooms under Smart Price Optimization and Management. Enjoy the rest of Outperform. Have a great day.