Watch our insightful on-demand webinar where we explore how AI-powered platforms are transforming pricing and rebate management for manufacturers. Discover how integrating artificial intelligence into your pricing strategies can help you navigate market volatility, enhance customer relationships, and drive profitability.
In this session, we cover:
- The key differences between discounts and rebates and their strategic importance.
- Common challenges faced by manufacturers with traditional rebate systems.
- The benefits of unified platforms in streamlining operations and improving decision-making.
- Trends and advancements in AI that will transform how customer agreements are negotiated
Don’t miss this opportunity to learn how AI can empower your business to achieve sustained growth and competitive advantage.
Speakers:
Marcus Demmelmair – Head of BU Sales, Marketing & Pricing, Horváth
Nick Boyer – Senior Director of Strategic Consulting EMEA, PROS
Lisa Hellqvist – Managing Director, Copperberg
Full Transcript
Good morning, everyone, and welcome to today’s webinar. My name is Lisa Hellqvist, managing director of Copperberg, as you probably already know. And today, I’m going to take you through the hour, I would say. Let’s see how how much we can dive into this, today’s topic.
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If also life comes in between you and the intention to watch this full broadcast, it is available on demand afterwards. So don’t worry. You have access by actually registering to do this session.
Also, we’re here to answer your questions in the live chat. So if you have any questions to, Nick and Marcus, who I will introduce in a second, please pop them into the chat, and we will try to cover as many of them as possible throughout this broadcast.
Okay. Enough about the housekeeping rules. Today, we’re going to deep dive in a fireside chat, version, to the great and maybe sometimes mysterious questions around rebate management and pricing strategies.
We all know that our customers are, in under as much press pressure as ourselves, and they’re always trying to get maybe a good deal out of you.
But we also can do this in a strategic way, which allows us to build customer loyalty rather than one off discounts, God forbid, using that word in a pricing environment. But that’s the truth we’re still facing.
And today, we’re going to deep dive in how how we do this strategically and how we can enhance this with help of AI. I said the word. It’s not the first word you time you will hear this during the broadcast.
But with me, I have two experts, thankfully.
I have Nick Boyer from PROS. Good morning, Nick. How are you today?
Good morning, everybody. I’m very well. Thank you, Lisa. How are you?
I’m very well. Thank you. The sun is shining even in Stockholm. What can I do?
You know, spring is coming. And all the way from Germany, I believe, Marcus Demmelmair. You are from Horwath, and you’re also here to help us, guide us through this, you know, mysterious, maybe, question. Good morning, Marcus.
Good morning. Great to be with you guys.
Nice to have you both here.
And, of course, I’m you know, as you know, I am, always going to take my community into consideration and the people watching this. I’m going to start with an icebreaker because this was a little bit a few years ago when I started digging deeper into pricing and I worked more closely with PROS and yours Horvath, for example, I realized that there is a true definition and the terminology difference.
And I’m obviously a native, you know, Swedish speaker. So for me, rebate translate into a discount in my Swedish language. I understand it does not in the in the English language, But as an icebreaker and for the audience now, just recently logged in, what is the difference between a rebate and a discount? Are they the same? Help the audience clear this, misconception maybe out for them. Nick, your thoughts on this?
Yeah. It’s a very good question. It confused me a little bit as well because we work a lot with, with German companies, and they, I think, also use the word rebate for discounts. Right, Marcus?
And for me, really, I I consider it really the difference between something that’s on invoice and something that’s just off invoice. And so a discount is on invoice Mhmm. Whereas a rebate is something that happens after the invoice has been issued, you know, potentially quarterly, annually, etcetera. It happens after the event of the invoice.
So that’s how I really distinguish between discounts and and rebates.
You’re nodding, Marcus. Do you agree, or do you wanna add something?
Absolutely. It so me as a German native, it also confuses me often with with clients where the topic of rebate and discounts, gets mixed up.
As Nick has said, discount is right away on the invoice, and rebate is a more tactical, or it’s rather put more strategic instrument.
Mhmm.
Typically, only, like, smaller numbers, one, two, three percent, and often, yeah, much, much harder to to steer and much harder to, to to manage. And this is exactly, the topic of our webinar today. Right?
Mhmm. And, I mean, this is a follow-up question, but it also feels since, you know, rebate is a strategic tool. It’s also mitigating risk rather than the one off, which could sometimes also be an initiative from one single salesperson and therefore chewing off some of your margin. Is that the correct assumption here as well?
Yeah. Well, you you’re mitigating risk through rebates by by not conceding something until it’s been earned. Right? Because, you know, so, you know, a salesperson could be in a negotiation.
The customer the the the purchasing person in front of them says, well, I’m gonna give you an extra ten thousand kilo this year. So, I I I should it warrants an additional discount. You’d say, well, no.
I’ll give you the same discount, but I’ll I’ll introduce a rebate. And if you give me that additional ten thousand kilo, then you’re gonna get an additional three percent or whatever it happens to be. And that, as you say, Lisa, then mitigates the risk because they have to earn it first before it gets paid.
Mhmm. Seated.
I think that brings me into my first question of today because we always wanna focus on what the key challenges are, for companies, of course, with rebate management here. And, I mean, Marcus, why is rebate management so important?
So first of all, despite it’s quite overlooked, in in in in many companies in daily practice as everyone’s focusing on the discounts, it’s rebates have a huge impact on profitability.
Yeah. Take for instance, the construction, material industry where we see, like, an average, rebate payout of six to eight percent in terms of revenues. It’s that’s a substantial number.
And rebates are a key driver for profitability or for margin leakage. Yeah? And, therefore, especially in these times where we see a lot of market volatility, yeah, where customers might grow tremendously or actually, vice versa, the topic of the rebate management, rebate schemes, they need to be managed much more professional and, really sustainable, as they have, like, really important implications on profitability, but also on our growth and our growth ambition.
And, last but not least, what we’ve also seen because it’s a topic a bit more on the side, the topic that is overlooked, that rebate management is often done a bit on the fly. As Nick has said, oh, okay. Get an extra, percent of rebate. Yeah. But this adds up. Yeah. And this is, like, one of the source for March to leakage.
Mhmm.
And I mean, it is quite complex, this, you know, rebate management. As you said, it’s not something that is just at always so let’s say, embedded into our strategy, it could be more ad hoc.
And, you know, you start out saying with the volatility, this is probably something one can really look into. But why is it so complex? Do you think, Nick, what’s what’s your take on this?
Well, it’s a good question. It’s a question I asked myself kind of fairly early on in my career because I was, I used to implement, SAP.
And I was doing it for, a part of Sangiban, which is a building materials, manufacturer.
And, we needed to obviously we were intending to bring the rebates into into SAP. So we had to understand what rebates were out there.
And it was, I mean, it was a real eye opener. So first of all, the fact that it was very difficult to even find out which rebates had been agreed with our customers.
But secondly, the incredible variety that there was in the way in which the sales teams had defined these rebates with their customers.
And I think that, the reason it is so complex is, is is two is a number of different reasons, really. And it’s to do with the objectives of the the manufacturer or the or the company that’s issuing the rebates and the objectives of the, the buying company or the company that’s the recipient of the rebates. And if we look at the the manufacturer first, they they obviously want to, they want to create an incentive to to grow revenue, to do all a lot of the good things that that Marcus has already mentioned. Mhmm. And in order to do that, you know, they want to make sure that their sales teams are, introducing incentives that are aligned with their corporate objectives and not just giving them another tool to to give more, margin away.
They want them to they they want their sales teams to use rebates to to change behavior. So they want their to drive, their customers to buy more or to have the biggest share of their basket or or drive more loyalty or maybe buy specific product lines.
So there’s lots of different objectives behind what they want to achieve, and there’s many different ways of of providing the incentive as well. So sometimes it could be based on volumes being achieved. Sometimes maybe it’s, specific growth year on year, that’s gonna trigger a rebate. And sometimes it can even be, what’s the right word, kind of qualitative. So, you know, maybe there is a specific, marketing campaign that they want their customer to do or maybe, you know, display, display, but position a display in a in a particular part of the store or send their guy their guys on some specific training or something like that. So so lots of different reasons why and behaviors that they want to incentivize. And that, first of all, drives complexity because you have have to have lots of different ways of of dealing of defining a rebate to deal with these different objectives.
And then, at the same time, a manufacturer wants to aim for standardization. So they want to try and get as much common as possible to make them easier to manage. So there’s there’s a conflict there straight straight away, between doing something that’s easy to manage and standardize and having lots of different objectives to fulfill and lots of complexity there in terms of the different requirements the sales team wants to achieve. And then when you look at the the buying companies, they also have, they have they have different objectives. So so they want to try and use the rebates strategically.
So they want to so they need to decide how much to pass on to to their customers.
You know, the more they pass on, the more competitive advantage that they have.
But they don’t want to pass on too much because because, ultimately, a rebate has not been earned yet, so they’re at risk of giving too much away. So there’s some complexity around that. And and different companies, address this in different ways and, you know, even decide on how much of the rebates show to their different stakeholders in different way ways. So, for example, with, in the building materials industry, there was there there was quite a lot of differences between even even similar building materials distributors deciding how much of a rebate to to keep at head office level versus how much to pass to their subsidiaries and to to branches, so that they can see more of the true, margin, or the the true cost and therefore decide on the margin. And that would vary from from company to company in terms of, how much they empowered the you know, locally versus how much they wanted to to keep centrally.
And then at the same time, they have the complexity around wanting to drive those behaviors. So depending on how much visibility they give, it’s difficult for them to drive the right behaviors and order from the right supplier to trigger these rebates if they’ve not given that visibility. So there’s lots of complexity there, both from from a buying company’s perspective and from a manufacturer’s perspective.
And at the same time for both of them, the other complexity is understanding the impact of all this. Right? So so we we make all these agreements, but it’s for something that we have to forecast in the future in terms of exactly how it’s gonna play out. So so, yeah, lots of different reasons why why rebates are complex.
Yeah. And I think you’re pointing into a very interesting aspect there by the complex ecosystems that I know that many of the manufacturers watching this are sitting in, you know, with distributors, wholesalers, you know, channel partners, you name it.
And I mean, obviously, you don’t wanna go in too much, in conflict with their potential margins either because then you become someone who kind of steals from your collaborators.
But Marcus, I’m I’m thinking here, you know, the different channels here. How do we, you know, the complexity of that? Because we’re obviously in an online versus offline world as well. So how should one go about that?
I I I just love to to add, to Nick on, like, the the multiple objectives companies have. Yeah? And, multiple objectives, obviously, make rebates ever more complicated. Yeah?
As you mentioned, the channel topic, now in b two b, you want to incentivize that more of your volume is sold via some b two b online channel. Right? So you incentivize, that you incentivize the volume that goes over the online channel, and this is to also to some degree incentivized via rebate schemes. Yeah.
This adds complexity. This needs to be managed. This needs to be measured.
Other topics are, like specific customers, for instance, in industry verticals, where you want to grow. Obviously, you incentivize this further. What we often see in in in projects is, that, those incentives are often then forgotten. Yeah? So, and still paid out, despite actually, it has already been achieved, the objective, or you put up, the rebate in the first place, or, actually, the volume is much lower, but we still, paid as this it’s it’s no one is actually tracking it. Yeah?
And another source of complexity is obviously, product innovation, product management. Because if you once you introduce a new product, a new product version, some innovation, you often, want to also push this a bit into the market via rebate schemes. Yeah? Mhmm. And, then you also need to track exactly, your your scheme. Often, these new products are kind of linked to the existing ones so that you get the double kickback once you buy a specific share of the new products compared to the share of the, of the existing products.
And last but not least, the metric, how the rebates are paid out, this is also quite complicated as there’s two different, ones. There is one that you, get, like, on the total volume. Then you get the rebate on the total volume, or you only get the rebate on or a bit more rebate on, like, the additional volume. Yeah? And so, this is it’s getting tricky once to get really the full transparency.
And, if you really want to do your your math right and the calculation right, as it depends on so many, many things. Yeah?
Mhmm.
And, I mean, I’m immediately thinking now, that this will have implications.
And, I mean, it could probably if if you’re a traditional company that tends to, you know, discount a lot and ad hoc, I’m thinking salespeople here, I know. We always talk about them in pricing situations, but they are, on the other hand, a very you know, they’re a vital part of every organization, but they are also you know, they’re working towards specific goals, often involved in monetary goals, incentives, etcetera. And then I’m thinking about then the other opposite would would be, of course, the chief financial officer or someone who’s looking at the numbers. I mean, what are the implication of this for the finance team and for the financial, you know, officer here if we we look at rebate management? How would they go about this?
So, I mean, to be quite quite frank and open here, typically, finance departments, they hate rebates. Yeah?
Of course they do. I I’ve managed I’ve I’ve I’ve I’ve mentioned the topic of transparency.
Yeah.
And finance needs to have the transparency. Right?
And transparency is a big issue in in rebate management. Also, the topic of the payouts as they are quarterly or annually is also some some difference.
And, often finance needs to put, like, set up accruals due to the rebates. Yeah? They’re not paid out rebates.
And, you need to have due to compliance reasons and and taxation reasons, you need to put the right number in your accruals. Right? So I’m not a finance person, but this is something, finance is is very picky on it. And, I mean, and, therefore, you need to have transparency. You need to track this, accordingly.
And, this is really something, finance is chasing and and because finance just gets gets worried if, your numbers are not tracked, in a in a very clean way. Right?
Mhmm. Yeah. There’s nothing finance team loves as much as the wrong numbers in the wrong box. Right? That’s how you how you really make enemies internally.
And, Nick, if I let you then talk about the sales, team’s perspective on this, because we also know there’s always, you know, a little bit of a struggle between the traditional maybe pricing team, the sales team, you know, how do we work together on the strategies around pricing? Rebate management in my head, at least, was under a very strategic tool, both commercially, to be honest, but also, you know, from a pricing perspective. If that, you know, scheme is calculated properly for, then, you know, it is a potential, you know, customer loyalty win, incentivizing customers to stay on and buy more for a longer period of time. So how do we associate sales with this so it actually works and doesn’t become ad hoc?
Yeah. Well, there’s always a nice tension between sales and finance.
A healthy one maybe. I don’t know.
Yeah. Well, the I always think there should be a nice bit of tension between a pricing team and a sales team for sure, then that means you’ve got it all correct. Right? There should be a little bit of tension.
But I also, you know, I’ve become a a lot more sympathetic with sales teams than I maybe was back in the day when I was SAP, and I came across all these different things that they’d they’d come up with because they they do need flexible options, first of all.
You know, we already touched on earlier Mhmm. The fact that they are negotiating with companies that potentially have quite different objectives themselves. And therefore, you know, one size doesn’t necessarily fit all. So you can’t necessarily expect the sales team to negotiate, you know, the same type of rebate program even with two very similar end customers because they’ve got different objectives themselves.
And, and they have, as we’ve already mentioned as well, they’ve got all these different incentive objectives. So we’re going to get them to buy more, switch brands, drive loyalty, etcetera, etcetera. So they need lots of flexible options from a sales team’s perspective. Mhmm.
But then as as at the same time from a from a sales manager’s perspective, there needs to be we need to try and understand the true margin contribution that the combined deal is providing to the company. Right? So both the discounts that we’re providing, but also the rebates. And, you know, I’ve often come across situations where they are considered as two completely different different points in time and two different approval, mechanisms if there even is an approval mechanism for for for both of them.
You know, and as a salesperson, it can be quite easy to think, well, okay. I don’t really I’ll I’ll look good on my discounting, but I’ll give them lots on rebates.
You need to try and avoid that from a sales manager’s perspective, from a pricing team’s perspective.
So try and so try and, like, get your arm around the entire, implication of everything that’s that’s being, agreed is is a key, is a key objective, I think, for for well run sales teams. And also to consider the the the the the competitive angle as well because rebates are a nice way of reducing price transparency. You know?
And you talk to your end customer. They say, well, you know, your, you know, your competitor is giving it me at this price.
But in reality, if there’s a rebate behind and the rebates vary from from company to company, you can’t truly see the price that that, that they’re getting. And therefore, it, it results in less price transparency. And that obviously is what a lot of companies are aiming for these days where, you know, with the Internet and everything, there can be quite a lot of price transparency out there. So that’s a positive impact as well for, for, for, for sales teams.
But then the other implication for sales teams is it’s really, it can be quite difficult to judge, how much the, the trade off between, creating a rebate program that will give me additional volume, but giving away some margin to achieve that additional volume. How much additional margin should I give away that make that additional volume, you know, worthwhile? And, also, you know, how how realistic is it to get all that volume as well? So Mhmm.
Therefore, what should the thresholds be that I put into my rebate program? That can be quite complex for for a salesperson, to work out. So so it’s quite a lot of, implications for for for sales teams when it comes to to rebates. Doesn’t help, doesn’t make their day job any easier for sure.
No. Could we be better at arming them with this? I mean, I’m thinking you saying the the trade off there. Is that, do you think something we really miss at times, the opportunity to inform them properly?
Maybe this is what we come up to within the end, how we fix this. Right?
Yeah. That’s right. Well, I mean, definitely. There’s definitely an opportunity to to get your, your your kind of IT platform in order.
But there’s also, you know, there’s an opportunity, which I’m sure Marcus can tell us a lot more about, but there’s an opportunity to to link your to to make sure that your rebate strategy truly is part of your pricing strategy. And it’s not it’s not something that’s almost happening on the side. It needs to be, you know, con coherent whole. Yeah.
So very It’s like it’s a bit of a mindset aspect as well to it.
You know, the link again between sales and pricing and finance. But okay. Brings me to my next question, maybe the most obvious question in on the planet, but I bet I also can guess the answer to this. So one would assume that someone has gone about doing a real, you know, rebate management, program and looked at this maybe for everything sits in one nice place. Right? It’s a robust system around this. Or am I just going to assume that that’s not the case, Marcus?
I’m already I’m already laughing because, indeed, it’s it’s not surprisingly, this is not the case. Yeah. And, what I’ve seen in in my consulting work, that in the best case, rebates are kind of stored in an Excel spreadsheet. Yeah.
At least they’re monitored then in the best case. Yeah.
I’ve seen worst things like, that they are managed in, like, emails in Outlook, for instance, or even in okay.
This was a couple of years ago in hard copy files. Yeah.
So Love that.
Love that.
This is this is this is this is the reality, and this is, like, surprising. And often, the other topic is that the the rebate management sits only with with very with one or two persons that in the company that really have the overview, and it’s typically their, their their their tacit knowledge, yeah, based on, one, two, three decades of of experience in working in in in rebates. Yeah. And, once this person is is not here anymore, many, yeah, you you run into an issue. Right?
So it’s it’s very in in practice, it’s often managed quite quite poorly.
Plus, there is also the Nick mentioned it already. There’s often, like, it’s often done locally in in specific markets. And, so it’s a lack of transparency. It’s a lack of governance.
And, also, one big issue is obviously, that, like, a single platform, as you have mentioned, a single infrastructure is missing.
Yeah.
Anything you wanna add on this, why this is, something we’re struggling with today, Nick? I mean, we we hear it siloed data, siloed processes, siloed individuals, obviously.
But on top of that.
Well, I think one of the implications of those, like, fragmented systems that Marcus mentioned using Excel, etcetera, is that there is there is no framework for defining your rebate programs within. Right? You can do everything in Excel. Yeah. Yeah. And so you can decide on, you know, any level in the product hierarchy, any combination of things.
And I’ve seen that in the past as well where, you know, finance are desperately trying to work out how to calculate the accruals based on something that the salesperson has has, you know, invented basically has created. Oh, I promised.
Yeah. Yeah.
Yeah. Exactly. Yeah. Not really check. Well, can we actually do this? Have we got the, you know, have we got the BI tools to even interrogate our systems to, to, to calculate this rebate in the first place?
So, so, so that’s a real problem when you have, when you, when you’re using Excel or, or even outlook as, as Marcus mentioned, sales team alignment is, misalignment. We’ve kind of touched on already. It was, but I think a lot of companies are struggling with that. So making sure that they are, that they have a playbook and that they’re using rebates for the right thing, Because it should always be to to drive a behavior that isn’t currently happening today.
That’s the incentive that you’re providing the rebate for.
You know, if they’ve already bought ten thousand kilos offers last year, then it makes sense.
We negotiate a discount assuming they’re gonna buy another ten thousand kilos this year. But if they they’re promising to buy a completely different product line, well, that’s a that’s that’s a change in behavior. That’s benefit for us. So we give them the, you know, the incentive of the rebate as a result.
What else are they struggling with? I mean, Marcus has already touched on the accounting that that’s obviously a nightmare in terms of providing accurate and, and, and preventing errors.
Mhmm.
And I think one of the thing I’d mentioned I’d mentioned as well, because I think this is an interesting point to consider as well, is companies are struggling to be as a result of the way they’ve implemented rebates, they’re struggling to be good partners for their customers. Because, you know, if, if I, if I negotiate a rebate with my customer and they hit a certain threshold and they get an additional five percent, if they get to the end of that period and they’re ten kilos below triggering that threshold, they’re not gonna be very happy with me when they find out in the first week or the following quarter.
Right? So so being able to, like, nudge them and let them know that there is that opportunity to if they just, you know, if they just order another ten kilos of that product, they’re gonna trigger the threshold. Mhmm. I think that’s important as well.
So, you know, being a good partner is something that I think a lot of companies are struggling with because they they don’t have visibility to the rebate programs themselves.
No.
So how can they help their their customers, provide that visibility?
Yeah. I think there’s really an an element of being able to predict the customer’s next move and help them, go in the right direction. I mean, now we’ve spent a lot of time talking about the fact that we are some of us at least are falling behind. There’s this, you know, kind of scattered information across organizations. But there is obviously, we’ve identified that rebate management is a potential strategic tool for organizations when they invest and kind of set the knowledge sharing across, teams and in collaborative orders. So if we’re going to focus then on what’s good and, you know, the strategic importance in this for those who are doing it right, how do we then go from, the Excel scenario here and design instead a performance rebate scheme?
How do we do that? Marcus, your thoughts on this?
I mean, in the first place, and this is what not so many companies do on a on a regular or yearly basis in the first place, align your rebates with your business and pricing strategy. Sounds super easy, super stupid, but this is, like, really the first step and the most important step. Yeah? Yeah. So every basically, you you you should only design rebates, for topics you want to kind of reward, behavior you want to, incentivize. And therefore, every year, you basically, you you want to ask the quest you need to ask the question, what do I want to achieve this year in terms of products, in terms of customer customer verticals, in terms of channels?
And so what are my overall goals? What is my my strategy? And, and and how can rebates help me, to get there. This is sounds super super simple and super easy, but this is so important to set up, rebates in a way that I really reward, the specific behavior, I want I want to achieve. Yeah.
That that’s actually a very good input. Your thoughts, on this, Nick, maybe from the the modern pricing strategy aspect of this?
Yeah. I think when you, when you think about what a lot of companies are getting getting better and better at, it helped with the likes of Marcus, is Yeah. Is putting in place pricing strategies that, that work off a a pricing segmentation. Right? And that segmentation considers not just the price that different customer segments should should pay, but also the products and services that you’re gonna offer to them.
And and that segmentation should also consider who should be eligible for rebates and what type of rebate should those companies be eligible for. So you’ve got a holistic kind of pricing strategy and pricing segmentation, if you like, that considers rebates as well as as discounts and, and, and everything else. I think that’s important.
And then I think it’s important that as part of the, the, the pricing process that in the approval workflows, discounts and rebate agreements are bundled together and considered as a whole and optimized as a whole rather than being being treated separately. I think that’s that’s that’s important as well.
Mhmm.
Anything to add there, Marcus, on any I saw you nodded. Did you come up with some other great thing, Tad?
No.
I it just I I really You agree.
Yeah.
Okay.
But then, of course, we discussed the the the, lack of transparency in terms of, you know, the organizational challenges. And, I mean, it is, of course, quite clear that if something sits in a person’s inbox in Outlook, in some, you know, remote location, it’s very hard to, you know, use that as a strategic lever across the board. Right. So, that goes to to show that we obviously need more centralized, unified, you know, platforms for this.
But, you know, what’s your take on how a centralized sort of approach improves the efficiency and the decision making, here, Nick? I mean, obviously, you have a lot of experience in this, but what have you seen in terms of how one should do this in terms of streamlining?
In terms of a platform or in terms of, Both processes and platforms.
I think they go hand in hand, don’t they Yeah. In one sense. They support the decision making because we’ve already kind of, I think, highlighted that there is a discrepancy between what people see and have access to when it comes to rebates. Right?
Yeah. I think if you if you bring it all together into into kind of one platform, one process, you achieve, I think, a number of advantages. And the first one we’ve we talked we touched on quite a lot already, which is obviously transparency.
Yeah.
So you have all your rebate programs centrally in one place, and you you have a visibility of true profitability, both when negotiating the discounts and the rebates, but also on an ongoing basis. So so there’s that whole transparency benefit.
Governance is is something we’ve also touched on, but you you get a real benefit in terms of governance as well. So first of all, you know, you’re not you’re not relying on key individuals like, like Marcus touched on, you know, the guy in the dark room with a very complicated spreadsheet. He goes away and it’s all kind of captured in in the platform. Mhmm. And the platform allows you to impose these frameworks that we started to talk about as well so that you, you, you create a framework. That means that we bake programs use common data, use, you know, you can select from a menu of attainment criteria.
You can select from a menu of incentive structures, and it still gives you, the sales team, the the freedom to be fairly creative but within a structured framework, which means you can then drive the efficiency of automating your accruals, of of calculating your settlements and and and paying your settlements Mhmm. You know, and creating a price waterfall with with the applicable, waterfall elements of, you know, what is my forecasted rebate?
What is my actual rebate on a on an ongoing basis? That that’s kind of the benefit you get from from udevive platform and, and then, of course, to reduce errors Mhmm. And having everything in one place, which ultimately you can potentially share with your end customers as well.
And then finally, having the when you’ve got it all in one place, you can optimize at the combined level of both rebates and discounts.
So you can start to use AI in a far better and more efficient way than than you could otherwise, I think.
And if we don’t take it, into the technical execution, Marcus here, any best practices for the actual implementation, rebate implementation?
Maybe before quick quickly add to to Nick, that this topic of the net net transparency. Yeah?
Oh, yeah.
So you fully have transparent your your your net net margin. You you see the net net price. You have full transparency on a net net margin. This is some some some something that is so powerful. Yeah.
So you can much, much better manage and and steer pricing in in general. Yeah. So, this is, like, definitely one of the big, the the the big outtakes, big advantages of of having, like, one platform. In terms of the technical, execution, I mean, when we look about when we think about what triggers actually such a technical execution, it’s as I said, the key person is retiring.
There’s compliance or or legal issues that make a better rebate management necessary. And last but not least, it’s s four. Yeah? Moving into s four.
Mhmm.
And, and the my biggest advice in terms of technical execution is once you you you you start or you need to reinvestigate your rebate topics, Don’t just take what you have and replicate or digitize, but rather really reinvestigate from business and IT and also finance perspective your entire, rebate I don’t wanna say disaster, but your entire rebate schemes, and, do not and this is like a big big error.
I’ve seen with many many firms is that they they need to act often quite quite fast. As as I said, someone is retiring and they need to go to school, whatever. And and they they jump and quickly quickly want to just digitize and quickly want to bring what they already have into, like, a different system.
But, this is a bit garbage in, garbage out. Yeah. So but rather really take the time, investigate your regrade schemes. Yeah. Make it easier, simpler.
Also, see what you can leave away, maybe other components you need to add, and and then digitize or bring it into a platform instead of just rushing too fast. Yeah.
That brings me to my next question because we heard it from Nick. I think I opened up saying this. So, you know, the the words word on everyone’s lips right now, AI.
But, of course, since we’re talking about something that comes from then a unified platform, centralized data input put and can probably quite easily be automated, towards the customer and the internal teams, to be honest as well. I mean, what is the the actual impact of AI and advanced analytics in this field, and how do you think this will transform, rebate negotiations going forward, Nick? What’s your take on this?
Yeah. Well, obviously, at least you’d probably expect pros to have a big AI angle on even on the topic of rebates. Yeah. And, so there’s there’s there’s two things that we really are aiming for with our with our rebate capabilities.
One is to is to make sure that we, that we have this ability to implement a governance framework around around rebates. So having, like, a rebate model versus a rebate program, to to to to to allow pricing teams to to allow, you know, companies strategy to strategically to think about what type of models, what what type of rebates am I going to allow and then have the freedom of executing within that framework. Yeah. And then the key the second key thing that we’re focusing on is, well, how can we use how can we use AI to truly optimize, rebates?
And the first thing, that we want to do, because this is this has kind of historically been a bit of a problem with using AI in negotiated prices in the past, is if if you think about AI, it uses uses training data. So it uses, you know, maybe past invoice transactions that that looks at the result of negotiations that have happened in the past. That tends to be a discount negotiation, typically. This resulted in an in a margin, and you’re using that margin for the AI as a proxy to drive willingness to pay.
Mhmm.
But if you’re in a in a situation where there’s lots of customer specific rebates as well, and we’ve already touched on the fact that the companies that you’re selling to can have different objectives themselves and want to use those rebates in different ways, it would mean it means that potentially you’ve got very similar customers.
Mhmm.
Some have got very small rebates. Some have got very large rebates.
And that obviously means that they have a different expectation of the amount of discount that they want to, negotiate on the invoice. So it’s very important to consider that from an AI perspective as well. Mhmm. So approach, we want to optimize the the the total incentive, first of all. So we we use AI to to determine what should the total incentive be for this type of, customer.
Okay.
And then secondly, use AI to then suggest and recommend how that total incentive should be split between discounts and and rebates.
Mhmm.
And then even use AI to then propose what rebate tiers and the what amounts there should be on those tiers, you know, based on your your company objectives. Something that I I mentioned earlier is is something that sales teams can really struggle with today to to get that kind of rebate tier structuring correct.
And if we can achieve that, then we also have the ability to automate our rebate approval slightly we do with our negotiated AI. So so, yes, lots of interesting things that we’re working on. And then also, you know, this topic of AI agents is is very much in in kind of a news and is a hot topic at the moment this year. So you won’t be surprised to learn that that pros are also you know, we’re introducing AI agents to help with rebates. And to really help, a salesperson well, just just ask questions like, well, what percentage of rebate? What or what percentage of volume will this rebate impact?
And be, you know, have the AI agent provide that answer and, you know, help them creatively through the process of, of creating rebates. So lots of exciting things, I think, coming from an AI perspective this year for for rebates.
If I if I may add, what particularly, finance will will be most interested in is like the forecast Yeah.
So if you can really forecast how much rebates so if you know already in January or now in March how much, rebate to be, will be spent or rebates will be spent by December, yeah, based on, the first, month of performance, in in in in this year. This is this is very powerful. Yeah? And, it gives and and and could help to make finance, become friends with rebates maybe. Yeah? Yeah.
Yeah. And that’s already there. That that ability to predict the the you know, to forecast, and from those forecasts to to generate the accruals, that’s that’s already there.
And Yeah.
And I think you’re onto something there also, Marcus, because if you can showcase in what you said, you know, Nick, before that if we can get, you know, incentivized for changing the behaviors, we actually new behavior means often then spend more money or the same customers are spending more money with us. I mean, in the end of the day, finance are often most interested in, you know, making sure the numbers are in the green and that the revenue is steadily increasing and etcetera. So if they can take, you know, as we discussed earlier, reduce risk and actually add a predictability to to to their year, I think they will be pretty satisfied with that.
At least I know that, you know, I have a finance background, so I know I would be if I was in in that finance team, you know? What I don’t like is surprises, you know? Yeah. That’s my least favorite thing.
You know, don’t don’t mess with my spreadsheets, you know?
Joking aside, but it is a little bit like that. And I mean, obviously we can see that this helps, then getting a more clear picture. But then if we go in sorry, Nick. Yeah.
Oh, yeah. I was just gonna add, Lisa. Yeah. And I think if you, you know, when you can actually forecast how, you know, how the rebates are playing out, you can proactively nurture your customers to, again, you know, change their behavior, during the course of the rebate agreement to bring them back on track as well. So, yeah, forecasting is very, very important.
Very important.
And then if we go into these sort of practical tips and tricks here, because we obviously started off saying how the actual, you know, state of the rebate management is for many already, you know, we know it’s, is what it is. But where do we transform for here to get this more cohesive picture of, you know, rebates and how we can actually use it? And I mean, one one major thing we have to do is collect or at least get some kind of consolidated data into place.
But, Marcus, I guess you’ve done this transformation, for some of your, you know, clients and customers. What would you say, is the where to start, basically?
Basically, where to start, is to investigate what rebates are available across the entire organization.
Again, sounds easy.
I told you that some are in spreadsheets, some are in Outlooks. Yeah. Some are even in hard copy files.
Not so much anymore. But, nevertheless so you need to collate all this and and and bring together in the first place. Yeah. And, what we then do is we we rework the types of rebates.
Yeah. What is there? Does it make sense? Shall we add additional components?
Does this align with your overall business and pricing strategy at all? Yeah. And, what we then put together is kind of a toolbox, yeah, for specific strategies, for instance, for specific, verticals, for specific product segments. And, and we then validate this, with the with the relevant markets, to get to some degree of of harmonization.
Yeah. It is important to give the local businesses some freedom, but also not too much of a freedom so that you have some harmonization, some standardization.
And then ideally bring it into a common platform, bring it into a single source of truth, that you can ongoingly, sustainably, manage your your rebate schemes. Yeah. And ideally, then connecting it, as as Nick has said, back to the discounts, back to the the rest of your price management.
Do not, manage it in in isolation or disjunct from from all your other, pricing, components. Yeah.
And now you’re talking about the best practice, but you’ve probably done this. I always ask the same question then. What are the pitfalls that should one avoid?
One big one of the biggest pitfalls is, that and I mentioned this, that you replicate existing logics. Yeah? Existing logic is always easier because that’s that is what is known in an organization. Yeah?
But the worst case is to bring existing logic into new system.
But we use the opportunity once you work on it, to fix it from the business, from the data, and from the technical side. Yeah? Another pitfall is that in the stretch between standardization and localization, you kind of, get lost, and you end up in the wild west again. Yeah.
Yeah. Obviously, no one, wants. And last but not least, in such, in such a project, it is really important, that, pricing sits on the table, that, sales teams and, the representatives from the local market sit on the table as well as finance sits on the table. These are really and last but not least, IT, not to forget IT.
How could we?
These are the important stakeholders.
Sales and finance and IT, they need to really by a aligned rebate concept, that that really also flies operationally. Yeah.
I think we’ve touched upon, the final discussion point a few times, but I would really like to hear from Nick also because it seems like we’ve discussed now that the, the rebate management actually, enables you to also manage your customers more professional, in a more professional way. What would you say are the sort of biggest, benefits that an organization actually gets in terms of, you know, customer loyalty, customer interaction, and those buzzwords that we’re all still aiming for today. And it’s probably one of a necessity in this kind of really competitive market is that we stay close to our customers. Right? So how does that the the rebate management and and achieve transparency in it, how does that help in providing that for your customers?
Yeah. Well, it helps make you a better partner. Right?
So being if you can if you can introduce, a, like, a rebate portal, a collaboration portal Mhmm.
Where, you know, once you’ve even even during the course of defining a rebate program, you can share that with your customer. They can see, they can interact with that. And then once it’s been agreed, they’ve got a they’ve got they they’ve got a clear understanding, clear record, common record of what’s been agreed, then that’s that’s got benefits. That’s mutually beneficial for both, you know, the Mhmm. The manufacturer and and and their customer.
And then sharing the forecasts with with your customers as well means that that gives them, like, as we’ve touched on already, the, the best chance to trigger those thresholds and to get the maximum benefit from the rebate programs that you’ve you’ve agreed. Mhmm. You know, and even give them a kind of, like, slight no judgment guide on how to how to trigger those those thresholds, what they additionally need to do, how much on track they are, what what what how much additional they will need to buy. If you can do that in kind of real time, that gives them the best opportunity to to trigger these rebates. And that, you know, puts you that that that sets you up as a good partner and kind of drives loyalty from from your customer’s perspective, I think.
Yeah. And it’s a great point. And I always think also around, you know, the complexity of being a salesperson today. You know?
We know the customers are under pressure. They also try to keep their money, you know, close to their hearts as well as all of us. And then, you know, salespeople often with a good relationship, established one, they don’t wanna sort of push product on their customers. There could be a little bit of a, you know, reluctance there.
But if you have a, let’s say, a reason to contact the customer and say, okay, this would be a benefit for you, even though they would have to buy more, but it’s also benefit at the other end, it gives them a totally different, you know, you know, as you were emphasizing, a partnership reason to give them a call where it look you know, where we’re actually looking after the customer and their interest rather than trying to just push more product or services or whatever it is. You know? So it also changes the dynamic of the relation. Right?
And it’s yeah. You have far more constructive conversations where, because at the moment, a lot of companies have conversations around what you’ve calculated it wrong. There’s an error. Yeah. Negative conversations, which, you know, so you, you, you, you switch that around and have really constructive, mutually beneficial, conversations instead.
Yeah. I can you can always see how this works almost like a bonus program in the consumer world or, you know, where it’s like, if you earn a certain amount of points, you know, your provider will tell you, you know, they are about to go lost or you can spend them here or this is open to you. And you never feel like you’re being, you know, overly pushed to do anything. They’re just informing you that you’ve reached the new Yeah.
You know, tier. So it is a nice interesting, you know, perspective to to bear that in mind in terms of commercial performance as well. But, you know and don’t we all wanna have reasons to be tighter with our customers, today? I mean, that that’s one of the things we we really see, at least at Copperberg in research, that we need that kind of we need to tie the customer even closer to us, you know, and get them to value that partnership.
And this is obviously a reason, or a way of doing it.
I think we’re almost coming to an end, but, of course, some questions here. Let me see what we have. Of course, there’s a question around AI here.
Isn’t there isn’t there always? But I think, this question actually symbolizes some of the the the questions I always get in these settings is do you see any imminent risks in applying AI to rebate management? Is there a risk of miscalculation?
You know, I think you touched upon it, Nick, that, you know, there can be if you take, for example, discounting into the the algorithm, it could be, you know, a little bit off maybe. So so how is AI actually then? How do we, risk manage AI in this scenario, to make sure that we don’t accidentally eat up margin? We don’t wanna eat up.
Well, I think the risks of applying AI to rebates are the same as applying AI to anything really. And that is making sure you know, AI is all about the training data.
And you need to make sure that the training data you’re using the right training data with, with the right context.
You know, I I mentioned the fact that I’ve seen AI being used for negotiated prices in the past and not considering the impact of rebates Mhmm.
When the re when the impact of the rebates means that, actually, similar customers are willing to have different levels of discounts.
So, so it’s very important that in capturing the training data, you know, the, the correct training data is captured to achieve what you want to achieve. I think that’s, that’s the biggest risk with AI generally. So you need to make sure that you you are you’re training it in the right way so you don’t introduce noise that then would result in the, the wrong answers.
And that brings me, to to another question here, which is a little bit around building your, your master data management around this. Right? So so, Marcus, you you said, okay. It’s one guy, one office outlook.
It could be, you know how do we actually the audience now listening, they’re like, yeah. It sounds great. We have a unified platform, but how on earth do I get, you know, Ginter over there and George over there? You know?
And how how ambitious should one be when they start and take off? Do you have any sort of step by step step, like, what is the minimum viable sort of product or items that needs to go in for this to actually work in a more consolidated way?
I mean, we typically, start start small. We think big, but start small. Yeah. So I’ll start with a pilot, in terms of, one product vertical or one market, to bring things live. Don’t do it all over, globally, all products, all customers, but, really start small. Once this is stable, you then can scale across other markets.
Mhmm. Start small. Think big. Start small. I I thank you for that.
I have another question here as well, which is I think Nick touched upon it.
Do you think that we need to change our incentive structures for salespeople given that we are working with rebate management instead of, sort of discounting?
Well, we need to make sure that our incentive structures reflect what we want to achieve with our corporate objectives. So I I guess it really depends on what the incentive structures are at the moment. But, yeah, we definitely need to take rebates into account when designing those incentive structures for sure.
Because I think that sorry, Marcus. Go ahead. Yeah.
Yeah.
Fully agree with what Nick said. Always look at the net net margin. You know? Once you take into account the net net margin, and then you might continue working with your current incentive scheme for your Salesforce.
Definitely net net transparency, as we’ve discussed, is really important.
Good. Thank you. I think that was actually all we had in terms of questions as well. Any final thoughts or, you know, ideas that you now have that you wanna leave leave the audience with before we we, thank them for their time today?
Marcus, maybe you wanna start?
I think the the rebate rebate management is one of the most overlooked topics in in in pricing, and, it definitely deserves a reinvestigation, particularly now since there’s, much more tools and and and software available.
Mhmm. Nick, your thoughts on this?
I I and I would just reiterate that, make sure that it’s, you know, it’s it’s it’s incorporated into the wider pricing strategy, and you’re using them to to drive different behaviors, basically. Behaviors that wouldn’t have been achieved otherwise.
Yeah. And, I mean, it is obviously you know, p is all the four p’s that Kotler came up with right now and then he added a lot of p’s afterwards. But the four core ones, you know, pricing is definitely one of the the the major ones in in the fundamental four. And I believe that, pricing needs to be transparent and understandable on the customer side and rebates go into pricing.
You know, that’s it’s a part of the perceived price. It’s a part of the perceived, you know, package you get from your from your manufacturer or your supplier or whatever it is. So, if the customer don’t understand it, then then it’s really of little value, I would say as well, if they don’t really understand what they get. So that could also even dilute, the impact of the rebate, if it hasn’t fully been understood what they’re getting.
So it’s I mean, it’s obviously one of those, aspects that I see we would get more and more, especially when we, are looking at this volatile market situation. Right? And customers are asking for maybe lower prices or premiums in terms of if I buy more, do I get more? They’re trying to maybe limit the number of suppliers they have, etcetera.
Right? So so this is something that I think we will see an incremental trend, in in organizations trying to refine, to stay, you know, ahead of the game, I would say, and keep their customers tighter.
For anyone who wants to deep dive into rebate management and how that goes into to your pricing strategy, I will also make sure we have the download link to the white paper that we’ve done together with PROS. You can access it there directly, or just, reach out to us. It’s available on the Copperberg website and you will also get it in the follow-up email that follows post this webinar.
Other than that, I would like to thank you for your time. Nick and Marcus, thank you so much, and thank you for all of you listening in and watching us today. I hope you enjoyed it. And just, you know, reach out to Copperberg if you have any questions, and we will get back to you with the follow-up email after this. So thank you for joining us this morning.
Thank you. Thank