Episode 36 Aug 05, 2021

Why Intelligent Rebate Management is a Game-Changer

Rebates – every B2B company offers them or other off-invoice credits in some form or fashion. This is because they are a great way to incentivize customer behavior and drive loyalty in your brand. But they also tend to create massive headaches for accounting, sales, pricing and product management teams due to a status quo of manual rebate management.

Today, Zilliant Director of Product Management Brian Hirt joins the show to walk through the challenges and opportunities inherent in rebate management for each of these B2B personas. Brian and host Barrett Thompson share observations and points of view from their extensive work with distributors and manufacturers, before discussing better ways to approach rebate creation and automation.

Brian Hirt

Brian Hirt

Simply the ability for sales reps to have visibility to what programs are out there and which ones their customers are actually enrolled in, that alone is a gap in many cases. If a rebate’s out there and a customer doesn't know about it, it does no good, right? The customer needs to be incentivized to change their behavior based on that, (or) you're just giving away free money.  
- Brian Hirt, Zilliant

Episode Transcript

Brian Hirt: Simply the ability for sales reps to have visibility to what programs are out there and which ones their customers are actually enrolled in. I think that alone is a gap in many cases, maybe they saw an email come across. It says there's a program but that's not top of mind for you when you're having the conversation with the customer.

You're unable to drive that incentive, right? If a rebate’s out there and a customer doesn't know about it, it does no good. Right? The customer needs to be incentivized to change their behavior based on that, then you're just giving away free money.

Barrett Thompson: Hello everyone. My name is Barrett Thompson. I'm the General Manager of Commercial Excellence at Zilliant. And I'll be your host for the podcast today. I'm joined by Brian Hirt Zilliant’s Director of Product Management. Brian welcome back to B2B Reimagined.

Brian Hirt: Thanks, Barrett. Glad to be here.

Barrett Thompson: Brian, would you share a little bit about your background for those who haven't met you?

Brian Hirt: So I work in Zilliant’s product management department, so I have the opportunity to oversee development and growth of our sales growth solutions. So that includes Sales IQ, Campaign Manager, and our rebate management solution. Prior to my time in product management, I worked as an engagement manager for about seven years.

So I got to work with many of our customers and lead a lot of those implementations to get exposed to a lot of the different businesses we work with. And then even prior to that, I started at an electrical distributor and had a good chance to see at the ground level, somewhat how rebates and [00:02:00] pricing are managed and still able to leverage some of that.

Barrett Thompson: It's great. You have a broad perspective. You've seen this from both sides of the fence, so that's really valuable. And thank you for coming to share with us today. When I talked to customers in the marketplace and hear about what they're doing in pricing and the topic of rebates comes up. Brian, what I hear is it's both wonderful and problematic at the same time.

I wonder if you can help unpack that a little bit for us. Maybe let's begin by talking about the types of companies or the typical situations where rebates and other off invoice programs are used as a part of the pricing mix.

Brian Hirt: Yeah. Great question Barrett. So really I've found that across the B2B customer base, that I've had a chance to interact with rebates exist in some form or fashion across the board.

They may not call it a rebate, but I found that essentially every company in some form will do some off invoice crediting the customer. Based on some targets achieved or our overall incentive. So to me, they're ubiquitous. I definitely [00:03:00] have seen the challenges that customers have in managing them almost in every case.

I see it, it's also kind of a manually managed program where someone in accounting has to pull the data and calculate a spreadsheet and run it past people say, “oh yeah, I agree to that rebate.” And obviously it serves a purpose. Sales is able to use it as a nice tool to incentivize behavior and try to drive loyalty.

But I think that the people who are managing them might see them as a necessary evil in the sense that yeah, we need to have these customers expecting to get rebates, but oh man it’s headache, is the general sentiment.

Barrett Thompson: And I've picked up on that word incentive because I empathize with all B2B pricing teams and sellers that I've spoken to have been through the disappointment of, “I offered a customer, a special price because of a volume commitment or a purchase behavior that the customer said they would offer an exchange and then they didn't meet that in the future.” And so I hear them talk about these [00:04:00] more backend programs and off invoice programs as a way to get the performance for. And then the price benefit later, instead of offering the price benefit first, taking the risk of offering that price benefit first. So yeah, I think they have a place. I think they're here, but to your point, it seems like state-of-the-art is unfortunately manual and maybe error prone. So let's talk about some of those pitfalls that you see in managing those rebates.

What happens that someone would like to change today?

Brian Hirt: I think number one pain point I see is simply managing and tracking. I see cases where accounting isn't even aware of the rebate agreement that was made. Right? So it might be something that was done informally or over email between a sales rep and a customer.

And then on mid January, right when accounting is trying to close the books the sales rep jumps up and down and says, “oh, well, we owe my customer a rebate.” And simply just [00:05:00] awareness across the board, I think is one challenge. So that creates a pain. Obviously for accounting, but also for the sales rep, sort of we've been responsible for trying to make sure that gets paid out.

So I think management of it is huge. I think there's not a lot of science I think that's applied when those are set up. It's sort of, hey, to your point, it serves a purpose. And incentivize a behavior. And we're trying to secure that behavior in exchange for a price concession essentially, but how much is too much, right?

Or how much is enough to get that? Then I think there's not a lot of analysis often goes into that. And so you can obviously end up with rebates that pay out far too much, or don't pay out because the customer doesn't meet the goals and it's sort of useless. So I'd say those are the top two I see is the tracking and setting them up correctly, right.

Barrett Thompson: Having sort of optimal settings and threshold, that makes so much sense. And I'm pleased to see many B2B businesses are very intentionally focused about getting [00:06:00] sharper and more accurate on their on invoice prices. And I hear what you're saying. But the off invoice could be still a bit the wild west, and maybe there's an opportunity to bring some of these analytics and thoughtfulness, data science, intentionality, et cetera, to that off invoice process. That makes great sense to me then, Brian. Different people as you've talked about rebates here, you've talked about the program definition. You've talked about accounting. You've talked about the sales rep - sounds like this is a multi-party activity, the creation, application, management, accrual, and payment of rebates would you just outline for us who are the main parties involved?

Maybe we could spend some time exploring rebates from the perspective of each of those parties.

Brian Hirt: Yeah. When I think about this question, Barrett, I think there's maybe two models that I see. So one might be for simplicity. It might be with a distributor where they don't lead with rebates necessarily. It's not a core part of their incentive or [00:07:00] pricing model, but they're out there.

And, distributors tend to be sales led businesses. And so I think in a lot of those cases, sales is basically dictating, defining the rebates and then they're just handing those to accounting, right. Hopefully before the end of the day, they're just saying, “Okay, here's the rebate we've agreed to with this customer.”

Besides the VP of sales signing off on it, there may not have been a lot of controls around what was done there. And then it's sort of given to accounting to manage and pay out. So that has its own challenges. But I think a lot, in that sense, accounting, I think is lacking the tool and the visibility to help manage the programs and sales.

Maybe doesn't have a good way to sort of consistently convey the information that they’re craving. The other model I see for simplicity might be with a manufacturer where rebates are perhaps a much more common part of their pricing model, where there may be dealing with large distributors who take large volume. They have maybe fewer customers.

And rebates are sort of a key part of [00:08:00] driving the incentive volume that they try to get for manufacturer needs to keep their lines running to everything. And so I think in those cases, there's more likely a rebate manager. It's more of a sanctioned activity with, someone who's responsible for it.

There's still going to be sort of the wrangling of sales and accounting around that process. But I think in those cases, there's likely an established process. Albeit still a manual one, a challenging one, and simply being able to manage the accruals, you can imagine as a complex process, you're going to have different rebates with different targets and different, customer specific baseline metrics.

You're trying to achieve all sorts of things that really make it difficult to actually accrue what was given out in that case. I think often you have lots of different rebate programs, high complexity. So I think in that case, there is a process, but it's challenging to sort of execute on would be my observation.

Barrett Thompson: And some instances, as you're saying it, they may be sort of tactical and it's more of a, tell me model. Sales is going to do it, tell someone else. And then in [00:09:00] other cases it's more strategic and those programs are thoughtfully defined, managed, and they have a specific macro objective that the whole program's trying to achieve for the business, which has maybe the sum of whatever it achieves for each of the customers to whom you apply the rebate.

So let's use that latter example, the strategic case. Let's explore that a moment. If I am a manager or an operations person who is responsible for a rebate program, what are some of the ways that rebate management software could make my life easier?

Brian Hirt: Sure. What comes to mind for me is actually a specific example.

I got talking with a customer of ours about their use of rebates. And the example he gave was we liked to run rebates to promote a particular product, but we want to promote incremental growth. So they want to incentivize customers to grow their sales in that product line. But he expressed that they simply didn't have a mechanism to track it at that level.

So they could say, “Hey, we want to sell [00:10:00] more of this widget.” And then they would pay anyone who bought that widget based on their sales over a time period. But they didn't have a mechanism to say, well, well, this customer bought a hundred thousand widgets. Well, actually they bought a hundred thousand last year too, so that is 0% growth, they were still paying out the rebate on the hundred thousand widgets that they bought this year.

But they wanted a mechanism to say, well, Mr. Customer, you get incentivized when you grow 10% or more, right. It's you have to buy over 110,000 widgets in order to get the rebate. So it sort of sounds simple in concept, but you know, what I've observed is that even for someone with a rebate management process, they don't necessarily have a robust enough toolset to handle it.

There are more complex use cases that actually try to drive the behavior they want. And so they end up with paying out rebates on everyone who buys that widget. And just hoping that it drives a little bit of incremental growth, but not necessarily giving the customers who are already buying it, the additional nudge to get over the hump.

So that, that was just a very specific example that came to mind in that case.

Barrett Thompson: I can appreciate that one. They’re [00:11:00] sort of using a big hammer, right? Just total quantity purchased when, to your point, the more refined metric would be how much incremental quantity are you bringing me over what you would have brought me anyway.

It's conceptually not very distant from the first, but in execution requires you to see and know and track some other things. Doesn't it?

Brian Hirt: Yeah, exactly. Yeah. For each customer, you need to be able to pre-calculate how much did they buy in that last year? And so that's now 10% plus that's now the customer specific target.

So it's just an extra level of rigor here that goes into creating the rebate and tracking against it, that I think isn’t resident in sort of the general manual use case that we see.

Barrett Thompson: But in this rebate management software tools, that's a pretty straightforward activity.

Brian Hirt: Agreed. Yes. In a rebate management solution where we've got the transaction data already built in, doing those sort of calculations, very straightforward.

Where there's also, there's more to just be able to execute on that program, but the ability [00:12:00] to have projections about, “Hey, I'm creating this program where I want to incentivize additional 10% growth.” Well, if your customers grow 20%, how much does that cost you? I think it's key in a rebate management solution to be able to project that before you make the decision about signing up for this program.

Something that sounds good on paper or a sort of good at first glance, you might realize actually that's way more expensive than I want. So maybe I need to know if I achieved this goal of growth what’s that going to cost me? So having the ability to project that and simulate those programs before you commit to them, I think is a key part of our rebate management solution.

Barrett Thompson: That makes so much sense. And then you could adjust your thresholds or adjust the rates and so on, right. To kind of land the program within whatever budget, rebate budget had been given. Well, let's pivot over and talk about the sales rep. For example, we know that they're involved in almost every case, whether it's the strategic rebate or it's sort of the tactical, [00:13:00] tell me rebate, how can rebate management software make their lives easier?

I think

Brian Hirt: I think for the sales reps, the couple of challenges that I see are one understanding what are the rebate available to them? So I think specifically in that strategic use case, I mentioned where you have an established rebate management process. Those rebate managers are coming up with programs and say, “Customers are now eligible for this,” right?

And so maybe all customers are auto enrolled, maybe they're not. But I think it's simply the ability for sales reps to have visibility to what programs are out there and which ones their customers are actually enrolled in. I think that alone is a gap in many cases, maybe they saw an email come across.

It says there's a program. That's not top of mind for you when you're having the conversation with the customer. You're unable to drive that incentive, right? If a rebate’s out there and a customer doesn't know about it, it does no good. Right? The customer needs to be incentivized to change their behavior based on that, then you're just giving away free money without driving the additional value.

So I think [00:14:00] first and foremost is making sales aware of that so that they can then make that part of their conversations with the customer. So, awareness, I think is one. But then beyond just awareness of I have a program that's out there, how am I performing against that program? Or how are my customers performing against that program is critical.

Right? So if I have, back to the 10% growth example, so I've got a customer that's grown 8% in that category and we're in November. That's a great conversation I could have. I could say, “Hey, if you can get a little more volume or maybe buy a little more upfront, I can show you you're going to get this additional incentive based on that.”

And having the customers be aware of that so they can easily show that data to their customers and convey that to try to drive the incentive is so important because otherwise it's when you're having those conversations, if that's not front of mind, you're simply not able to drive the incentive.

You're relying on your customers to remember that. And understand how it's calculated and all of that.

Barrett Thompson: And they’re dealing with, I can appreciate it from the [00:15:00] customer's point of view, they're dealing with a number of suppliers and all of them have different rebate programs that the customer is participating in and the formulas are different and the thresholds are different.

And so, yeah, it's kind of a weak expectation to think that the customer is sort of situationally aware of when they're about to trigger a breakthrough amount of rebate dollars for themselves. Just seems to me and what I'm hearing. It's a win-win if we could tell the sellers of a manufacturer or distributor, “Hey, your customer’s close. They're going to thank you. They're going to welcome that phone call that says, yeah, just forward buy a little bit, or pick up a little bit more volume here, and you're going to unlock that 2% that we talked about, on your purchases or something. The worst that can happen is the customer says. “No, thank you.”

The best that can happen is they absolutely take an action, an order action, and it's virtuous for both parties. So, yeah, I love that. Its visibility seems simple on the surface. Really impactful if you don't have it today. And I think many don't [00:16:00] as you described Brian. Well, let's talk about the accounting team.

I know they will always be there to handle the backend finances. So how does the rebate management software improve their activity?

Brian Hirt: Yeah. So, as I mentioned before, the accrual process to me is actually, the linchpin in sort of a rebate management solution. And, honestly, as I looked at the market of rebate management solutions, a lot of them sort of stop at the first two, stop at management and sales.

Where it's like, okay, I've got a tool to create a rebate. And it just generates a document and then sales reps can see the document. The customer can see the document. The manager can see the document, but actually having access to the transactional data that you use to run the accrual. And that's aware of all the different nuances and parameters of that rebate document is really key. Because you can generate a cool looking PDF that says, oh, you get 10%. Or once you get 10% of these products, blah, blah, blah, you get this additional incentive. But actually having those [00:17:00] baked in, having data behind that document that allows you to see and accurately calculate against all the parameters that were configured.

When that is achieved, is a big undertaking. That's the part that it almost always seems manual where, accounting is then responsible for figuring out, well, you said it includes this widget. Did you also have this widget, very similar widget in mind? Do those sales count against this rebate?

Nuance things that may not have been taken into account when the document was created and create a lot of churn, a lot of back and forth, lost productivity, simply trying to figure out the right way to calculate it. I think that's a gap, right? Just simply not having the right toolset so that the rebate document itself is closely tied to how it's accrued and have those basically be one and the same.

It's an important part and that's really what accounting wants. Right? They don't want to have to figure out what you meant when you said this or which exact customers in this group are included. That should all be explicitly defined.

Barrett Thompson: Yeah, I can appreciate, they'd like [00:18:00] a clean definition, which product, which customer, which effective dates and someone tell me, does that quantity qualify in or out?

Yes or no? And then let's apply the arithmetic on top. And what I'm hearing you saying is the rebate management software can do those things for you. You don't have to leave it up to interpretation or guesswork or “Gee can I track the sales guy down on his mobile phone while he's on holiday to get the skinny on whether this really qualifies or not?”

Well, Brian, tell us a little bit about Zilliant’s rebate solution. We've recently released that and I’d like to give you a chance to overview that for us before we wrap up today.

Brian Hirt: So, the rebate management solution, we're releasing as part of our Price Manager product. And so it's something that comes with Price <anager and we've really focused on really those three personas that we just mentioned.

We're focused on the ability to easily create rebate programs from a top-down approach, define all the sort of nuanced parameters around what goes into that. Make those [00:19:00] readily visible to sales reps. Specifically, if you're using our Deal Manager product, which is a customer facing application. That's the opportunity to be able to make that information visible to the sellers, allow them to see and enroll in programs.

And then once they're enrolled be able to easily track their progress against different programs. This is what we've built in the Deal Manager. We've also added an extension. If you're using our Campaign Manager product, you can drive specific actions for sellers based on their performance against the rebates.

So one thing to sort of just allow sales reps to see how a customer is achieving, how they're progressing against a rebate. But with a campaign, you can create a, “Hey, we specifically want to go and create an action, a nudge for all the sellers when their customers are close to achieving a certain target.”

So we've added the ability to create a campaign. Essentially against the rebate progression.

Barrett Thompson: That makes it actionable. Doesn't it? Takes it just from the realm of reporting. And let me do a checkup on how close you are to, “Hey, I need to call somebody.”

Brian Hirt: So exactly. So we focused [00:20:00] on defining the programs and these are the specific products that are included. These are the specific customers that are included. These are the different conditions. These are the payouts that are defined because really with all of our customers, we always have transaction data. That's sort of core to, whether you’re using Price IQ or Sales IQ or Deal Manager. We always have that as part of our implementation.

And so we're easily able to do things like project, “Hey, when you run this rebate and you try to get this incentive and you're going after these customers, here's the expected payout, right? If these thresholds are met, this is what you can expect to pay.” Or backwards looking, “Hey, you had a rebate program last year. Here's what you ended up paying out. Here's the additional sales you were able to get. So just try and provide that level of visibility that you don't get without having that connection to the actual transaction data and to be able to show at a real granular level, how programs have done in the past, how they will perform in the future.

And then ultimately, the output is, “Hey, we run the accrual and here are all the rebates due, right?” So both sort of here they are in progress. And then [00:21:00] finalized here are the rebates due. We're not necessarily trying to be your accounting system, but that could be a source of truth for accounting to reference when they go and issue the credit to customers.

In a nutshell, those are sort of the core capabilities we're offering with our new solution.

Barrett Thompson: That’s very comprehensive Brian, and as you said, touches on all of those personas, lays the framework for a much smoother and more automated and centralized handling of the whole rebate process, end to end. Brian, this has been a great discussion today.

I want to thank you for sharing with us, your perspective on rebates and all that's possible when someone steps up to a modern software platform. Thank you again. And I want to thank each of our podcast listeners for being with us today as well. Please see the show notes for a link to our upcoming webinar on August 19th, “Streamlining Rebate Management, Across Pricing, Sales, and Finance.

Brian's going to explore this topic more deeply and you'll get a chance to see the solution in action. At Zilliant we're committed [00:22:00] to your success. So if you need any assistance, please reach out to us. This concludes our podcast. Please take a moment to rate and review the show as it helps us to continue to put out great free content. Until next time, have a great day.

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