Incentives And Rebates Still Have A Role In Digital Transformation

Pamela Dunn

A rebate involves refunding a portion of an item’s sales price after a transaction is completed. An incentive is a special offer that makes a purchase more manageable or attractive to potential customers, such as lower financing interest rates or extended repayment terms. Sometimes sellers combine the two strategies, but more typically they require buyers to pick which program they want to use.

These strategies have been around for as long as people have had things to trade. In the 18th century, for example, merchants in what is now the United States gave customers copper tokens that they could use to make future purchases. Today, digital transformation is giving us a variety of new ways to attract customers, but some business leaders may be wondering if rebates and incentives are still relevant in the age of real-time data and predictive insights.

The short answer is a qualified “yes, but…,” according to Cara DeGraff, vice president of product management at Vistex, a global provider of software for managing master data, contracts, pricing, rebates, and incentive programs.

While rebate and incentive programs remain vital elements required for businesses to drive revenue and incent buying behavior, “you cannot continue to do the same types of programs,” explains DeGraff. “The expectations are different in the digital economy. Everything is changing.”

Data and analytics are crucial to program success

Part of that change is that customers can access an incredible amount of information and opinion through the Internet. This resource means they are often more informed than past customers and also more likely to have been influenced by peer reviews and conversations on social media.

Companies and their channel partners must be similarly informed and engaged to attract and retain these customers. This level of awareness requires not only granular data and real-time analytics, but also a decision-making culture that allows the sales and marketing functions to adjust and refine their rebate and incentive strategies in concert with relevant online and social media conversations.

“You have to be flexible,” says Gary Adams, consumer products industry principal at Vistex. “Regardless of what you have tried in the past and whether it worked or failed, you have to constantly look for smarter and more efficient and effective ways to use your incentives and rebates. To do that, you have to understand how customer behavior is changing.”

Quality data helps to ensure accurate predictions

Data and analytics are critical components of the digital transformation process. They allow businesses and channel partners to ask new questions, model possible outcomes for proposed programs, and track and assess how those predictions align against actual performance over time.

Of course, collecting useful data remains an ongoing challenge for busy decision-makers. But research suggests that customers will provide this information if they trust the recipient and are given something in return.

“It can be monetary or a product or gift,” says DeGraff. “But to collect data, you need to pay people for actions, not just for purchases.”

How businesses structure these exchanges is important. Experts such as John McDonnell, an industry value advisor for SAP, recommend avoiding overly complex offers. “Keep things simple to avoid confusion by customers about why they are doing business with you,” he says. “Every transaction should be as transparent as possible.”

Interested in learning more? Listen to the SAPRadio show: “Target Incentive and Rebate Programs: Driving Digital Transformation.” And check @SAPPartnerBuild on Twitter.