Every year hundreds of millions of dollars have been invested / spent by manufacturers to solicit preference from distributors. In fact, about 10 years ago we estimated over $500M was spent in rebate funding. (Today we estimate over $1 billion!) All in an effort to retain business and, as manufacturers hope, to gain preference and generate growth.
This funding is in addition to other investments made by manufacturers such as co-op marketing, market / business development funds, training funds, staffing investments and other direct infrastructure / employee funding to curry favor.
And some consider SPAs as an additional source of investment to help earn the business (personally, a little questionable as this can also be considered a targeted pricing initiative when done properly. Improperly it can be taken advantage of.) The key here, and it has gotten better through technology, is timely claims and reimbursement.
Please recognize, I used to work for IMARK and I don’t begrudge distributors receiving, and asking for, rebate and other marketing funding. After all, manufacturers can say “no”.
Many manufacturers have approached us and are questioning the value of their investments. Reasons include:
- Broad-based investments into groups due to slowing growth differential vs national chains due to allowing increased competition into the groups.
- Less opportunities for conversions
- The challenge in getting rebate information, or preference, driven down within organizations.
- Distributors not knowing rebate differentials and hence asking for “double dip” programs
- The programs have devolved into “numbers games” and the marketing, training and operational process benefits and tools are rarely valued (but can be huge demand generation and profit enhancement generators.)
- And more.
And part of their concern is the lack of impact that they see these funds making as they are more \”retention\” oriented than growth driven as few distributors effectively communicate commitment to these lines throughout their organizations. The \”heavy lifting\” to gain conversions and adoption was done years ago, however, with a plethora of new suppliers, there is purchasing leakage to companies that are \”unknown\” by senior management.
With increased interest in this field, Channel Marketing Group has partnered with Benfield Consulting on a multi-industry “manufacturer funds” survey to gain better insight into earnings, process management and usage of the funds.
All input is confidential and the survey is soliciting input from plumbing, electrical, industrial supplies, contractor supplies, power transmission and other industries. Results will be shared with respondents and executive summary articles will be published in key industry publications.
And no financial data is being solicited, solely opinions about rebates, marketing funds and SPAs in general.
To share your thoughts, please take the survey. Distributors only. (and if you are a manufacturer and have an opinion on these programs, give me a call or drop me a line).
And distributors, if you’d like to share more, you can opt-in to a qualitative interview or give me a call.
The information will be used for an upcoming article in various trade publications and research findings will be shared with survey participants.
With industry growth and the growth in the number of manufacturers offering rebates as well as double dip programs, we estimate that today over $1.1 billion is spent by manufacturers on rebates and is invested into distributors. Add marketing funding and we may be approaching $1.3 billion. And then if you added SPAs …
So, is this a good investment? How could it be made \”better\” / more effective?
5 thoughts on “Over a Billion Dollars in Rebate and Marketing Funding to Distributors”
This is definitely a conversation our manufacturers are having in the background.
Distributors keep asking for more and the manufacturers have been saying yes. But the cost of business is starting to pinch.
Great article. What if we all just said no?
Great topic today and so timely.
Our CFO is from outside the industry and not too tied into electrical distribution. Bet you can guess what he thinks of rebates! Looking forward to seeing the distributor survey and understanding how these rebates can be more effective for both sides
Your article on rebates raises an interesting topic as larger manufactures, whose line are difficult to convert, ask the same questions.
The more “commoditized” the product offering, the easier it is to make the conversion at/with the distributor. And the more necessary a rebate program is.
With a highly differentiated/specification-oriented product offering, the more difficult it is to make a conversion. And less necessary to provide a rebate program to the distributor.