The Best Practices for B2B Promotions, Rebates & Discounts
Even though in both B2B and B2C you sell a product to a specific person, B2B marketing is very different from B2C. This article will give you an overview of the best practices for running sales promotions in the B2B context, alongside examples and tips on how to use incentive marketing to attract and convert business leads into long-term partners.
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How are B2B promotions different from B2C?
The key difference between B2B and B2C marketing is the target audience. In general, B2B marketing techniques are based on the same principles as B2C marketing, but they are implemented in different ways. Individual customers choose products and services based not only on the price but also on popularity, whims, and other emotional reasons. In contrast, B2B buyers make decisions primarily based on price, ROI, expertise, and other potential business benefits. This is why flashy and urgency-based sales promotions do not work well in the B2B context.
In addition, the B2B sales process is longer, because it takes more time to turn a lead into a paying customer. This is because plenty of people and departments tend to be involved in the B2B buying process. Therefore, your B2B promotion strategy should be optimized for nurturing long-term loyalty rather than reaping quick rewards. Loyalty and upselling should be the main pillars of your B2B rebate strategy. But preferential payment terms, volume deals, and other vendor rebates or incentives are only the tip of the iceberg.
Are you sure that your B2B promotional strategy brings you the ROI you want? Are you able to track and manage all the incentives you offer? Can you tell which discounts bring you the most value? Read on to learn more.
Types of B2B discounts and rebates
Plenty of B2B businesses fail to use discounts strategically achieving the opposite effect – instead of generating value, discounts destroy it and lower your brand perception in the process. When analyzing B2B discounts, it is possible to differentiate several categories:
- Fixed discounts – the same type and level of discounts are offered to all buyers, with no differentiation between client segments, order volumes, or contract type and length. For example, every customer who purchases more than X products, gets a -10% discount.
- Flexible discounts – in this category, B2B sellers differentiate discounts based on various customer and order characteristics but fail to deliver discounts based on the predicted CLV and reward value-creating behaviors.
- Value discounts – companies who do their discounting strategically, use this approach. By offering value discounts, sellers are able to connect the value that a given client's behavior generates with a relevant incentive.
You probably can tell that value discounts are the ones your business should always go for. However, it may be difficult to get started and find out what are the value-creating behaviors in your business context. I have gathered some examples of client behaviors that should be incentivized and rewarded with relevant discounts:
- Switching to a standing order which guarantees a longer partnership.
- Offering a referral or other form of reference to aid in your lead nurturing phase.
- Purchasing higher-margin products.
- Collecting and sharing customer data that can help you refine your offer.
How to generate value from B2B promotions?
Any $1 invested in a discount has an impact that can be quantified, in volume, product mix (the one that the dealer purchases from you), or retention benefit. This can and should be quantified in a way that helps to compare rebate effectiveness.
If you simply lower your prices to become more attractive, the following scenarios could happen:
- All your other customers will expect the same (lower price) and/or,
- your competitors will react by lowering their prices thus creating a price war.
Either option impacts profit margins and your relationship with customers.
The solution to the difficult pricing game is keeping your prices stable and differentiating the price by offering promotions and discounts to selected customers only. The best practice here is that the offered discount should deliver the desired price, volume, and product (or product line – portfolio-level) mix and that the complexities of the offer do not outweigh its commercial benefits.
B2B discounts can and should be refined to foster specific customer behaviors such as growth, retention, product mix improvement, or purchases of bundled offers. Like other forms of discounts employed to modify behavior, B2B promotions allow sellers to communicate to customers how and why the customer receives the lowest price.
How to build a smart B2B rebate strategy?
Before implementing your promotional strategy, your organization should answer the following questions:
- What value-building behavior are you trying to incentivize and reward?
- What discount type and value to offer per desired behavior?
Once you have your strategic goals set, you should move on to more operational questions:
- How to personalize those offers (so that you are sure the customer who receives the offer is actually worth the spent)?
- How to track the use (redemptions) and ROI of those offers?
- How to make discount management quick and easy?
Why B2B companies get volume discounts wrong?
One example of how inefficient B2B discounts can be is giving volume discounts to all customers. If you offer the same discount to all customers on a volume deal basis then:
- You might be increasing your production costs (you need a big capacity but only from time to time).
- You might be losing money by offering a discount that does not bring you more sales but just shifts the orders from regular, small batches to punctual, big orders.
The main pitfall here is the lack of offer personalization, no long-term strategic goals, and no tracking of the discount's impact on customer behavior. Volume discounts are one of the worst B2B moves you can make – most sellers feel obliged to offer a big discount if a customer makes a big order, but forget about two key aspects. The main purpose of volume discount is to incentivize the client to purchase more than they intended, so offering it post-purchase when the client already decided that a big order is what they need will only cost you money. Another thing is that big orders usually come from clients who rely on your products, so discounting them doesn’t make much sense as they were going to make that order anyway.
The best approach to avoid this (and other) pitfalls is setting the KPIs for your promotional strategy, personalizing your offer both on the customer level (customer segments, customer behavior) and on the product level, and tracking what works and what doesn’t.
I am well aware that it all sounds great but is difficult to implement. Discounts, especially if personalized, increase the complexity of the pricing processes, adding administrative costs and complexities. But I have a solution to this.
How to use Voucherify to build a sound B2B discounting and rebate strategy?
Voucherify Promotion Engine helps B2B clients automate and track the entire incentive management lifecycle. By using Voucherify, companies can quickly implement plenty of different kinds of incentives and rebates and personalize them for each of their customers, often on a 1:1 basis.
Voucherify rebate management system helps sales and marketing teams create incentive programs (without the need to involve IT) as well as track the redemptions and incentive payouts, protecting you from fraud and giving you a clear view of the effectiveness of your incentive program with your overall sales and margin performance. Here is the overview of how Voucherify can support you through the whole B2B rebatelifecycle:
1. Creating campaigns
Voucherify lets you target a vast range of promotional offers at selected segments or individual vendors. For enhanced security, you can place additional restrictions on top of discounts.
When you correctly accrue, validate, and pay claims using a single solution, you prevent incorrect payouts that negatively impact your margins and customer relationships. As a result, you will be a step closer to meeting your growth objectives and margin targets.
2. Tracking & ROI calculation
Many companies do not have a system of record for discount information. In the worst-case scenario, the discount information is kept in a spreadsheet by one person. Rebate accruals are managed in yet another system. This kind of hellish setup makes it very difficult to consolidate and track discount data on a regular basis. Voucherify provides the finance department with greater certainty, keeping information accurate and up-to-date in on system.
Ideas and examples for B2B sales promotions
I have compiled a couple of ideas for value-based discounts and incentives you can implement for your B2B clients to drive the desired client behavior and improve your margins.
1. Product launch discounts
For example, a supplier might offer an extra 1% discount across an entire product range in exchange for spending X amount on the new product or purchasing Y pieces of the new product. It can be targeted at customers who have never purchased the product before or at customers who tend to place repeat orders.
2. Stock clearance
As older products are phased out, suppliers might plan to sell as much of the remaining stock as possible before the new collection arrives. This goal is sometimes achieved through extra volume discounts on the older product lines.
3. Product mix incentives
To encourage customers to buy a wider range of products, suppliers may provide a discount based on the total amount spent over a certain time period. This type of B2B incentive can be used to deter customers from turning to competitors.
4. Conditional discounts
This type of B2B promotion can be very versatile. For example, you may offer a discount on the whole product range provided that the customer has made purchases amounting to X within Y months. Or you can offer a rebate on a select product range based on the purchase of another, so if a customer purchases product X, he/she will get a discount on product Y.
5. Referral programs
Yes, as a B2B business you can also launch referral programs, especially if you are selling the product directly, and not through dealers. For most B2B businesses, a referral program can be a cheap way to gain more customers and build brand awareness.
6. Loyalty programs
In the B2C context, collecting points for each purchase is nothing new. But customer loyalty can also be nurtured in B2B sales. B2B customers are looking for a chance for a long-term cooperation based on trust and support. They spend a lot of money, for which they expect appropriate gratification. These could include occasional discounts and other benefits. B2B loyalty programs are all about the same thing: positively strengthening your company's relationship with the client.
Those were some of the most popular B2B sales strategies I have summarized for you. There are plenty of possibilities out there and with the Voucherify promotion management system you can set up all the validation rules by yourself either for specific customer segments or on a 1:1 basis, following your contractual agreements with your clients. Even better if you can combine a robust rebate system with a cloud-native digital commerce platform such as Emporix.
This way, the full lifecycle of your B2B discounts and incentives can be managed in one platform, quickly and easily. And automated reports will support your financial and sales teams in defining the best promotional strategy for your B2B business.
Start running personalized promotions for your B2B clients