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​Why manufacturers offer rebates and not net pricing

In a corporate situation, there are pros and cons for both the buyer and the manufacturer to use the rebate system.

February 23, 2015 by John Krebs — President, Axis Purchasing

Some buyers prefer net pricing from a manufacturer and cannot understand that this may not always be possible.

To their credit, they are just trying to get the lowest possible invoice price and not deal with tracking incentives and rebates.

There are often solid reasons why manufacturers do not release their net-net pricing to "broadline" distribution channels, no matter who the buyer may be or how much they buy. Some manufacturers utilize either pricing and a rebate or just a rebate for two key reasons:

• Manufacturers do not want the market to know their bottom line price. Therefore, a manufacturer may offer no special pricing or discount their products to a certain price level and make the net deal better through rebates. This way the market does not have knowledge of their customer specific programs. 
• Manufacturers use the rebates from one party (the buyer) to audit price deviations from the distributor. They want to maintain control via this auditing function. When a rebate is filed based on sales data, there is an exact accounting of how much an account purchased compared to what a distributor sold. This insures special pricing is not provided to customers that are not allowed on a program.

In a corporate situation, there are pros and cons for both the buyer and the manufacturer to use the rebate system.  

The true "bottom line" is that buyers should get a better program with an understanding from the manufacturer's perspective. 

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