Worksheet: Make your biggest rebate pay for behaviour

Most rebates reward what a customer did last year, whatever it was. This sheet lists every rebate and term, rates what each one buys, and rebuilds the biggest so it pays only for behaviour you can measure. It builds the Competent step of the check:

Major rebates pay for behaviour we want more of (growth, mix, order size, compliance), not for size alone.

Step 1. List every rebate and term

Scheme	Paid to	Dollars last year	What it pays for today	Why it started	Paid whatever the customer does?
e.g. Annual volume rebate, 3%	Top 15 accounts	$1.8m	Total purchases	Matched a competitor offer years ago	Yes

Step 2. Rate what each behaviour gets today

Behaviour we want	What happens now	Rating (good, medium, poor)	Action
Larger orders and drops	e.g. A minimum order charge exists but is low and rarely applied
Payment on time
Long lead times, few rush orders
A growing share of their spend with us
Buying the lines we want to grow

Step 3. Rebuild the biggest one at the next renegotiation

Element	Now	New
Condition
Measure and data source
Threshold
Checked by, before payment
Renegotiation date

Step 4. Retire one dead term

Term	Why it is dead	Customers affected	Retired at	Owner

Done when: the biggest rebate pays for measured behaviour you want more of, not for the customer's size, and one dead term is retired.

Adapted from our own pricing process (PSP, 2004).