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MAPP Plastics Discussion Forum

The MAPP Plastic Industry Discussion Forum allows members to rapidly communicate with each other. Post both questions and answers to questions that other MAPP members have about any industry topic from material and process issues to R&E Tax Credits and other business issues.

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Posted:  23 Aug 2010 17:25
Recently we were asked by a client to set up and participate in a rebate program based upon annual sales volume. Has any custom molder in our group done anything like this and how was it structured?

Chuck Sholtis
Posted:  23 Aug 2010 17:41
Chuck,

It is something we do for two of our largest customers. It was done in return for first right of refusal for all their molding and tooling needs. I would be willing to share a copy of the agreement with you. You can email me @ tnicolay@montrosemolders.com

Thanks.
Todd

Todd Nicolay
Posted:  23 Aug 2010 17:46
We have a rebate program that we use with strategic customers across markets, with an empasis on rewarding for growing business.  The key to the program is that it is paid only once a year for the shipments made in the preceding 12 months.  We offer the customer the flexibility of choosing the calendar dates for the 12 month period, as many have different fiscal years, and purchasing departments want to have it booked prior to the year's close so they can apply it to their "purchase price variance" or price reduction goals.  The mechanics are that we offer a certain percentage rebate for the 12-month period.  The rebate percentage goes up as the total business goes up.

Lisa Jennings
Posted:  23 Aug 2010 17:57
Chuck-

I can tell you that we have participated in rebate programs before.  It helps to have a little sales history with the customer.  You can have different sales tiers where a percentage is offered.  As an example, take the previous years sales and make that the benchmark for the customer to hit.  If they reach that mark you could offer some percent rebate at the end of the year.  Set a second tier sales benchmark at say 10% higher and maybe offer them a little higher rebate and then set a third tier sales mark at 10% higher than the second tier sales benchmark and offer a little higher rebate again.  Anything above the third tier would be at the maximum rebate.  I don't think there is any set percentage on sales tiers or rebate amounts, it's really more of what you are comfortable with offering.  I would also say that this type of rebate offering should be included in some kind of multi-year contract deal signed by the customer.  If the customer isn't willing to sign a contract, then I'm not sure I would make it available to them.  Best of luck.

Bret
Posted:  23 Aug 2010 19:05
We set up a very simple format for one customer.  During a 12 month period, accumulated all sales volume.  Based on sliding criteria, pay the associated rebate % on total dollars spent in year.

Annual Spend             Annual Rebate(%)
$000,000 - $300,000    0% (min threshold)
$300,001 - $475,000    1%
$475,001 - $650,000    2%
$650,001 - $825,000    3%
$825,001 - $1,000,000    4%           
$1,000,001 +         5%

All rebates back to dollar one

Obviously need to scale on min/max based on opportunity, with heavy focus on growing your sales.  Don't just give away the farm on existing business.

Derran Smith
Posted:  25 Aug 2010 16:05
Many thanks to all of you and your feedback is very helpful.

.....as ever.

CAS

West Texas
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