At CBRE when procuring Services or Goods we must also consider the consequences of engaging in activities that involve incentivisation from a Supplier.
Supplier incentives are benefits or offers provided by Suppliers to encourage buyers to purchase more of their products or services. These incentives can take various forms including:
- Volume discounts
- Early payment discounts
- Rebates
- Promotional deals
- Loyalty programs
- Exclusive contracts
- Extended payment terms
- Free or reduced shipping
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Introduction
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A Look at Supplier Incentives
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This is a financial incentive that Suppliers offer to buyers who purchase large quantities. It is aimed at encouraging customers to purchase more items.
Offered by Suppliers to encourage buyers to pay their invoices before the due date. For example, a supplier might offer a 2% discount if the invoice is paid within 10 days rather than the standard 30 days. This helps the supplier improve their cash flow.
These are post-purchase refunds at a given % offered by Suppliers based on certain conditions. The buyer can claim after making the purchase. This strategy encourages purchases by effectively reducing the final price of the product.
These are temporary incentives to stimulate sales and most often associated with old stocks or stock that may be redundant.
Suppliers may implement loyalty programs to reward repeat customers. These programs typically offer benefits such as exclusive discounts, freebies, or early access to new products.
Suppliers may offer exclusive contracts that are only available to one Customer due to their volume and value of purchase. This is often associated with a Preferred Distributor arrangement, not for an end user.
Suppliers may provide extended payment terms or allow them to break it into installments. This can be particularly beneficial for customers with cash flow limitations or those looking to manage their expenses more effectively.
In the case of Goods supply a Supplier may offer Free or Reduced shipping. This cost is usually absorbed by the Supplier into their profit or potentially their Selling price.
A Supplier may offer some goods Free Of Charge when volume purchases are made. This be part of a rebate arrangement from their source of supply or just absorbed by the Supplier in their profit.
1:
Volume Discounts
2:
Early Payment Discounts
3:
Rebates
4:
Promotions
5:
Loyalty Programs
6:
Exclusive Contracts
7:
Extended Payment Terms
8:
Free or Reduced Shipping
9:
Free Goods
The Goal of Incentives
The goal of incentives is to stimulate sales and business growth, improve cash flow, retain existing customers, and attract new customers. However, they also come with risks such as decreased profit margins, potential devaluation of products, cash flow issues, and increased administrative costs. Therefore, Suppliers need to carefully manage these incentives to ensure they achieve the desired benefits without causing unintended negative consequences.
What are the various types of Incentives ?
Type of Incentive
Description
Risk
High
Recommendation
Not recommended. May contravene CBRE procurement policies
Medium
Not recommended. Apply WCP instead of this incentive
Medium
Not recommended. Apply WCP instead of this incentive
High
Not recommended. May contravene CBRE procurement policies
High
Not recommended. May contravene CBRE procurement policies
High
Not recommended. May contravene CBRE procurement policies
LOW
CBRE Standard terms are 60 days. Terms beyond this may be okay but must not comprise contractual relationships
Medium
Be wary and check that the cost is not absorbed into the price of the services or products
High
Not recommended. May contravene CBRE procurement policies