Vendor Incentives: Out of the Shadows and into the Sunlight

Brandt R. Allen, MBA, DBA, and Paul W. Farris, MBA, DBA, and David E. Mills, MA, PhD, and Robert J. Sack, CPA

Each year in the United States, manufacturers, distributors, and retailers exchange billions of dollars to win sales from resellers or promote the products of the sellers. These payments are an integral part of the marketing plans of many sellers and resellers, and in some industries they have become so ingrained in the business that the players cannot operate without them, regardless of how effective they might actually be. These payments go by many names: rebates, trade discounts, supplier funds, slotting fees, advertising allowances, dealer incentives, markdown money, bill backs, buy downs, off-invoice allowances, return privileges, lease incentives, charge backs, and others. More emotionally loaded names include push money, kickbacks, price protection, penalties, and pay-to-stay. Throughout this article, the term “vendor incentives” will be used.