Understanding Customer Rebates

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The prior versions of the ARTS ODM do not include strong support for rebates.  This new topic and related subject areas adds support for rebates.  Customer rebates, as modeled in the ARTS ODM are a kind of Reward.  Rebate earning and redemption processes follow the same pattern defined in Understanding Rewards.  This approach offers retailers a great deal of latitude in setting up customer rebate programs.  While customer rebates share many properties of rewards, there are important differences that warrant separate treatment in the ARTS ODM V7.3.

Rebate Definition and ARTS Data Model Treatment

Rebate Definition

A customer rebate, as used in the ARTS ODM is a subtype of Reward that pays back a portion of the total price a customer pays for purchasing merchandise and/or services from the retailer.  There are a number of different kinds of customer rebates as discussed later on.  Within the ARTS treatment of rewards customer rebates are distinguished from point of sale discounts based on the way they are disposed of and classified for accounting purposes when redeemed.  This distinction is important because too often the terms "rebate" and "discount" are used interchangeably and they are NOT the same thing from a formal information modeling point of view.

Customer Rebates Versus Discounts

Since customer rebates and point of sale discounts are both types of rewards, they share a lot of properties like eligibility criteria and derivation rules that define what they offer, when they apply, where they apply and how they may be earned.  Customer rebates and point of sale discounts part ways at their redemption when it comes to specifying how they are to be disposed of and financially classified for accounting purposes.  The table presented here highlights the most salient differences between customer rebate and discount reward types.

Figure 39- Rebate Discount Distinction


The distinction represented here, as noted earlier, is used to explain how customer rebates vary from discounts within the formalized ARTS ODM.  It is not intended and should not be used as a normative accounting standard or recommendation.  Retailers must consult with their financial, tax and accounting advisers to make such a determination.

Customer Rebate Classification

There are a number of different kinds of rebates.  The table below lists the major kinds of rebates seen in a retail enterprise.  The rebate types in the dashed box are out of scope for ARTS ODM V73 but will be addressed in future releases.  They constitute rebate deals between retailers and their suppliers.  The rebates outside of the dashed box are all consumer-oriented rebates which are in scope.  This is an important table because it concisely explains how ARTS is classifying customer rebates.

Figure 40 - ARTS Rebate Classification


Rebate Entities and Attributes

The next figure presents the ARTS ODM customer rebate entity types.  The numbers identify key features of the data model view and the sequence of narrative presentation.

Figure 41: Customer Rebate Entity Diagram


The customer rebate overview uses colored blocks to organize the presentation.  Rebate master data identifies, defines and describes the customer rebate programs and related customer accounts.  In the ARTS ODM, customer rebates may be linked to customer accounts but may also stand alone.  This enables retailers to represent manufacturer instant rebates that do not require any kind of ledger or account to post to as well as deferred rebate programs which allow customers to earn and accrue rebates for subsequent payment which require ledgers of some kind to post to.  Customer rebates are kinds of Reward and inherit a lot of reward properties.  The inheritance happens in the  Rebate Line Item linkage block.  The CustomerRewardLineItem is extended by CustomerRewardRebateLineItem as an outrigger entity.

The ARTS ODM supports the creation and maintenance of different kinds of customer accounts as discussed in detail in Logical 07010.01 - Party to Customer Account Mapping.  Customer reward related accounts (as well as related ledgers and journals) are segregated from customer retail financial accounts.  Retail transactions routinely collect line item level information that requires to posting to multiple kinds of customer accounts.  It is important to provide linkages between retail transaction line item types like SaleReturnLineItem, PriceModificationLineItem and CustomerRewardLineitem because there are causal relationships between them.  For example the SKUs captured in a SaleReturnLineItem may trigger different kinds of Rewards.  Rewards may, in turn, trigger gifts of items which require SaleReturnLineItem plus a RetailPriceModifier (to reflect its zero price giveaway).  There are many, many kinds of cross reference required between retail transaction line items and these are supported through the RetailTransactionLineItemAssociation entity type.

Customer Rebate Master Data

Figure 42 - Customer Rebate Master Data




Customer Rebate Transaction Context

The next entity diagram zeros in on the retail transaction aspects of customer rebates.  The text blocks explain the most salient modeling features.  Earlier, the linkage between retail line item types related to merchandise and service sales and reward line items was introduced to represent the causal relationships.  There are also line item associations between CustomerRewardLineItems (and their rebate extensions).  The inter-Reward associations capture the relationship between earning rewards and disposing of those rewards (see Understanding Rewards for an explanation of reward earn and disposition).  The RetailTransactionLineItemAssociation entity serves as the vehicle to link reward earn and burn activity as explained in this diagram (lowest text box).  The Understanding Reward Earn and Burn - Reward Disposition section of this narrative provides an explanation of how rewards are earned and expended/redeemed.

Figure 43 - Customer Rebate Retail Transaction Context



Customer Rebate and Retail Transaction Line Item Level Detail

As discussed earlier in this topic, there are several different kinds of customer rebates.  Each has different procedural and accounting disposition characteristics.  The entity attribute model shown here lists the entity types, attributes and entity type definitions that are included in ARTS ODM to represent the different customer rebate types.

Figure 44 - Customer Rebate Line Item Entities


Retailer rewards (which include rebates) is an extremely complex business area to model.  Accordingly, this is one of the most complex part of the ARTS ODM.  As designed the ODM is intended to address the most typical retail promotional and customer membership based programs encountered.  There are going to be exceptions and specific retailer extensions required to incorporate special competitive features of each retailer.  With this in mind, retailers should use the ARTS ODM treatment of Rewards and customer rebates as a guideline and reference model.