This paper analyzes supply chain coordination under channel rebates with sales effort effects. It examines how different rebate structures, such as linear and target rebates, affect coordination between manufacturers and retailers. The study finds that when demand is not influenced by sales effort, a properly designed target rebate can achieve channel coordination and a win-win outcome for both parties. However, a linear rebate cannot achieve coordination in an implementable way. When demand is influenced by sales effort, a properly designed target rebate combined with a returns contract achieves coordination and a win-win outcome. Other contracts, such as linear rebates or returns alone, cannot achieve coordination in an implementable way. Contrary to the view that accepting returns weakens incentives for sales effort, the study finds that returns can strengthen incentives for effort. The paper explores the role of rebates in different industries, including hardware, software, and automotive. It discusses how rebates are used to align the incentives of manufacturers and retailers, and how they can be structured to achieve coordination. The study also considers the impact of sales effort on demand and how this affects the effectiveness of different rebate structures. It concludes that target rebates combined with returns contracts can achieve coordination and win-win outcomes when demand is influenced by sales effort. The paper provides a theoretical framework for understanding the role of rebates in supply chain coordination and highlights the importance of considering sales effort in designing effective rebate structures.This paper analyzes supply chain coordination under channel rebates with sales effort effects. It examines how different rebate structures, such as linear and target rebates, affect coordination between manufacturers and retailers. The study finds that when demand is not influenced by sales effort, a properly designed target rebate can achieve channel coordination and a win-win outcome for both parties. However, a linear rebate cannot achieve coordination in an implementable way. When demand is influenced by sales effort, a properly designed target rebate combined with a returns contract achieves coordination and a win-win outcome. Other contracts, such as linear rebates or returns alone, cannot achieve coordination in an implementable way. Contrary to the view that accepting returns weakens incentives for sales effort, the study finds that returns can strengthen incentives for effort. The paper explores the role of rebates in different industries, including hardware, software, and automotive. It discusses how rebates are used to align the incentives of manufacturers and retailers, and how they can be structured to achieve coordination. The study also considers the impact of sales effort on demand and how this affects the effectiveness of different rebate structures. It concludes that target rebates combined with returns contracts can achieve coordination and win-win outcomes when demand is influenced by sales effort. The paper provides a theoretical framework for understanding the role of rebates in supply chain coordination and highlights the importance of considering sales effort in designing effective rebate structures.