Thursday, March 19, 2009

Incentive Programs...worthwhile or waste?


With vendors vying for the attention and mind share of their channel partners incentive programs have become a standard in most channel programs. While I believe that a channel partner would not decide whether or not to do business with a vendor based on an incentive program, it may come into play on a deal by deal basis.

In other words, if a solution provider is a certified Dell partner and a certified EMC partner and their customer is looking for storage, both are identical in capability and price, an incentive program may push the solution provider to lead with one or the other.

Some vendors have very structured program such as EMC's Journey to the Top where you get points that can be turned in for merchandise such as flat screen tv's or a mountain bike, others have a less traditional approach on a deal by deal basis....we like to call that more margin.

I understand the benefit to points in that you can get partners more deeply engaged and put some cheerleading behind the program "you're only 100 points away from X". Also, individuals are more likely to brag about getting 400 points then they are about $1000. But Cash is King right?

Which incentive programs do you think deal with this right and which need help? Is it worthwhile to do an incentive program or do the deal by deal negotiations suffice?

3 comments:

  1. Interesting question.

    I think it really depends on the nature of your partners, their business model and your relationship with them.

    In your example, you're essentially talking about price competition, but at the supplier level, rather than the end buyer level. Make your offering more financially attractive, and you make the list, not the other guy.

    In our business, our partners aren't carrying competing vendor's products, so we don't have that challenge. Still, we've used periodic incentives to try to get them to close more deals this quarter or that month... The goal is easily enough understood, but it's not at all clear that we have enough leverage to change their salespeople's behavior. As near as we can tell, our partners make their money on services, not so much on seats. A little extra margin on seats is nice, but it's not going to change the fundamentals of their business model. Unless the incentive carries that leverage or helps them create more opportunities or expand the opportunities they have, it's just not going to sway behavior.

    So to me, it seems less about the form of the incentive, than how the incentive complements/aligns with their business.

    I'd be interested in your thoughts back...

    J

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  2. See other comments from channel professionals here http://www.linkedin.com/groupAnswers?viewQuestionAndAnswers&discussionID=2093021&gid=93801&commentID=2375268&trk=view_disc

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  3. In a perfect world, loyalty would count more than financial incentives but reality is that incentives make up a large part of channel sales strategy.

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