Everybody is looking for an edge. That hint of magic that turns a deal from a prospect into a sale, and money in the bank. Vendors and distributors want resellers to push their solutions. Often, partners have other ideas.
That has led to a plethora of sales incentives and market development schemes, from rebates to loyalty programs to straight-out gifts as rewards – or bribes, as some in the industry call them – not always with the best outcome for the customer in mind.
With PC and IT sales squeezed and vendors fighting to hit quarterly targets, not all programs are well thought-out strategies. Resellers have told CRN stories of the pressure of desperate vendor pitches to hit difficult targets and dubious practices from underhand deals to overreaching with a partner’s sales team.
Indeed, the feedback that CRN received during our research was that larger end user customers are starting to query rebate schemes during the tender process, interrogating their potential suppliers about how they are rewarded to ensure that the solutions they are proposing are being suggested for the buyer’s benefit, not the seller’s.
It’s an issue the industry needs to address, says Bruce Rasmussen, managing director at sales enablement consultants Carpe Diem.
“We have to start with the customer at the front of mind. When resellers are talking to customers, they don’t want to be thinking about rebate structures,” says Rasmussen. “Instead, you need to be thinking about what is the right solution for the customer.”
Putting the customer first is the ethos of Neil Campbell, director of solutions at Dimension Data. He says the giant integrator is not vendor-agnostic – that could lead to a lack of focus and skills with any given technology – but does advocate “vendor-independence”.
Campbell singles out three areas of concern when it comes to vendor programs: discounting, vendors that overstep the mark, and a lack of consistency around pricing.
The problem with discounts is that too many resellers pass them on – they “go to the street”, says Campbell. “Typically if you just increase discount across the channel, it becomes more margin to give away.”
Hence why he is a fan of rebates, but with some caveats. “Rebates are very good mechanisms for promoting partner profitability… if it doesn’t come in the form of a discount and it is subject to something that can be measured, like client satisfaction, it can’t be built into the discount.”
Client satisfaction is one option for the rebate scorecard. Another, says Campbell, might be to rebate a managed service provider based on reducing the number of support requests pushed to the vendor. These are just two examples; there are sure to be many more. The point is ensuring the rebate can’t be gamed.
If a rebate is guaranteed, says Campbell, it will go to the street.
Then there’s the issue of overstepping the mark. Vendors run all sorts of attractive incentives to encourage their partners to push product. But they must remember who is in charge of the feet on the street. At Dimension Data, vendors are barred from offering incentives directly to the integrator’s salespeople, says Campbell.
“We don’t want our own people to be skewed by that vendor. It creates behaviour that is not best for the client. We have clear policies and there are penalties for participating in vendor incentive programs.”
Campbell adds that it is “difficult to police”, but it often comes back to the integrity of the vendor. Finally, he mentions the problem when vendors conveniently forget their own pricing for the sake of a big deal.
Dimension Data, of course, is the biggest integrator in the world and hence one of the top partners for many vendors. Campbell says vendors must stick to their guns when it comes to tiered pricing, even if it means turning down an opportunity.
“Maybe a small partner will find a large client and the vendor thinks the small partner should be able to discount. If you give a small partner a large partner discount to support them into a client with a unique opportunity, you make it impossible for large partners to compete. Then the small partner hasn’t made those commitments to the vendor’s technology and they are just fulfilling, not integrating and supporting the technology.”
This is not just about looking after Dimension Data’s interests, says Campbell, but also the vendor’s and client’s. “Technology must be implemented in a way that adds value to the client,” says Campbell.
Next: Discounts aren't a priority