Why channel programs are not working

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Vendor marketing and rebate programs often are not effective and the money being spent of these initiatives is not delivering quantifiable results, according to attendees at CRN's quarterly Channel Roundtable. Most attendees were confused about what returns can be gained from vendor channel programs. 'I think sometimes because it's someone else's money, we in the channel make the mistake of actually thinking of crap ideas that we would never spend our own money on,' says Stuart Hendry, managing director at Logical Australia.

'When you make it work is when you use that money as if it was your own money,' says Hendry. 'You spend all this money and you have no quantifiable results for the money being spent, and when you talk about ROI you need to understand the impact it's had. There's lots of work going on to do the plan and zero work to deliver back the results of the plan,' he adds.

Express Data managing director Ross Cochrane adds vendors get more caught up in launching channel marketing and rebate programs than actually asking what these programs are meant to deliver. 'I think there's too much confusion about the value of being whatever level of partner for different vendors.

'So you're Platinum for this guy, Gold for this guy – what does it all mean? What does it give you in return?' he queries.

Chris Hale, general manager at Alstom IT, says vendors are not thinking enough about what goes into their respective channel programs. 'They [vendors] think that we're stupid. They'll sign you up and give you the small print – there are that many barriers to climb over. What are we trying to do? If people do stop and think about what they are trying to achieve by the program it makes it a lot easier,' he says.

Cochrane adds that channel program and rebate contracts are so 'one-sided' that vendors are 'nailing you to the floor' on every single thing. 'Nothing's reciprocal. If [ita]we[end] do something, then there is a problem – if [ita]they[end] do something, it's not an issue. A lot of rebate programs are like that – instead of being a goodwill thing, it becomes a negative. It's like a report card,' he says.

Some agreed that marketing funds are also diminishing. Michael Bosnar, managing director at Exeed, says when vendors first introduced rebates and marketing funds, it was the channel's money. 'Now, [it's] their [the vendor's] money. If it's your money then keep it and give me more discount, stop bullshitting around,' he says. 'I guess the fundamental thing is if it's there for us to earn – let's make it real. One vendor in particular – it's amazing how the marketing funds have diminished over the year.

Phil Cameron, PCD channel manager at IBM Australia, quickly jumps in: 'He's not talking about IBM there'. Frank Colli, managing director at Leading Solutions, recalls the days when vendors provided two sets of funds: one for business development and one to develop new markets for the channel. They've now rolled both into one and Colli believes that in the past, maybe dealers have misused funds. 'That's our fault, but they've taken them [the funds] and reduced them so far down and used them themselves. But they're not productively using those funds any better,' he says.

Veritas' technical services partner manager, Jamie Pride, retorts: 'The market has changed. It's not five years ago and you can't expect everything to remain in constant status. 'You can't criticise the vendors for changing their strategy to meet a changing market. It may not be the right strategy but you can't sit there in the channel and expect – well this is the way it's always happened year-on-year,' he says.

Colli hits back. 'What's stopped happening is – what is the role that programs play; what are you trying to achieve?' he says.

On a roll, Colli also dumps on vendor rewards programs for channel sales staff. 'The ones that exist out there create more negative impact to salespeople because of the amount of work that they have to do to submit them,' he claims. Logical's Hendry disagrees, saying that manufacturers are quite clear about what they're trying to achieve and want to drive preference towards their products and services.

Cochrane adds: 'It's normally volume-related, which is the worst measure because the pie is this big, so the pie gets cut up in a different way – because one guy will say, "I get the rebate so let me just dump as much as I can because then I'll get the rebate. New instructions: all salespeople sell at cost for the next week!" 'So they sell at cost and make the rebate. Excellent. We're heroes! We made a rebate, we must be doing the right things!' Cochrane exclaims.

'I'd be very dismayed if I was a vendor for those kinds of programs. If there was one of them that had a target that was volume oriented, I'd be saying, "I'm wasting my money". Because all I'm doing is not growing the pie but making the pie get cut open,' he claims.

Netgear MD Ian Mclean Ian Mclean, managing director at Netgear, says the vendor is looking at developing programs at the moment. 'We've been out to a number of our key distribution partners looking to benchmark and get the KPIs on what are the good programs and what are the bad ones,' he says.

Hendry adds: 'I'm thinking of launching another program which I'll pay the vendor sales people to give us leads and convert them into business and I'll call it a rewards program!'

Tech Pacific's Joshua Velling Rebates are part of the business dynamics, according to Joshua Velling, category director at Tech Pacific, and the reality is that there are a lot of financial directives in the rebates and they are there to drive business. 'Strategically, a rebate structure can become problematic for the industry where the sum of the individual rebates is greater than the market expectation. And that is not shifting the pie – it's actually aiming for a greater pie that exists, and that is a structural flaw within vendor rebate programs.

'I think with various programs it's a reality that they're shrinking, but I'm concerned about the increasing administration costs to support a decreasing amount of funds and I see that's a problem because you need to spend more money to administer a less amount of money,' Velling says.

Colli adds: 'It's almost that you're spending as much money administering it [as] you get'. Velling replies: 'And that's a real issue, because it also says vendors aren't 100 percent comfortable with the partners' overall use of the funds – they've got to be policed'.

Regular communication between the vendor and the partner is critical to ensure a good program, says Velling. 'But it does astound me that we have some vendors out there that don't use it in that strategic way. They put a target on the total and then come back six months later and say: "This is what you've got".'

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