The Social Enterprise and the Channel

September 6th, 2011 by Mark Geene No comments »

The theme of Dreamforce ’11, The Social Enterprise, marks a new direction for enterprise software, one that embraces social media as an integral part of enterprise applications. The emergence of the social enterprise has already dramatically changed how businesses interact with their customers. Customers engage actively in two way conversations with vendors; providing consumers with a powerful voice providing unprecedented influence over everything from how customers are serviced to product strategy and direction.

“We often forget the symbiotic relationship between trust and ROI”
Gary Vaynerchuk, The Thank You Economy

However, the impact of the Social Enterprise on business-to-business relationships is evolving more slowly as many industries cling to out-moded ways of interacting and doing business. Take the relationship between many industrial product vendors and their distribution partners for instance. Being “social” starts with trust between the parties. How do you build a full relationship when parties are reluctant to share sales and forecast data freely with each other? In many industry segments partners are still unwilling to share end-customer data due to the fear of disintermediation. The irony is that when the information is shared vendors can better serve their partners by improving incentive programs, product features and marketing programs.

Communication must be a two-way street. Countless partners have been burned in the past when they shared information with vendors, but this is changing. Just as consumers have found a stronger and more powerful voice through social media, so will partners and end-customer businesses. The vendor / partner relationship will be transformed with open sharing of information. Information will flow more freely among all parties and will become actionable analytics that will guide vendors and partners alike in an interactive “social” relationship. Those that embrace it will benefit greatly as they understand the real ROI associated with trust.

Does paying VARs faster help you?

August 29th, 2011 by Elizabeth Schultheisz No comments »

Only 7% of partner incentive claims are paid within 14 days of the claim being submitted. Even worse, over 30% wait 45 days or longer to receive their incentive payments. And in most instances the clock on incentive payments doesn’t start until after a program ends. This can have a devastating impact on partner working capital – tying it up for 30, 60, 90 – even 120 days after an incentive program ends. Their problem quickly becomes your problem when your partners don’t have the capital to buy your new products, or participate in new programs.
Our Channel Best Practices survey results shed some light on the reason behind the lengthy delays in payments. The tardy payments may be caused by a vendor’s inability to accurately calculate payments quickly. Only 40% of respondents calculate and process incentive payments automatically. The remaining 60% rely on labor and time-intensive manual calculation processes.

Some vendors are considering adopting a “claimless” option, where payment is automatically made based on a predefined calculation. Prompt payment based on timely, automated incentive calculation frees up your partners’ working capital. You have a double win in that you have just differentiated yourself from your competition in the battle for partner loyalty, and freed up partner working capital for re-investment in your inventory.

Do you know how well your incentive programs work?

August 9th, 2011 by Mark Geene No comments »

Everyone loves incentives! Our recent Best Practices survey revealed that our respondents run an average of 21 channel incentive programs each year, with an average channel incentive spend of 11% of annual channel sales revenue. Given that the average annual channel revenue reported by our survey respondents is $318M, this adds up to almost $35M each year. For that much money, you’d expect that they would be seeing a huge return, and 86% say that their programs meet expectations some of the time. However, the startling fact is that only 38% of respondents actually calculate an ROI on their incentive spend. Only 33% are satisfied that they are implementing Best Practices for incentive programs. Even more telling is that on average respondents believe they are over-paying incentives by 6% – or more than $2M per year.

How can this be?

We delved into the mechanics of how respondents structure incentive programs to find the answer. It turns out that 60% of respondents rely on labor and time-intensive manual calculation processes to pay on incentives. This is borne out by the fact that 56% or fewer pay incentive claims in 30 days or less.

Our Best Practice Recommendations for getting the most out of your incentive programs are simple:
● Calculate ROI on incentive spend
● Speed incentive payments by automating your incentives process
● Provide real-time visibility into incentive program performance

What have you found to be Best Practices as you create and implement channel incentive programs?

Special Pricing Program Abuse

July 15th, 2011 by Elizabeth Schultheisz No comments »

Abuse of special pricing programs may cost high tech companies an estimated $1.4 billion in lost profits each year. That really grabbed my attention. According to the latest survey conducted by The Alliance for Gray Market and Counterfeit Abatement (AGMA) special pricing abuse may affect up to 25% of all channel sales. 84% of respondents agree that incentives program abuses can fuel gray market activity, resulting in unfair competition and price erosion.

I found it interesting that 75% of respondents use some combination (stacking) of end-user, programmatic and channel partner accreditation level incentive types, and many use all three. Most respondents felt that end-user incentive programs had the strongest potential for abuse because companies have little visibility into the end-customer and must rely on unverified partner reporting.

The next largest potential for special pricing abuse lies with stacking incentives in a single transaction. Many companies may not have the mechanisms to track total incentive payments across multiple programs, allowing inappropriate use of special pricing to go undetected.

So, what can you do to stop special pricing abuse?

• Improve partner programs by testing and modeling based on historical data
• Automate incentive and discount programs with custom rule to prevent inappropriate stacking of special pricing programs
• Monitor special pricing program performance in real-time to gain visibility into how the programs are used by product, partner, territory
• Track serial numbers to the end-customer to identify potential gray market activity

I’m interested in your thoughts on the survey results, and in what you do to prevent your partners from abusing the special pricing that you give them.

Do you know who your customers are?

June 27th, 2011 by Mark Geene No comments »

Our recent Best Practices survey revealed the challenges that technology vendors continue to experience in planning and executing incentive programs that will reach targeted end-customer market segments (e.g., specific industry vertical markets or horizontal segments such as SMB).

The 112 companies that responded consistently invest in efforts to segment their channel-served end-customers. They then use this data to

  • Compare end-customer growth in a particular market segment with industry benchmarks
  • Create incentive programs that will work with specific end-customer segments
  • Optimize partner coverage in targeted market segments

Yet the surprising result from this survey was that only a third of the respondents are able to consistently identify the end-customer and their market segments (e.g., industry vertical , business size, etc) served by their channel partners. These companies are investing in end-customer marketing programs, but continue to struggle to measure the results.

The recommended Best Practice is to base direct and channel incentive programs on performance goals, such as increasing sales into targeted markets. Of course, in order to do this timely, accurate and complete end-customer data is essential. Channelinsight supports this Best Practice by providing standardized, enriched channel POS and inventory data in real-time. You can target your incentive programs to best serve your end-customers.

For a video presentation of this survey, please follow this link: http://www.infonow.com/ci%5Fbest%5Fpractice%5Fsurvey%5Fmay/