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.