Principals regularly announce schemes and incentives to push
product sales. Nothing wrong with that. The problem arises when there are too
many schemes running simultaneously and the manufacturers are not able to meet
their commitments. This is especially the case during quarter and year endings.
Agreed that manufacturers are under immense pressure to meet their quarterly or
annual sales targets and despite their misgivings, the channels generally lap up
these schemes.
The issue gets complex when the manufacturer has multiple
schemes running for each of their myriad SKUs. When thousands of claims pour in
from all corners of the country on a daily basis, and each claim has to be
verified and processed, one can get an inkling of the humungous task faced by
the manufacturers. If claims are not settled at the appointed times, channel
partners accuse principals of making empty promises. While this may not be
entirely true, the channel community is justified in its criticism.
Vendor Call
So, does the crux of the problem lie in the fact that incentive schemes are
far too many and far too frequent? Yes and no, say vendors. According to some,
the schemes are never too frequent. The problem arises when the principals are
unable to honor their commitments. Whenever incentive schemes are controlled and
honored, there is no issue.
Says S Rajendran, GM, Sales and Marketing, Mobility and Display
Products Group, Acer India, "In an industry where margins are under
constant pressure and RoI is sometimes an issue, channel partners look at the
principal organizations to ease their pain. Channel schemes are structured to
either incentivize partners to 'push' up sales or to make it easier for them
to sell, by giving customers an additional incentive to buy."
Agreeing with him is Sandeep Arora, Channel Sales Manager, Intel
South Asia, who said that the need for, or frequency of incentive schemes is
dependant on the short, medium and long-term goals of the vendor organization to
move its products in the market. "Incentive schemes are a means to
popularize vendor products in the channel, liquidate inventory and push products
for initial impact," he added.
But there are vendors who feel that keeping too many schemes and
incentives creates confusion and inconvenience not only for the channel partners
but everyone involved. According to them, it is better to announce loyalty
programs with fixed parameters at the beginning of the quarter, clearly
indicating the 'reward schemes' for all the efforts put in by channel
partners. It is also important to keep the communication lines open and collect
feedback on schemes so as to reduce problems. "Schemes and incentives play
a critical role in a company's channel strategy. With a crowded market place
and a variety of products available, it is essential for companies to engage
with their partners on a continuous basis. Not only do these programs boost
sales they are also an excellent motivational tool for channel partners. In
addition, such programs suffice as key differentiators for vendors in the
market," opined Dhiren Singh, Assistant Director of Marketing and Consumer
Imaging, Canon India.
"Incentive schemes are |
"It is best to document |
Incentive schemes also create a pull for the product and
excitement at the customer level. The need of the hour, vendors feel, is enough
people to sell the products and make them available to the customers. Stressing
that 'push' should not be always seen from a negative perspective,
principals are of the opinion that incentives are the additional 'motivation'
that channel partners need to concentrate on a vendor's offering.
Well-designed schemes help to strengthen the bond between the vendor and the
channel organization, according to them.
Given that many products and services are truly unique,
high-end, and are competing with new introductions in the market, companies need
to create a strong recall and brand loyalty for their products in their partner
minds. Like R Manikandan, GM, Sales and Marketing, LG Electronics Ltd put it,
"The ultimate goal of any scheme is the profitability of the company and
its partners, liquidation of goods and satisfaction of the end consumer."
Vendors are also clear in their verdict that channel partners do
not unnecessarily raise an issue of claim settlement. According to them, if the
fulfillment process is well documented, there would be no cause for complaint.
However, if there is an inordinate delay even when all terms and conditions of a
scheme have been met, then the channel feels let down. So it is critical for the
vendors/principals to keep the communication lines open at all times, work
closely with partners and ensure that there is no room for complaints.
"Claim settlement is a very sensitive issue for all
companies and any delay definitely causes friction. All companies have faced
this during some point. However, as processes have evolved, this area has been
streamlined to ensure complete channel satisfaction. Most effective solution to
solve this issue would be to have simpler schemes, unambiguous procedures for
settling claims, proper supporting documents and using IT systems to streamline
the same," says Singh of Canon.
Vendors also feel that multiple schemes causeproblems if their
backend infrastructure is not robust enough to handle them. With many vendors
adopting the online way, and claim processing being outsourced to professional
organizations, these problems can be resolved faster. Multiple schemes running
parallel can cause confusion in claim settlement if communication and
documentation is not explained to the partner and the claim processing person
clearly.
Incentive schemes are devised based on feedback as well as
market imperatives since it is not possible for companies to work alone and
capitalize on all the opportunities that are available today. It is essential
therefore that companies work with a strong network of partners to leverage
their complementary strengths. Principals need to keep in tune with their
channel requirements and market developments by designing and developing schemes
and incentives that are reflective of the market scenario in question.
Channel partners also need to provide their feedback on the
products and schemes as they are a part of the market and understand the pulse
and needs of the consumers, vendors say. Since most of the schemes are based on
vendors' interaction with the channel partners and their feedback on previous
schemes and market requirements, the general belief is that the cycle of channel
partner and vendor interactions, which solicit feedback and understanding, help
strengthen the vendor channel partnership.
Channel Verdict
Like the vendors, the channel too is divided in it opinion as regards
incentive schemes. Some partners feel that schemes are announced every quarter,
so it is very rare when two schemes are launched back-to-back. Therefore, they
get enough space between each scheme. The only thing, which should be taken care
of by the principals, is to ensure that the incentives or claim reimbursements
are paid upfront.
However, there are other partners who claim too many schemes are
launched too frequently. This means that everyone involved concentrates on
sellouts rather than payouts and this causes delays in settlement of claims
besides amounting to wastage of resources.
"Well documented |
"Since incentive |
Given today's competitive market, everyone has to fight for
his or her own space and needs to put in some extra effort. "Incentive
schemes therefore help both the manufacturer as well as the dealer to earn some
money by selling the products," said Asif Khan, Director, Technocrat
Infotech, Kolkata.
Since customer pull is always created by vendors, incentive
schemes serve as one of the few options that are available for vendors, believes
Ajaya Kumar, CEO, Park Group, Delhi. Continuing in the same vein is Ranjan
Chopra of Delhi's Team Computers who said, "Schemes and incentives are
important and play a key role in motivating the people involved in the sales
process. Most of the schemes are appropriate, segment specified and have a
defined time line. Therefore their frequency does not affect their
effectiveness."
While partners argue on the plus and minus of incentive schemes,
they quite agree with the verdict of Harish Kumar Shetty, Binary Systems,
Bangalore who says, "Well documented procedures from the vendor side are
the best way to handle incentive claim settlements, since this provides for both
clarity and transparency in the entire procedure."
Interestingly while most partners seem to settle issues directly
with their principals they feel that IT associations can always come forward to
settle the issues between the channel and the principals. They can discuss with
the representatives of the manufacturers to sort out the authentic claims in a
fast and easy way.
IT Associations and What They Say
Incentives schemes and their benefits or complexities depend on the nature
of products or vendors promoting them. Any scheme that is directly floated by
the vendor to the partner makes it viable and accountable. Complexities, they
believe, arise if too many partner tiers are involved. For some products, the
schemes are too many and too frequent and the partners lose control on both
inventory and profit management.
"If the principals do not document the schemes and take
necessary endorsements from their finance department or top management, delays
are bound to happen. More than the multiple schemes, complexity results from the
absence of documentation with due endorsements. This ultimately hampers claim
verification process," said Anand Rao, President, AIT (Association of
Information Technology-Karnataka).
All said and done, IT associations also believe that incentive
schemes help build vendor-channel relationship. Most issues relating to claim
settlement therefore seem to be subjective. While most vendors do keep their
commitments, there are delays. In the larger scheme of things, backend disasters
arise when the vendor has fund problems or cash flow issues. Whether this is due
to technical reasons or otherwise, it is important for the channel partners and
their principals to work in sync so that both stand to gain by the incentive
scheme on offer. Since incentive schemes ultimately are about offering better
prices, the vendor who sells has to work to create more awareness of the product
and establish a wider customer reach for the same.
"Too many incentive |
Settling Claims
While most channel partners appear to settle their issue as regards
incentive dues directly with the vendor, IT associations often advise vendors
not to float schemes so often if they are internally not geared to handle the
settlements effectively and efficiently. Being a mutual issue between the vendor
and channel, most IT associations do not seem to take the onus as regards issue
pertaining to claim settlements. The general advise that they give to the
principals is to make the objective or the plan clear while devising the
schemes; discuss the same with the partners and customize the scheme that is
mutually agreeable. Also they feel it is imperative that vendors document the
scheme and spell out the conditions that both mutually have to comply with and
take necessary endorsements and approvals from within their organizations to
float the incentive schemes.
In summary therefore, there are certain issues related to the
dealer schemes and incentives set up by the principal companies, which spring up
often. The individual companies and the manufacturers have mutually settled
these issues. The matters didn't extend to the point where IT associations had
to interfere. Also there's always a concern that if the matters will be taken
to the IT association then all the pending claims would be stacked for an
uncertain time.
As KL Lalani, President, Compass (Computer Association of
Eastern India) put it, "Till date as far as Compass is concerned, we have
received no complaints from members related to incentive settlement delays.
However, if any such grievances are lodged with the association then definitely
we would address the issues and help the dealers realize the claims which are
authentic."
Manufacturers on their end need to ensure that the schemes are
kept simple in order to cut short the lengthy verification process involved. It
is important to continuously monitor and fine-tune the incentive structure to
ensure that it is in tune with market developments. Pushing the channel to sell
a product for which there is no customer-pull will only result in a blockage in
the movement of stock. Given that the current market scenario is a sign of
things to come, it is important to make sure that incentives offered do not end
up as a disincentive for the channel," he added.
Subbalakshmi BM
subbalakshmibm@cybermedia.co.in
(With inputs from Snigdha K and Nelson Johny in Mumbai, Ruth Samson and Lata
Singh in Delhi, Piyali Guha in Kolkata and S Gopikrishna in Chennai)