Vendor Sales Incentives Gone Wrong

Spiffs, rebates, special discounts and limited promotions are tools all vendors use to tickle their customers into loosening their purse strings. Vendors surrender a little margin in favor of capturing a customer to upsell and expand the sales relationship later. But are these special incentives always worth the expense? How do they affect the partner in the sales process?

This is the question Bill Leutzinger, president of telecom reseller TelecomMedic, asked in his recent blog post on Phone Plus Magazine’s site. In his blog, Leutzinger admits an appreciation for the extra revenue that comes from spiffs and rebates his vendors, carriers and master agents afford his company. What he doesn’t appreciate is the short-shrifing of partners in incentive programs designed intentionally to rob them of money and keeping customers from cashing in.

Leutzinger’s observations and accounts are spot on. In his blog, he talks about vendors advising him on how to use spiffs, rebates and “free offerings” to capture new leads. They may help win customers, but their rife with problems. He points out, are the free offerings – such as buy a year’s service and get three months of bandwidth free – actually takes money out of reseller’s pocket; the free service is equivalent of partners working for nothing while the vendor captures the real revenue. Further, rebate programs are often designed with complexity in mind, making it unlikely the customers will complete the process – that Leutzinger points out, only makes for angry customers that he and his peers must manage.

Incentive programs targeting partners and customers are not necessarily bad for business. The issue is how they are designed and implemented. Vendors and carriers that design complex programs that solely target end-users are not taking their partners’ revenue and customer service needs into consideration. They are really just looking to capture net-new business without considering the downstream effect on customer satisfaction, renewals or partner engagement.

Vendors cannot cavalierly discount the effects poor incentive programs will have on their partners. It’s more than just lost revenue; it’s about customer service. Solution providers are – in a sense – customers too. Vendors continually must earn their trust, loyalty and business. To saddle them with poorly conceived incentive programs means more than just lost revenue, but also forcing them to expend valuable time and resources cajoling disenfranchised customers.

Leutzinger isn’t incorrect in his assertion that vendors should pour more of these incentives into the hands of partners to raise sales. What’s really necessary is for vendors to craft incentive programs that pay benefits to both partners and customers – providing equity to the partner and value to customer.  In other words, incentive programs must spread benefits across the value chain.