What's your definition of a channel rebate?
Rebates are a powerful motivator for channel partners, made even more powerful, when they are an element of a strategically developed channel incentives strategy.
The spend associated with channel rebates can be hard to measure because vendors tend to use terminology inconsistently. One vendor’s rebates are another vendor’s incentives or rewards. Some vendors consider product discounts to be part of their rebate program, others don’t.
This inconsistent use of terminology causes confusion which can leave both the vendor and their partners vulnerable to misunderstandings that ultimately reduce the effectiveness of their channel incentive programs. Partners are often confused by variations on incentive terminology and how different vendors operate incentive programs in different ways.
The Definition
Rebates are paid to partner companies, that have reached a pre-determined sales target within a pre-determined timeframe.
Examples of these back-end rebates are:
- Base rebates for achieving revenue or unit target (at product, BU, or partner total revenue levels)
- Rebates for achieving net new business growth goals
- Rebates for achieving market penetration goals
- Rebates for achieving attach rate goals (i.e. a target percentage of services sold or services revenue goal)
When a partner achieves their goal, the vendor issues a rebate payment within an agreed-upon timeframe. Rebates are often reserved for top-tier partners and typically average between 2 and 2.5 percent of sales. Loyalty programs average 1 to 2 percent. Volume incentives can be as high as 5 percent, depending on the goal achievement.
Channel Program Structure and Incentives
The problem from partners’ perspective is that vendors spend far too much time on channel program structure and incentives, and don’t invest enough in the supporting processes and systems to make transactions uncomplicated, or, as some would desire, “simple.”
Therefore, one of the first steps vendors must take is to ensure that they have well-defined and easy to understand channel incentive programs in place and that the incentive terminology they communicate is clear and precise. Additionally, vendors must:
- Ensure that the vendor and its channel partners are on the same page when it comes to channel incentives.
- Use clear terminology for all incentives, make the definitions and terms of incentives readily available to partners, and include this information in new partner onboarding.
- Use a planned approach to align incentive types, goals and objectives to properly utilize funds and take advantage of ways to engage with partners.
What are you doing with your rebate programs to stay current with today's market changes?
Drop me a line, I'd love to chat.
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