Channel Rebate Best Practices
Channel leaders are often curious about whether their rebate programs are fueling and motivating the right partners in the right ways. They also wonder if other vendors are experiencing the same struggles and challenges. One of their challenges is to find the right level of investment that will optimize the sales and marketing performance of their partners, without overspending. That means being very, very efficient with your incentive programs or your rebates.
The most compelling issues on the minds of technology vendors are:
- Is my rebate program truly driving the right behaviors?
- Why is the partner participation lower than I expected?
- Is my rebate program too rigid or complex?
- Do my rebate programs drive measurable ROI?
Channel partners have similar issues, but they want to know:
- Do my vendors rebate programs align to my business needs?
- Are my vendors channel rebates easy to manage and administer?
- Can I influence the vendor's program and tailor it to my business needs?
- Will the vendor share results in a timely manner, and with meaningful dashboards?
So let's look at some rebate best practices.
Best Practice #1: Move Away from Revenue Attainment Rebates
In recent years vendors have become more discerning about the partner behaviors they want to influence. This trend has been driven by the need for partners to change their business models and for them and their teams to acquire new skill sets due to business model transformation. While rebates for achieving base quarterly revenue targets are still quite common, they are typically extended to remain at par with the competition. We expect this type of rebate to be replaced by programs with an emphasis on rebates that generate net new business, rather than repeat orders with existing customers
In addition, vendors will payout for creating net new business in designated vertical markets, with pay-outs based on achieving revenue goals with net new customers, and rebates for adding value such as attach rate goals for services. Vendors will also pay out rebates for partners that achieve certain expertise and/or skill sets.
Best Practice #2: Use Clear Incentive Plan Terminology
Vendors use a wide range of terms for their channel incentive programs which can create confusion. Rebate spend and the impact of rebates can be hard to measure because technology vendors tend to use terminology inconsistently. One vendor’s rebates are another vendor’s incentives or rewards.
Vendors must 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.
Best Practice #3: Clearly Communicating Objectives and Benefits
While using clear incentive terminology is very important, so is clearly communicating objectives and benefits. Before the start of each quarter you must communicate, communicate, communicate, ensuring partner engagement and program compliance. This means that you communicate the partner’s target, the rules of engagement, promotional periods and the possible earnings.
Record the partner’s acceptance of these rules and terms and conditions, to ensure (among other things) their targets and payouts are not shared, and keep partners current on their standing against goals through interactive dashboards, and a monthly account statement e-mail
Best Practice #4: Re-evaluate Your Rebate Strategy
In today’s channel the emphasis has shifted from pure rebate pay-outs to vendor support and vendor-partner collaboration. Not all rebates need to be cash-based. While cash is king for many channel partners, there are non-cash rewards that many organizations find useful. The fact is that cash has a limited value in promoting loyalty at the company level.
Non-cash programs at the company level allow you to target your incentive budget to the promotion of your products and solutions. Partners will use the dollars to generate more demand, and that's exactly the type of behavior you want. Motivating specific company behavior will help you establish a unique competitive advantage. Cash is still going to be important, but it's time to consider using part of that cash rebate as non-cash, and offer pre-packaged marketing plays.
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