Vendor focus

Why incentives matter

Many of the industry’s biggest IT providers (vendors and distributors) are turning to front-end incentives and rebates as a way to help solutions providers improve profitability in the Middle East channel.

Most vendors and distributors in the region have programmes that reward solution providers for selling their products, IT services or both. In fact, most vendors and distributors have taken this further and have been running incentive and rebate programmes, and paying channel partners thousands of dollars for converting and winning over new clients who are on competitor hardware or software platforms.
As vendors and distributors continue to expand their front-end incentives and rewards programmes, industry pundits have been raised concerns as to whether incentive schemes do help in boosting sales, grow revenues and profits, and build loyal channel partners.
Guruprasad Padmanabhan, GM, Strategic Alliances and Channel Development at FVC, says over the years three key drivers that have always played an important role in the channel’s technology choice include: demand for technology or products, differentiation from competitors and profits they can generate from the opportunities. Padmanabhan says incentives play a vital role in enhancing profits for channel organisations as well as provide motivation for the individual sales resources in the channel to influence the purchase of a specific technology, product or service.
Khwaja Saifuddin, Director Sales MEA, Western Digital, concurs and says Western Digital is always looking out for new and innovative ways to incentivise its channel partners. Saifuddin says through the SelectWD programme which has been designed for resellers and system Integrators, the company is able to build loyal and specialised partners.
He explains that the SelectWD programme membership is generally available to qualifying resellers, system integrators, and small corporations that buy WD hard drives only from WD authorised distributors in the region.
Annick Reyngoudt, NEC spokesperson, says as NEC‘s IT platform division, is operating 100% via the channel, instilling effective loyalty programmes is key in the company’s go-to-market channel programmes. “Incentive programmes have proven to maintain, as well as increase the long-term loyalty of our channel partners,” he says. “Incentives give us the opportunity to build relationships, help fill any communication gaps as well as improve the flow and frequency of communication between the channel partners and NEC.”
Reyngoudt says these schemes are highly feasible in the long-run and help increase efficiency and effectiveness through increased motivation to partners. “The ultimate aim of incentives is to recognise partners that invest time in identifying opportunities and succeed in the completion of deals,” he says.
Shahood Khan, Director: Sales and Marketing at regional distributor Empa, says there is no doubt that front-end incentives are extremely vital in fulfilling distribution functions in the channel.
Khan says incentives help in not only helping to build a loyal channel base but are particularly useful in giving direction to solution providers in terms of forecasting and charting their profitability path. “Incentives in managed correctly, they can motivate partners to grow their businesses to profitability,” he says.
Dan Smith, GM for Integrated Marketing for the Middle East and Africa region, says at Xerox the company offers all the necessary incentives such as rebates, channel training, bid, the support, global account penetration, marketing interlock funding, sales incentives and sales operational excellence awareness. Smith says there are many other tactical actions that take place throughout the year – however the above represents a fundamental reason why the longevity of Xerox partners is measured in decades and not months.
Value adding
Baraa Al Akkad, Regional Manager at Axis Communications ME, says while incentive programmes are vital, channel partners need to continue to add-value to the brands they represent in the region, in terms of product knowledge, stock and after sales service. “We at Axis, always stress the importance of receiving feedback from our partners,” he says.
Al Akkad adds that providing continuous and on-going support to customers is definitely the most important aspect of being a VAR and should continue to be a key focus area going into the future.
He explains that while it is the responsibility of the vendor to train to reseller partners on an ongoing basis, partners need to be making the effort to take an active role in this.
Al Akkad points out that the Axis Communications Channel Partner Programme has been designed to help channel partners capitalise on Axis’ offerings in the fast-growing network video market. “As a channel-oriented company, we view our partners as an extension of our team, playing a key-role in the go-to-market strategy and the overall success of our company,” he says.
Al Akkad says lead-sharing, early product information and technical/sales training curricula at the Axis Communications´ Academy are among the many benefits of this programme and is designed to give Axis´ channel partners a distinct sales advantage.
Taj El-Khayat, Director, Channels and Commercial Sector at Juniper Middle East, Egypt and Pakistan, agrees and goes on to explain that incentives on their own are not enough to build a sustainable channel business model. El-Khayat believes that incentive programmes should be embedded into the broader umbrella partner programme offerings as an integrated initiative. “Incentives and rebate schemes are vital in the Middle East channel and help in driving partner commitment, loyalty and sales,” he says.
He says that Juniper through its J-Partner programme is able to offer incentives for individuals as well as companies as a way of boosting loyalty and partner dedication.
“With whatever we do with our partner incentives, we are always mindful to be transparent, credible and conduct business with our partners with integrity.
Judhi Prasetyo, Regional Channel Manager at Fortinet Middle East, says while profits for partners and Fortinet is a key motivator for having an incentive scheme for the channel, it is important to ensure that this is an organic growth for both partners and the company, and also a solution that ultimately benefits end customers.
Prasetyo says incentive programmes are important in helping and encouraging partners to continue to support and promote a given products and solutions to customers. “Fortinet provides incentives to channel partners through its distributor,” he notes. “The scheme is designed to be simple and easy to understand and follow.”
This, says Prasetyo, means that it doesn’t take long for registered partners to claim their rewards. “We also have an trade-in and trade-up programme for end users. Any leads generated by this programme are passed on to our partners,” he says.
Smith say Xerox reaches out to the channel community through its promotion incentive and marketing co-op funds. According to Smith, these programmes seek to bring resellers and partners into Xerox’s network to sell a broad portfolio of hardware, software and services. “It is a simple programme based around a series of incentives for our partners that are used to reward performance and drive behaviour which we believe is mutually beneficial,” he says.
He explains that the programme is constructed to reward performance, not just in revenue or financial metrics but also other abstracts which are beneficial to our business.
Pros & cons
Andre van Rensburg, GM at Opennet MEA, says there are many advantages that can be discussed when it comes to running a rebate/incentive partner programme. Van Rensburg says through the incentives Opennet has been more creative in reaching new clients and, promoting its products. “We’ve been able to develop better strategies in driving the partner sales to ensure their targets are achieved,” he says. “In addition, incentive programmes also help with creating more brand awareness.”
However, Van Rensburg says one of the main disadvantages of running a rebate/incentive partner programme is the partner’s reliance on these funds. “When incentives are cut or reduced, the partner takes this as a loss to their overall business model,” he says.
NEC’s Reyngoudt says the most important advantage achieved through incentive programmes is a loyal channel base and being able to better understand channel partners and their needs. “With these incentives, partners get highly motivated to meet targets that entitle them to win rebates and points to further enhance their growth,” he says.
Reyngoudt says as for cons, smaller partners could sometimes feel de-motivated and this can create a negative environment if they are unable to meet the incentive’s mark-up requirements due to the lack of opportunities in comparison to larger partners. “A great level of care has to be taken while offering incentives,” he cautions.
Juniper’s El-Khayat concurs and says that although there is no doubt that incentive schemes help in building loyalty and commitment to a brand or set of brands, if these schemes are not structured properly they can dissuade partners to commit to an upfront incentive programme. “A lot of effort needs to be placed on value and benefits when developing incentives schemes,” he says. “These programmes have to be on par with what your closest rivals are offering in the market otherwise you’re bound to fail.”
FVC’s Padmanabhan believes incentives are bound to bring in extra motivation and drive towards influencing the sales of technologies and additional investments connected to profits. However, Padmanabhan says at times these can be a decelerator to business by the very absence of it or the utilisation of these additional monies in discounting the products further, creating channel conflicts.
Saifuddin from WD adds that every programme and manual is best when it is as simple as possible. We also tend to keep the terms and conditions as minimal as possible but ensuring that they cover all aspects of conducting healthy legal business practices,” he adds. Saifuddin says it is also important to have gatekeepers in any incentive programme to ensure the partners who are regular and committed are rewarded. He emphasises that incentive programmes are not meant to reward opportunists.
Prasetyo, adds that Fortinet has been fortunate enough in that it has not seen any negative factors arising as a result of running an incentive programme. “We do, however, need to continue to make sure that it continues to help our committed partners succeed,” he says.
With most industry pundits holding the view that incentive programmes do infact boost opportunities for partners, the onus is vendors and distributors to ensure that partners are finding these to be beneficial to their own business growth.
Van Rensburg agrees and goes on to say that Yes, incentive schemes do work in any market climate, if they are managed and driven with continued support and supervision from the companies that run them.
Reyngoudt remarks that there are more opportunities made available to people who are willing to work hard to gain their rewards. He points out that As part of its strategy, especially in emerging economies, NEC is helping business partners boost the margin from the sales of NEC Solutions.
It is clear that vendors and distributors that manage their partner programmes in a transparent and efficient manner are likely to succeed than those that use them to just push product. Incentive programmes should be designed to develop long term channel benefits rather than short-term gains. This is where the focus should be.

In a tough economy, front-end incentives and rebates seem to be the boost that channel partners need to stay buoyant. RWME?s Manda Banda reports.

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