According to an article I’ve read by Accenture, high-tech companies are overspending more than 10% when it comes to sales channel incentive programs. Accenture also explained that about 80 percent of the turnover for high-tech companies is from indirect sales channels. In addition, 3 to 5 percent of the revenue is attributed to sales channel incentive program budgets. That said—a lot of money goes into these budgets. How can you make sure that your money is well-spent? The trend is that importance of business knowledge becomes far more important in the sales process. Not surprisingly, first-time consumers have a lot of questions when buying high-tech products. This means that your sales partner or intermediaries need to level up their game when it comes to product knowledge and the business relevance of your product. So, when you think about your sales channel incentive programs, it’s important to think about these elements as well. Now, what are the drivers of overspending? While the situation can be different from company to company, Accenture found that there are three main factors that contribute to high-tech companies’ struggle to make their incentive spending more effective:
1. Complexity
Over the years, companies have been adding programs and incentives and a lot more Terms and Conditions to their incentive programs. This makes it difficult for partners, intermediaries, sales management, and account management to identify the incentive that can apply to a specific deal. Often, partners or intermediaries will spend a lot of time sorting through sales playbooks, programs, and documents that are unclear about incentives and price breaks. The partner or intermediaries can ask managers to clarify. However, managers may not be able to give a clear answer or find the situation too complex.
The result? Business Partners either apply for all the promotions and let your managers find out the ones eligible, or run down to another vendor. You can’t win the moment it gets too complex, so keep your programs and incentives simple.
2. Decentralization
A lot of companies have different sales programs in different departments. This makes it difficult to keep track of incentive spending, and also track P&L (profit and loss).
A company can also end up with duplicative programs and spend more to run them both. This eventually erodes their ROI and reduces their profit in the long run. To avoid this scenario, you have to make a single entity in charge of your incentivize programs and strongly delegate accountability for incentive spending. This way, you can get a full overview of where the money is going, and take action to address overspending.
3. Infrastructure Limitation
The third major driver of overspending is infrastructure limitation.
Data is all over the place. Companies conduct ad hoc analysis and often find it super difficult to get an overview of where the money is and in what process. There are limitations in terms of analytics because the investment is too limited. This makes it difficult for companies to gain insights on the performance of their partners or intermediaries and programs, as well as ROI.
What Have We Learned?
If you’re working with indirect sales and it’s an important part of your turnover, think about how you can make things easier. Brainstorm a sales strategy that can help you centralize things, and determine if you’re investing enough money in the analytics of your incentive programs.
Want to talk about your intermediaries, sales strategy, or sales channel incentive programs? Got any comments or suggestions? Let us know in the comments below.
