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Principals regularly announce schemes and incentives to push product sales. Nothing wrong with that. The problem arises when there are too many schemes running simultaneously and the manufacturers are not able to meet their commitments. This is especially the case during quarter and year endings. Agreed that manufacturers are under immense pressure to meet their quarterly or annual sales targets and despite their misgivings, the channels generally lap up these schemes.

The issue gets complex when the manufacturer has multiple schemes running for each of their myriad SKUs. When thousands of claims pour in from all corners of the country on a daily basis, and each claim has to be verified and processed, one can get an inkling of the humungous task faced by the manufacturers. If claims are not settled at the appointed times, channel partners accuse principals of making empty promises. While this may not be entirely true, the channel community is justified in its criticism.

Vendor Call
So, does the crux of the problem lie in the fact that incentive schemes are far too many and far too frequent? Yes and no, say vendors. According to some, the schemes are never too frequent. The problem arises when the principals are unable to honor their commitments. Whenever incentive schemes are controlled and honored, there is no issue.

Says S Rajendran, GM, Sales and Marketing, Mobility and Display Products Group, Acer India, "In an industry where margins are under constant pressure and RoI is sometimes an issue, channel partners look at the principal organizations to ease their pain. Channel schemes are structured to either incentivize partners to 'push' up sales or to make it easier for them to sell, by giving customers an additional incentive to buy."

Agreeing with him is Sandeep Arora, Channel Sales Manager, Intel South Asia, who said that the need for, or frequency of incentive schemes is dependant on the short, medium and long-term goals of the vendor organization to move its products in the market. "Incentive schemes are a means to popularize vendor products in the channel, liquidate inventory and push products for initial impact," he added.

But there are vendors who feel that keeping too many schemes and incentives creates confusion and inconvenience not only for the channel partners but everyone involved. According to them, it is better to announce loyalty programs with fixed parameters at the beginning of the quarter, clearly indicating the 'reward schemes' for all the efforts put in by channel partners. It is also important to keep the communication lines open and collect feedback on schemes so as to reduce problems. "Schemes and incentives play a critical role in a company's channel strategy. With a crowded market place and a variety of products available, it is essential for companies to engage with their partners on a continuous basis. Not only do these programs boost sales they are also an excellent motivational tool for channel partners. In addition, such programs suffice as key differentiators for vendors in the market," opined Dhiren Singh, Assistant Director of Marketing and Consumer Imaging, Canon India.

Incentive schemes also create a pull for the product and excitement at the customer level. The need of the hour, vendors feel, is enough people to sell the products and make them available to the customers. Stressing that 'push' should not be always seen from a negative perspective, principals are of the opinion that incentives are the additional 'motivation' that channel partners need to concentrate on a vendor's offering. Well-designed schemes help to strengthen the bond between the vendor and the channel organization, according to them.

Given that many products and services are truly unique, high-end, and are competing with new introductions in the market, companies need to create a strong recall and brand loyalty for their products in their partner minds. Like R Manikandan, GM, Sales and Marketing, LG Electronics Ltd put it, "The ultimate goal of any scheme is the profitability of the company and its partners, liquidation of goods and satisfaction of the end consumer."

Vendors are also clear in their verdict that channel partners do not unnecessarily raise an issue of claim settlement. According to them, if the fulfillment process is well documented, there would be no cause for complaint. However, if there is an inordinate delay even when all terms and conditions of a scheme have been met, then the channel feels let down. So it is critical for the vendors/principals to keep the communication lines open at all times, work closely with partners and ensure that there is no room for complaints.

"Claim settlement is a very sensitive issue for all companies and any delay definitely causes friction. All companies have faced this during some point. However, as processes have evolved, this area has been streamlined to ensure complete channel satisfaction. Most effective solution to solve this issue would be to have simpler schemes, unambiguous procedures for settling claims, proper supporting documents and using IT systems to streamline the same," says Singh of Canon.

Vendors also feel that multiple schemes causeproblems if their backend infrastructure is not robust enough to handle them. With many vendors adopting the online way, and claim processing being outsourced to professional organizations, these problems can be resolved faster. Multiple schemes running parallel can cause confusion in claim settlement if communication and documentation is not explained to the partner and the claim processing person clearly.

Incentive schemes are devised based on feedback as well as market imperatives since it is not possible for companies to work alone and capitalize on all the opportunities that are available today. It is essential therefore that companies work with a strong network of partners to leverage their complementary strengths. Principals need to keep in tune with their channel requirements and market developments by designing and developing schemes and incentives that are reflective of the market scenario in question.

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