This Common Sales Technique Could Be Costing You Thousands Of Dollars

A recent study of IT channel executives revealed an increasing dependence on the channel, and more specifically, on special pricing requests to drive sales and revenue. But what executives don’t realize is that these and other common sales incentives could actually be costing them money in the long run.

Organizations rely on a variety of promotions and incentives to encourage resellers, distributors, and other channel partners to sell their products or services. For example, there are special pricing requests, which are one-off discounts to help partners sell products. These are not to be confused with Special Pricing Agreements, rebates, and chargebacks, which offer pre-arranged pricing discounts. However, these types of incentives are tactical rather than strategic.

What works better? Try engaging your channel partners in co-marketing activities and rewarding them for their investment in expertise and sustainable efforts.

A growing trend with many channel teams is to encourage partners to develop expertise and behaviors that will result in a more sustained selling advantage. For example, investing in co-marketing activities that are planned and funded by the manufacturer, and then performed by partners at the field level, is a more valuable strategy than a one-off sale. The fund which pays for the activity is called a marketing development fund (MDF).

Think about it: One-off price discounts and back-end rebates reward a single sale. This method is short term and high cost by definition. In contrast, rewarding the investment and execution of marketing programs in the channel builds a competitive advantage for your sales efforts and will last far longer. Analysts, like Forrester, report that co-marketing and MDF activities are more cost-effective than one-off pricing—as long as the activities are some of the right ones.

How does your organization engage the channel in co-marketing and MDF planning? If your organization is like most, you struggle. Without a system in place, most teams plan co-marketing activities through phone calls or emails. At best, there is a marketing plan document, but it often is misplaced and out of date before the MDF funds are spent.

Reporting on MDF utilization is another common challenge described by channel teams. For example, requiring and receiving proof of reporting from channel teams are two different things. Most often, reporting is inadequate. But, partners are reimbursed for activities reported because partner engagement, loyalty, and sales productivity are the goal. Payment delays can cause real problems for partner cash-flow and undermine the strategic goal of the MDF program.

As a result of these challenges, channel teams retreat to short-term incentives. But finding ways to overcome the challenges is well worth the effort. Partners are responsive to better business planning and hungry for actionable insights. Channel teams should prepare for quarterly business reviews with partners by obtaining sales performance data within their category, region, and strategic markets, and then help them discern why longer-term co-marketing efforts help sustain sales productivity. A strong foundation of MDF and co-marketing allows your organization to reap the benefits for a long time to come.

The added bonus of the more strategic approach? Channel partners are more engaged, loyal, and sales productive.

For more information and best practices for channel-intensive businesses, download the recording of the recent Revitas webinar titled “Overcoming the Channel Paradox.” The webinar presents information from recent studies that reveal how channel teams are choosing short-term, high-cost tactics over longer-term, sustainable advantages that have been shown to decrease costs while accelerating revenue.

This Common Sales Technique Could Be Costing You Thousands Of Dollars