Rebates and incentives

In a market frequently tempted by price and the opportunity to make a short-term gain, instilling loyalty in partners can prove to be a monumental challenge. One solution is to provide a compelling channel programme that inspires continued partner loyalty and helps resellers maintain healthy and sustainable operations. Rebate and incentive programmes now form a major part of vendor go-to-market models, but how do you ensure the scheme is effective?

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By  Dawinderpal Sahota Published  December 27, 2006

|~|Khawaja,-Hafeez200.jpg|~|Hafeez Khawaja, Western Digital|~|In a market frequently tempted by price and the opportunity to make a short-term gain, instilling loyalty in partners can prove to be a monumental challenge. One solution is to provide a compelling channel programme that inspires continued partner loyalty and helps resellers maintain healthy and sustainable operations. Rebate and incentive programmes now form a major part of vendor go-to-market models, but how do you ensure the scheme is effective?

Channel Middle East delved into the emotive world of rebates and incentives and surveyed five major vendors to find out what they are doing to keep partners in the Middle East motivated.

They are: Bruno Haubertin, partners and alliances sales organisation manager at Sun Microsystems; Hafeez Khawaja, senior regional director for MEA and South Asia at Western Digital; Hisham Esaadi, director — alliances and channels MEA at Oracle; Kevin Isaac, regional director MENA at Symantec; and Salim Ziade, solutions partner organisation manager at HP Middle East.

CME: What role do rebate and incentive schemes play in your Middle East channel strategy?

Kevin Isaac: R&I schemes need to be designed to drive certain behaviour in the channel. The vendor needs to make sure that the scheme encourages partners to use their rebates for training, reinvestment in the market and investment in people. The end-user in this region tends to drive very hard bargains and there is a danger that the partner will use the rebate or incentive to discount the end price, and this is something we definitely try to avoid.

Hafeez Khawaja: The bigger benefit for partners — rather than financial benefits, which obviously they get if they achieve their target — is that they get first-hand information on technology, product road maps and any other strategic decision that Western Digital makes. This means partners can adapt their strategy based on this information and gain a competitive edge. It also builds communication and creates a personal relationship with the partner, and I think that’s a real strength for a vendor with a channel.

CME:Can you give us a brief overview of how your partner and R&I schemes work?

Bruno Haubertin: We have just launched a new programme called the Sun Partner Advantage programme. Partners who have reached a certain level of investment with us are categorised according to type and then get three potential levels of rebate based on achievement, direction and status. The partner can essentially define his own type of personality by choosing which product type he wants to focus on and to what extent he wants to specialise. We always try to align the objectives of our partners with our own. This scheme will be in place at the beginning of next year with the full roll-out in July.

Salim Ziade: Our main objective is to align our partners' strategy to HP’s strategy but we can’t disclose too much information about our scheme because we consider the HP Preferred Partner Programme as a competitive tool. It is recognised by the industry and all of the channel partners as the best scheme on the market.

KI: We have platinum, gold and silver partners. We categorise our partners according to qualifications, plans, commitments and skills. They then fall into different bands of relationships, margins and rebates. We only give leads to platinum partners and we would only help these partners really develop.||**|||~|H-Essadi-Oracle200.jpg|~|Hisham Esaadi, Oracle|~|CME What are the main objectives you seek to achieve from an R&I programme?

HK: We want to achieve breadth of resellers and inspire loyalty from them. We also want to be close to them and solve their issues. We want partner satisfaction by interaction and by building strong relationships. It’s much more than a financial reward; it’s a vendor-channel relationship that we offer.

Hisham Esaadi: We aim to use our schemes to encourage partner loyalty; to keep our partners interested and willing to do business with us. The scheme also helps build pipelines and strong relationships through constant communication with our partners. Also, these R&I schemes serve as a helpful tool when recruiting partners as they encourage potential partners to do business with us.

BH: There are several partners who have been putting lots of people in training and been fully dedicated to Sun — we want these partners to be rewarded for their commitment. On the other hand, we also want to open the door and reach partners that we had never reached before. We now have a full range of Opteron AMD 64 processors and this type of platform is normally sold in more of a distribution way rather than the value-add project-based way. It’s the first time we’ve offered this type of product so we are looking for a different type of partner for this range.

CME How often do you refresh your R&I schemes?

BH: Not that often, actually. The previous programme lasted five years but we are looking to refresh it now. Every year we consider whether or not to change the programme and we also review the performance of our partners on a quarterly basis to see how effective the scheme is.

SZ: Once a year we administer a full survey and then another smaller refresher survey for certain partners during the course of the year too. We also have numerous one-to-one meetings with our resellers about the schemes, which provide continuous feedback on how the programme is doing. It helps us to evolve and stay one step ahead of competition.

HK: We refresh our scheme every quarter, because we have new products coming in and changes to our regional and corporate strategy. We change our focus, from retail products to enterprise products and sometimes to mobile products, and that’s why we refresh the schemes every three months.

KI: We launched a two-year strategy in March and we monitor the scheme all the time. One thing that we launched first in the Middle East, which is now being rolled out globally, is an air miles programme. We actually offer our partners’ staff air miles for the work that they do with us and they get these air miles every time they reach a certain target for sales and training.||**|||~|rebates-and-incentives---br.jpg|~|Bruno Haubertin, Sun Microsystems|~|CME: How do you communicate your schemes to resellers?

HE: The Oracle Partner Network is an online web portal that each reseller has access to. It is catered towards each individual reseller and contains all the information that they might want to know. We regularly communicate changes through e-mail and direct marketing campaigns. We also try to arrange regular one-to-one meetings with our partners in order to give them an opportunity to raise individual concerns with us. Word-of-mouth is also a useful way of communicating information amongst resellers.

HK: Information for resellers will go out through the new website that we are launching for our partners. By next quarter everything will be online. The reseller can log-in, check their account, where they stand with their target and how much they have achieved. They can order brochures, ask for information and raise any issues they have.

BH: We communicated our new scheme to our partners in different formats. The first format was on the website and then we also announced it to our key partners during our symposium last month in Mauritius. Next month we will be holding one-to-one meetings with individual partners to review their status, re-explain the new programme and make sure that each reseller ticks the right sort of boxes in terms of their product and business focus.||**|||~|rebates-and-incentives---ke.jpg|~|Kevin Isaac, Symantec|~|CME: How does your scheme encourage partner loyalty?

BH: The notion of loyalty is a very open one but, in practice, I think that at the lower end of the spectrum the partners’ loyalty is driven by the profit that they get from Sun’s products. At the upper end, where we’re talking about integrating complex solutions into banks or oil and gas companies, loyalty is dependent on the relationship between the partner and the vendor. We have account managers, technical experts and advisors all working as a team with the partners on these accounts. Implementing solutions involving complex integration is a long-term engagement that is largely dependent on the relationship, and a good relationship generates loyalty.

SZ: Beyond purely monetary incentives, there is much more to this programme. When you are part of this programme, you have access to special pricing, access to HP marketing funds, support in training and first-hand access to new product releases. When you are part of the programme, you are completely part of the extended HP family.

HE: We encourage loyalty amongst our partners by generating leads, which we pass on to our partners. Oracle is very privileged in the fact that we are very self-sufficient and could carry out all of our operations directly with the end-user, but because the Middle East is such an extensive region, we depend on the channel to act as our eyes and ears on a local level. Partners working with us are therefore at a greater advantage as we have vast resources, which they can benefit from.

CME: Why should a reseller join your programme?

HE: Our scheme is very easy for a reseller to adopt, and Oracle is continually embracing new initiatives, keeping our schemes ahead of competition. Also, with Oracle, a partner is assured of a healthy return on investment.

HK: If you see real value in it, quarter after quarter, it drives your decisions for the future. Financial value is part of the equation but there’s a lot more non-quantifiable value in the scheme which has been recognised over years and that’s why partners have been associated with us. We’re not here to distribute money, we’re here to create a partnership with the channel — a partnership where resellers feel that WD adds to their business overall.

KI: We don’t use our schemes to recruit partners. Hopefully, partners see the value in working with us not because of our schemes, but because of who we are as a company, our level of technology and the value that we can provide to their customers. The scheme is really designed to improve their capabilities and to bring focus to our partners’ operations.

CME: What do you believe defines a good R&I programme?

HK: I think it’s all about the best way to share the gains with the channel. When the market grows 5% to 10% — and a partner’s business grows 30% to 40% — that is the value that we focus on. It’s what keeps them motivated and makes them want to be part of our programme. You can hunt for a better price anywhere in the world as we are living in a global village and you can go on the internet to find a better price, but these are not the people who will add any value to your business like we do here.

BH: I think that a good rebates and incentives scheme has to be based on non-disputable achievement, realistic in terms of targets, and attractive to partners. I would say that 50% of the income from a scheme should come from the profit made from a product and 50% from rebates. For example, a reseller should make 5% profit on a product that he sells, and then another 5% in the rebate.||**|||~|Ziade,-Salim-----HP-----Man.jpg|~|Salim Ziade, HP|~|CME: How do you prevent your R&I scheme from becoming too complicated?

HE: Oracle is flexible enough to be able to take any one initiative and localise it. For example, we have made successful initiatives in the UK work at a local level in the Middle East. Therefore, we have a proven track record of communicating and implementing schemes in a way that is not too complicated for the reseller.

KI: One of our key focuses globally is our partners. Naturally, bureaucracy clouds schemes like this but I think it’s important to keep listening to the partners and stay open-minded. If we do that, we’re on the right track to overcoming these sorts of problems.

SZ: We need to have a balance between something that’s simple and understandable enough to convey the message, yet elaborate enough to support all the HP business targets among all the business groups, because HP has a huge portfolio of products.

CME: How do you prevent resellers from using the R&I benefits to discount end-user prices?

HK: Sometimes we don’t give a cash reward, instead we provide support and allocate money to spend on marketing activities. This requires proof of purchase so resellers cannot drive those funds into the pricing.

HE: We have a consistent universal policy regarding incentives for resellers and we tend to have long-lasting relationships with our partners. It’s usual to see our partners coming into our office to do their work because they are part of the Oracle family. We are very selective in our recruitment to ensure that our partner base is protected.

KI: It’s very difficult to actually make it cut-and-dried. Partners can sell their products for whatever they want to; they can give it away if they want as it’s a free market economy. We sometimes require our partners to put plans together and show us how they’re spending their money, how they’re investing, and how they’re building their business. We’d be much more inclined to work with a partner who’s structured in its approach, has a plan and delivers a good end product. The platinum partner space is a very select club, and only partners who deliver that value are the ones that are going to be there.

SZ: We cannot prevent a partner from using their money the way they want. We can only advise them that we’ll support them on deals and reassure them that they don’t need to do that with HP products in order to succeed in the marketplace. ||**||

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