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A well-run rebate programme can do wonders for a vendor’s sales figures, not to mention provide its channel partners with additional income to supplement the revenue earned from ordinary resell margin. It is therefore in both parties’ interests to ensure that financial incentive schemes are implemented in a clear and compelling manner.

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Income status John Maliakal, Toshiba
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By  Andrew Seymour Published  June 21, 2010

A well-run rebate programme can do wonders for a vendor’s sales figures, not to mention provide its channel partners with additional income to supplement the revenue earned from ordinary resell margin. It is therefore in both parties’ interests to ensure that financial incentive schemes are implemented in a clear and compelling manner.

Even with the best product or marketing strategy in the world, vendors still need to offer a compelling rebate model to motivate their sales channels and foster loyalty among partners. If anything, rebate policies now play more of a significant role than ever before in some market segments, due to the challenges that the channel faces in generating a satisfactory return on transactional margins.

But developing a rebate system that achieves what it is supposed to without opening itself up to exploitation is rarely an easy task. Changes in price points, technology and general market trends mean vendors must constantly evaluate the relevance and success of the incentive programmes they operate.

For most vendors, there are specific objectives that they expect to achieve from a rebate programme. In more instances than not it is usually a way of driving incremental business and earning loyalties from the partner. As well as playing an important role in encouraging partner loyalty, rebates keep them interested in winning new business.

Khwaja Saifuddin, director sales MEA and South Asia at Western Digital, is adamant that an effective rebate programme will quickly prove itself to be a vital cog in the channel sales wheel. “These schemes encourage our partners to develop strong relationships with us as they benefit from having special rebates and preferential prices that allow them to grow their business,” he says. “In essence, these schemes offer a two-way support system. Retailers strengthen their business and in turn we help them increase profits.”

While there was a tendency in the past for vendors to implement rebate programmes that were largely vanilla-flavoured and quite obviously lifted from the US or Europe, there is now an acknowledgement that such schemes need to be developed and structured locally to work best.

Only recently, printer vendor Epson revealed that its dealers would be compensated for the volumes they do, taking into account differences in market size across the region.

“Targets for the UAE and KSA markets vary from US$10,000 for Bronze partners to US$300,000 for Platinum partners, except the supplies category which ends at US$200,000,” explained Middle East channel manager Ahmad Qasem. “In return, the incentives percentage and structure varies according to partnership category, and goes from 1% up to 8%. This is an aggressive percentage and I think it even exceeds what partners make on the upfront margins.”

Hard drive vendor Seagate has created several initiatives specific to the Middle East region in order to make it more compelling for local partners. “We have different programmes per country, per customer type and customer size,” explains Ayman Al-Ajouz, channel sales manager for the GCC at Seagate. “They are mainly based on a set sales target and a rebate percentage given accordingly. Over-achievements are rewarded with a higher rebate percentage. We always make sure that the targets set are reasonable, achievable and co-ordinated with the customer.”

Storage networking vendor Brocade is one company that believes a channel rebate model will help its fortunes in the Middle East. It has just embarked on its first ever half-year rebate programme and insists feedback has been encouraging. It now plans to refresh the programme every six months. “Partners stay interested when they see additional margins come in the form of rebates,” says Ali Ahmar, regional sales manager MENA at Brocade.

Like many vendors, Brocade’s rebate programme is by invitation only. In its case, rebates are pre-defined before the start of the qualifying period and shared with selected partners only. During the period that has just ended, all but one of the participating partners achieved their targets. “There is no cap on over-achieving the set targets, but they have to achieve 100% as a minimum to benefit from this programme,” says Ahmar.

Over at WD, a strong degree of localisation has been taking place for some time as far as the company’s incentive programmes are concerned. It runs the SelectWD Partner Programme for internal drives and the Volume Incentive Rebate Programme for external drives, giving partners the choice of taking part in either or both of the programmes. Saifuddin says that through these programmes partners benefit from different pay-out schemes. “We refresh these programmes every quarter and try to be as innovative as possible based on different criteria like partner feedback, demand, market conditions and the previous quarter’s results.”

Mobile PC vendor Toshiba also believes that rebate programmes need to be modified quarterly to stay in tune with market developments and keep resellers inspired. It has not made any structural changes to its own programme since it started, but it is looking to widen it to focus more on partner loyalty. “Toshiba’s partner and rebate schemes work together to achieve both quantitative and qualitative objectives that are derived based on the understanding of the market and of the customer,” says John Maliakal, country manager for Saudi Arabia and Libya at Toshiba. “Further qualitative objectives are added to ensure a healthy business.

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