by Craig DeWolf, CCI

We seem to be getting a lot of calls to put together a SPIF program for channels because “we have to motivate them to start selling now!” Such a request is often reactionary, and ill conceived for what has to be done “now”. Before I go on much further, let me first establish the appropriate context for this entry:

The word “SPIF” is an acronym for “Sale Promotion Incentive Fund” which is often seen with 2 “f’s” (which it doesn’t have), albeit that spelling seems to be somewhat acceptable to me when authors turn it into a “word” vs an acronym (as in “spiff”). In any case, we will use this reference as a sales incentive program targeting individual sales representatives (vs. rewarding Partner Companies as a whole). Literally, a “SPIF” program might be offered to your own sales force, or Sales Reps employed by your channel partners or resellers. For the purpose of this audience, my comments will be directed to those planning on offing such a program to their reseller sales reps.

With that context behind us, the following considerations seem to come up with every discussion surrounding the subject with clients inquiring about putting such an incentive program together. SPIF programs can be especially effective for influencing behavior because they directly target the sales rep: “where the rubber meets the road”, as they say.

Tactical vs Strategic: Tactical SPIF programs are designed to address a short term need (such as depleting stock of an end of life product). Strategic Programs are characterized by longer timeframes and are designed to build “relationships” with participants as much as motivate specific behavior. These are often referred to as Loyalty Programs. The challenge with the shorter-term tactical programs is the investment required to launch one in both cost and time. In addition to creating the infrastructure, there are costs around deploying and communicating the program in an effort to secure participation from all the right parties before the program period is over. What’s interesting to me is how manufacturers underestimate what is required to get mindshare from potential participants, and then once they do, the program expires. So, despite the investment in time and money, manufacturers have to start the process all over again the following year when a similar need arises. More often than not, these hastily designed programs rarely achieve the levels of participation and sales that manufactures hoped. Strategic Programs, on the other hand, create a foundation and a relationship for varying “rewardable” activities over time, and you only need to create the infrastructure and seek buy-in once. Generally, you’ll get a better bang for your buck over time.

Partner Acceptance of SPIF Programs in general: One of the things we have discovered is that a growing number of leading partner companies do not want their vendors influencing sales through SPIF programs. Rather, these partners prefer that all rewards go to the company for redistribution as they see fit. More often than not, the resellers who are against these programs represent the 20% of your partner base that makes up 80% of your sales. Not getting their buy-in can hamper the success of your program. Interestingly, acceptance of such programs targeting reseller sales reps can be higher if it is structured as a strategic program that addresses mutual needs of both the manufacture and reseller, and includes rewards for “Soft” activities (such as training) as well as “hard” sales. This rejection of tactical SPIF program by leading partners is often a surprise by manufactures after the fact. Don’t let that happen to you.

Get your Ts and Cs in order: Terms and conditions are a key requirement for the program before you launch it. Effectively designed Ts and Cs can protect you and your partners from embarrassment–and possibly litigation–in the future. Be sure that all participants agree to the program Ts & Cs as a condition of participation. Regardless of who authors them, it is the sponsor’s responsibility to make sure they are legal and binding within the jurisdictions offered, so be sure your legal team approves all Terms and Conditions for each country that you offer such a program. Note that as much as we take these programs for granted in North America, SPIF programs are flat out NOT LEGAL in many countries in EMEA and APAC as it implies formal employment between the resellers’ reps and sponsoring manufacturer—so don’t take this step lightly. Note that within the US, W-9s will have to be completed and 1099’s will have to be issued to all participants earning in excess of $600.

Consider pre-registration: One benefit to pre-registration is that it can provide an early metric for program acceptance before any sales are made. This will help you determine whether you need to step-up communication efforts in order to get the level of participation you expect throughout the program period. And for program participants, pre-registration can all simplify the process when subsequent sales are made, as much of the personal information has already been pre-registered.

There are many other considerations, too. But those will be topics of future entries. Perhaps you have some hard earned lessons of your own that you’d like to share….

Craig DeWolf is Vice President of Sales and Marketing for CCI.

Craig's extensive experience spans over 20-years, across a variety of industries and distribution models. This background has given Craig an excellent perspective of the issues facing marketers and their distribution partners, and the solutions that will make them mutually successful.

At a recent meeting of the minds of channel professionals, one of the biggest questions on their lips was "how far should they go in helping their channel partners through these tough times?" My POV-You can go far without too much effort.

Interesting times, these. In economic downturns manufactures react by scaling back their own workforce to try to offset any forseen loss in revenue. A natural (but not necessarily universal) fallout to that is an even greater reliance on their channel partners. Problem is, there are less resources available to capitalize on this need, including less direct support through the vendor's channel reps (less reps, means more partners per rep, which in turn means less 1:1 time with partners) and program budgets get scaled back...often waaaay back. In spite of the manufacturers own cutbacks, many are questioning how far they can, or rather "should", extend themselves to help assure partner viability through these tough times-up to, an including, bankrolling partners through the downturn. I say, you may not have to go that far. In fact, a little can go a long way.

Cash Flow is the number #1 concern of most resellers, and indeed most businesses. You can assist your partners in their cash flow needs with very simple changes. This includes little things like prompt payment of Co-op reimbursements or other rewards. For many reasons which may seem valid, many vendors take from 30-90 days to reimburse partners for certain activities-many of which may have been already pre-funded by the partner themselves. Without going as far as extending credit terms, you can improve their cashflow tremendously through this small change.

Another idea is to focus on key partners only. During tough times, there is no time like the present to determine which partners are the "keepers" and which ones are the "losers". Somewhere in the middle are the "Maintenance" partners-those that won't grow without a disproportionate investment, but are otherwise significant enough not to lose. We say focus your attention on the keepers.

As part of that process, now would be a good time to review the business plans of the "keepers" and make sure that those plans are still sound for the pending economic realities of '09. I hear "the worst is yet to come" all the time. Despite being a basic business discipline, most partner companies are not good a business planning. Working with key partners to help them evolve their plan to address the new realities may not cost you much if you approach it right.

Finally, there has been a lot of discussion about how distributors should change their business models to address downturn to help protect, and even support, their vendors revenue during the downturn. I hear strong opinions on both sides of that fence, from "Distributors are closer to the needs of the reseller and local markets" to, "Distributors are only good a providing logistics, not adding value". I'd be interested in which side of this fence you are on and why.

Craig DeWolf is Vice President of Sales and Marketing for CCI.

Craig's extensive experience spans over 20-years, across a variety of industries and distribution models. This background has given Craig an excellent perspective of the issues facing marketers and their distribution partners, and the solutions that will make them mutually successful.