The final objective of channel schemes/promotions is to promote the end-product, and help partners sell more. Considering this objective, vendors and distributors design/implement schemes based on products and geographies. These schemes involve cash incentives, freebies or even foreign trips. However, are vendors consulting partners before planning any scheme? Or are they transparent enough during their planning process? If the answer to both these questions is no, then 'what lies beneath' is a mystery for the channel community. Whether it's a foreign trip or cash incentives, what it takes for partners to attain it is hard to find out. Let us understand a few perspectives.

Mixed Bag:

There's a 'mixed bag' of opinion from partners on this issue. According to Aligarh-based Vijay Bhargavva, Proprietor, Computer Wizard, "Promotional schemes have always been an inherent part of IT distribution. However, channel schemes are effective only if they are planned and properly executed by vendors keeping channel's benefit in mind. To meet the targets, dealers many times indulge in price under cutting and create unhealthy market competition."

Adding more to it, Ludhiana-based Ankur Gupta, Proprietor, Royal Infovision, said, "Schemes are full of risk as a lot of discrepancies crop up during and after the period. It is essential for a partner to read the terms and conditions before signing. Generally, distributors do not communicate hidden clauses, and in disputes decisions always go in favour of the vendor.

Many partners believe that the vendor s reimbursement policy is a major issue, as they do not settle payments within the timeframe. "At times, we've to wait around three-six months for payments. In many cases, vendors float schemes to compensate for the high value of the product without reducing the price, and any discount has to be passed on to resellers to push products," added Bhargavva.

Plus there is pressure on partners to meet targets. Partners in small cities complain about vendor indifference. "In smaller cities, settlement takes longer time. It is a very cumbersome process and it also pressurizes us to generate volumes. If vendors can improve and promptly settle process, it will help us a lot," Shimla-based, Ashwani Sharma, Owner, Ace Infotech Systems said.

"These schemes should be region and tier specific. If a scheme works well in A-class cities, it does not mean that it will work for the emerging markets. Vendors should first figure out which products are in demand and what kind of schemes will attract the channel. There are stockpiling and claims recovery issues as well. Along with rewards and recognition, the schemes should also give partners options of alternative material benefits," added TK Arun, Arctech from Shillong.

However, all partners do not have bitter feelings. Sharing a positive view, Bhopal-based, Ashish Jain, Owner, Sam System, said, "Schemes can be fulfilled through various value propositions such as bundled gifts, discounts and foreign trips. These trips provide a common platform for the channel community to interact and exchange views with suppliers and vendors."

The Good and the Bad:

For vendors, these schemes are an effective tool to push product sales and create awareness. In the words of Sameer Mathur, Head (Solution Partners Organization), HP India, said, "This is very important from a vendor's perspective as it creates partner excitement and also offers avenues for improvising sales. While such schemes impact the overall volume positively, there is a need to support them with parallel investment. Also the products and solutions around which the schemes have been built need to have a strong value proposition."

Echoing Mathur, MA Mannan, Country Manager, Corsair Memory, said, "Channel schemes motivate partners to increase business quantity, but it does not work on all IT products. Partners do push the products wherein the schemes are attractive and when there is good return on their efforts. It also helps in liquidating stocks which might have been stocked up at the vendor's end."

However, vendors do believe that more needs to be done on this front. "The need is not only to innovate schemes and incentives, but also support these by training the sales force of the channel partners, thus enabling them to sell better," said Mathur.  

In the words of Mannan, "Schemes should be strategically drafted. Few criteria for initiating a scheme can be a need for a scheme, the ROI, the reach and the visibility attained at the end of the scheme. At the end of the day margins matter the most."

In the words of Tanmay L, Regional Manager, Cooler Master, "Schemes motivate partners to stock more material than the regular purchase. Even the focus of channel partner shifts towards the vendor offering the scheme. However, vendors should stop giving direct monetary rebates. On one side, it boosts sales which are limited to particular group of channel partners, but on other side it disturbs comparatively small traders in the market ultimately losing their faith in the vendor."

Do Schemes Provide the Extra Push?

Distributors feel that schemes provide that extra push to gain the momentum at various stages of sales cycles. According to Sudhir S, Managing Director, Inspan Infotech, "Schemes will work better for products with lesser life cycles. One can look at liquidating the stocks for new products. They emerge from different needs. Components undergo continuous change in terms of price, models / versions etc. Needs of geography / market segment can also be a trigger. Apart from this whenever one foresees a huge potential to push a particular SKU schemes come very handy."

Sriram S, CEO, iValue InfoSolutions, said, "These schemes help partners, since margin becomes a challenge, and additional earnings through schemes help the business. It's also a tool to get attention, mindshare and thus bandwidth of the channel for distributor / vendor offerings when administered in a fair and transparent manner."

For Sanjiv Krishen, Chairman, Iris Computers, "Yes, we do believe in the fact that schemes and incentive plans encourage partners to sell more. It is very human that as and when one sees more returns than usual in selling something, our attention and focus gets diverted towards it. Schemes and incentives have become more relevant in these difficult times wherein competition is stiff and channel partners are operating on wafer thin margins. Anything extra is more than welcome."

ChannelTimes Says:

Although vendors and distributors claim that channel schemes are helping partners in generating business, at the partner level the real benefits of channel schemes are yet to be de-centralized, as they are limited to the large partners. Once the entire channel partner community, irrespective of size and area, enjoys these schemes' benefits, the real motive of these schemes are yet to be achieved.