Emerging Trends in Channel Incentive Programs

Emerging Trends in Channel Incentive Programs
Key Take-Aways from the 2015 Channel Incentive Benchmark Study

2
PRESENTER
Steven Kellam
SVP, Sales & Marketing
CCI | Global Channel Management
Diane Krakora
CEO
PartnerPath

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After all, we are in the incentive business…
PRIZES TODAY!

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Respondents: Who We Surveyed
Optimism Varies by Industry
Vendors React to Industry Challenges
An Overall Lack of Access to Information
Partner Programs That Grab Top of Mind
1
2
3
WHAT WE’LL COVER
Digging Deep into MDF/Co-op
Rebates: An Opportunity Squandered?
The Well-Rounded SPIF
The Automation & Integration Lag
Our Conclusions
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5
6
7
8
9
10

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What would you like to change about
your MDF/Co-op processes?
1. ROI (1, 4, 5)
2. Improve partner marketing efforts (2, 3)
3. Pay faster (6)
HOWEVER - IF YOU ONLY PAY ATTENTION TO ONE SLIDE
41% 40%
37%
32%
23% 23% 22% 21% 21%
18% 18%
3%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Improve Data Analytics and ROI measurement
Improve marketing execution by partners
Improve marketing support/program planning
Overlay/ tie back sales data to Co-op/MDF spend
Closed loop process tied to POS data and/or deal registration
Faster payment process
Improve Partner support and issue resolution
Integration with CRM system
Revise guidelines to better reflect company goals
Global standardization
Streamline administration
Other

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 Industry
• Software
• Hardware / Devices
• Telecoms
• Smaller %: Pharmaceutical, Health Care,
Insurance, and Non-High Tech Manufacturing
 Job Functions
• Heavy on Channel Marketing, Channel Sales,
also Channel/Sales Ops and Execs
 Seniority
• Nice mix of Manager, Director, VP, C-level
WHO WE SURVEYED
Hardware
23%
Manufacturing
22%
Software
20%
Other
18%
Telecom
18%
Breakdown of Respondents by Industry
Primary Job Function Within Organization
n Channel Marketing (28%)
n Channel Sales (23%)
n Executive Team (CxO) (14%)
n Other Role (13%)
n Purchasing (10%)
n Product Development/ Technical (3%)
n Sales Engineer (3%)
n Finance (3%)
n Sales Operations (3%)
48%
26%
12%
10%
4%
Position Level
n Manager (48%)
n Director (26%)
n Vice President (12%)
n Program Support/Coordinator (10%)
n C-Level (4%)

8
 Size of Channel: Primary Categories by
Annual Channel Revenue
• < $100 million - $25%
• $100 million to $499 million – 15%
• $500 million to $999 million – 29%
• > $1 billion – 31%
 Really nice mix
WHO WE SURVEYED
n Less than $100 million
n $100 million to $499 million
n $500 million to $999 million
n $1 billion to $2 billion
n Greater than $2 billion
25%
15%
29%
23%
8%
Approximately how much revenue goes through
your channel per year (in $US)?

11
2015 GROWTH PREDICTION
 Hope springs eternal
 Double-digit growth plan is the norm
 Software vendors are the most bullish
about growth this year
0% 10% 20% 30% 40% 50% 60%
About the
Same
Higher
Percentage
of Total
Lower
Percentage
of Total
As a percentage of total company sales, how do you envision
your channel sales revenue will change in 2015 vs. 2014?
36%
57%
6%
0% 20% 40% 60% 80%
Software Industry
Lower Percentage
of Total
Higher Percentage
of Total
About the Same

Vendors React to
Industry Challenges

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#1 pain point for 2015: Complex or cumbersome processes for partners
 Has been the number one for challenge for partners for the past 3 surveys
 But what does it really mean?
 Lots of talk from clients about this… “partner experience” initiatives, etc.
 The key is…what are you going to do?
TOP CHANNEL CHALLENGES
What are your channel team’s biggest challenges?
1. Complex or cumbersome processes for partners 32%
2. Helping partners migrate to new business models (cloud, etc.) 28%
3. Ineffective sales and marketing capabilities from channel partners 28%

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Top overall pain points over the years:
 2010: Poor analytics & ROI tracking
 2012: Sales and marketing readiness from channel partners
 2015: Complex / cumbersome processes for partners
Top 2015 challenge by industry:
 Software: Help partners migrate to new business models
(cloud, etc.)
 Hardware/Devices: Inefficient access to data/analytics
tracking for program measurement
 Telecom/Cable: Complex or cumbersome processes
for partners
TOP CHANNEL CHALLENGES (CONT.)
Pain Points

An Overall Lack of
Access to Information

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Which of the following percentages show the
amount of individuals who believe they do not have
enough data to manage their channel well?
a) 10%
b) 25%
c) 40%
d) 60%
AUDIENCE PARTICIPATION

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 40% of vendor channel professionals say NO
• Do I get the data I need?
• Do CAMs share enough info?
 Channel marketing very dissatisfied with info sharing
 VPs perceive a data access problem most
DATA ACCESS & INFORMATION SHARING
True
60%
False
40%
My channel team members have adequate access
to the program and partner data we each need to
make informed decisions on a daily basis.
True
54%
False
46%
Channel team member access to information by department.
True
73%False
27%
True
55%False
45%
Channel Marketing Channel Sales (CAMs, etc.) Executive Team
True
32%
False
68%
Vice Presidents

Partner Programs
That Grab Top
of Mind

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INCENTIVE TYPES RANKED BY IMPORTANCE
Incentive Programs Ranked by Importance
(1 being most important and 5 being least important)
1 2 3 4 5
Don’t
Offer
Deal Registration 26% 14% 15% 14% 10% 20%
Rebates 25% 14% 21% 15% 9% 17%
Co-op/MDF/Joint Marketing Planning 21% 33% 16% 11% 7% 11%
SPIFs 12% 17% 17% 16% 18% 21%
Referral/Influencer Rewards 11% 15% 20% 19% 14% 22%

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However, most vendors don’t have time or headcount for the majority of partners.
LOOKS LIKE A WHOLE LOT OF PLANNING GOING ON
1%
7%
22%
29%
28%
13%
We don’t have a joint marketing
planning process.
Don’t Know
More than 50%
20-50%
11-20%
1-10%
0% 5% 10% 15% 20% 25% 30% 35%
PercentageofPartners
Vendors
What percentage of partners are involved in your joint marketing planning program?

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Filtered by industry:
 Software: heaviest joint planning
 Hardware JMP is much more exclusive
LOOKS LIKE A WHOLE LOT OF PLANNING GOING ON
0%
8%
32%
28%
32%
0%
0% 10% 20% 30% 40%
3%
6%
6%
21%
47%
18%
0% 10% 20% 30% 40% 50%
1-10%
11-20%
20-50%
More than 50%
Don’t Know
Don’t have a
JMP process
1-10%
11-20%
20-50%
More than 50%
Don’t Know
Don’t have a
JMP process
1-10%
11-20%
20-50%
More than 50%
Don’t Know
Don’t have a
JMP process 0%
8%
17%
21%
25%
29%
0% 10% 20% 30% 40%
Software Hardware Telecom
Vendors Vendors Vendors

23
Which activity does not qualify
as OPEX?
a) Trade Shows
b) Advertising
c) Demo Equipment
d) Direct Mail/Email

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FASB rule 01-9: Classification of Marketing Expenses (must meet all 4 criteria)
1.The payment covers a service by the partner that is a benefit to you
2.The benefit is clearly separable from the sale of the product
3.The benefit could be purchased by you from a source other than the partner
4.You have obtained proof of performance to reasonably estimate true cost
OPEX VS. CONTRA REVENUE
Sales Development Fund or Marketing Development Fund?
Marketing Expenses:
 Advertising (Print/Web)
 Broadcasting (TV/Radio)
 Catalogs
 Direct Mail/email
 Telemarketing
 Trade Shows
Contra-Revenue:
 Certification
 Training
 Seminars
 Demo Equipment
 Funded Headcount
 Recruitment

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Do you offer MDF/Co-op funds?
Filtered by channel size:
 Always ‘yes’ when >$1B
 Often ‘no’ when <$100M.
MDF/CO-OP FUNDS
Yes
77%
No
23%
Organizations that offer MDF or Co-op funds, filtered by channel size.
Yes
59%
No
41%
Yes
89%
No
11%
Yes
100%
No
0%
Less Than $100 Million $100-$999 Million More Than $1 Billion

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 Software: More alternative routes to market
 Hardware & Telco: More physical constraints and commoditization
MDF/CO-OP FUNDS
Yes
67%
No
33%
Yes
89%
No
11%
Yes
79%
No
21%
Software Hardware (High-Tech) Telecommunications

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 Key theme: getting reps into the same room as prospects
 Social media scores low – why?
 Enablement on the rise – increase in more complex sales
MOST IMPORTANT REVENUE-DRIVING ACTIVITIES
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
Customer seminars/ road show/ floor day/ webinar
In-Person Events: Industry Conferences, Workshops, etc.
Funded Headcount/ Brand Champion expense
Demo Equipment
Sales and technical training /certifications
Online webinar events
Email marketing
Outbound Sales Calling/Telemarketing
Product Catalogs
Newsletter/email campaigns
Online Advertising
Co-branded merchandise/ Promotional Items
Thought Leadership content development
Print Advertising
PDF Collateral/Case Studies, Pre-recorded sales/marketing videos
Direct Mail
Public Relations
Website Development and management
Social Media Enablement/Syndication
Broadcast Advertising
Other
For your MDF/Co-op program, which reimbursable activities that you currently offer to your partners do you think represent the
MOST significant contribution in building business for you and your partners?

Rebates: An
Opportunity
Squandered?

29
How does the IRS define a SPIF (as opposed
to a Rebate)?
a) Reward for selling something
b) Reward for buying something

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Do you offer SPIF, Rebates, or Loyalty Rewards?
 73% say yes
 Hardware vendors – heaviest reliance on reward incentives
 Software vendors the least
 Still a lot of old school rebates out there
OFFER SPIF/REBATE/LOYALTY REWARDS
Yes
73%
No
27%
Yes
52%
No
48%
Yes
90%
No
10%
Yes
64%
No
36%

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OFFER SPIF/REBATE/LOYALTY REWARDS
Do you offer SPIF, Rebates, or Loyalty Rewards?
Filtered by channel size:
 97% ‘yes’ when >$1B
 50/50 when <$100M
Yes
50%
No
50%
Less Than $100 Million $100-$999 Million More Than $1 Billion
Yes
79%
No
21%
Yes
97%
No
3%

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Rebates most common
Easy to administer
Easy to get CFO approval
Treated as a discount
Limited impact in shaping pre-sales behavior, since received AFTER sale
Don’t reward the actual sales guy who made it happen
Become an addiction/entitlement, so hard to turn off
MAIN REWARDS FOCUS FOR 2015?
2%
7%
18%
25%
49%
Other
None of the
above
Loyalty
SPIFs
Rebates
0% 10% 20% 30% 40% 50% 60%
+
+
_
_
_
_
What form of reward did most responders prefer?

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 A mix of both is best practice – hard to do
 Use of an application is pre-requisite for targeting individuals
 Filtering by industry:
• Company-level rewarding is highest in hardware
• Software companies showed a balance of doing both
TARGET REWARDS AT COMPANY OR INDIVIDUAL LEVEL?
0% 10% 20% 30% 40% 50% 60% 70% 80%
At the company level.
At the individual level (the specific
salesperson, sales engineer, marketer, etc).
How do you target incentive reward payments to partners?

35
What are the SPIFs for?
 Sales is #1
 Move to behavior modification
 Filtered by industry:
ARE ALL THE EGGS IN ONE BASKET?
0%
10%
20%
30%
40%
50%
60%
70%
What are the MOST effective SPIF
rewards you offer?
47%
19%
13%
19% 22%
13%
6%
0%
10%
20%
30%
40%
50%
Hardware
80%
20% 25% 20%
5% 10% 5%
0%
20%
40%
60%
80%
100%
Software
60%
20% 25%
10%
30%
15% 15%
0%
10%
20%
30%
40%
50%
60%
70%
Telecom

36
How do you pay partners for rewards programs?
 Cash still king
 Filtered by industry:
• Telecoms most open to non-cash
• Software most into cash
• Very cool travel and merchandise on the horizon
HOW DO YOU PAY FOR REWARDS?
0%
10%
20%
30%
40%
50%
60%
70%
Cash (checks,
wire transfers,
ACH, etc)
Gift Cards Reloadable
Debit Cards
Credit Points
Redeemable in
Travel and
Merchandise
Catalogs
How do you pay partners for rewards programs?
0% 20% 40% 60% 80%
n Credit Points Redeemable in
Travel and Merchandise Catalogs
n Gift Cards
n Reloadable Debit Cards
n Cash (checks, wire transfers,
ACH, etc.)
0% 20% 40% 60% 0% 20% 40% 60%

The Automation &
Integration Lag

38
Is your MDF/Co-op program run on an automated system?
 Overall: about half use an automated system
 Filtered by channel size:
• <$100M – 13% automated
• $100M to $499M – 50% automated
• $500M to $999M – 43% automated
• $1B to $2B – 29% automated
• >$2B – 67% automated
MDF/CO-OP: SPREADSHEETS OR AUTOMATED?
Automated System
48%
Spreadsheets
46%
Not sure
6%
Automated
System
50%
Spreadsheets
50%
Not sure
0%
Automated
System
43%
Spreadsheets
52%
Not sure
5%
Automated
System
29%
Spreadsheets
71%
Not sure
0%
Automated
System
67%
Spreadsheets
33%
Not sure
0%
Automated
System
13%
Spreadsheets
80%
Not sure
7%
Less Than $100 Million $100 - $499 Million $500 - $999 Million $1 - $2 Billion Greater Than $2 Billion

39
How do you manage your SPIF and
Rebate programs?
• <$100M – none automated
• $100M to $1B – half automated
• >$1B – 40% automated
SPIFS & REBATES: SOFTWARE OR SPREADSHEETS?
How Do You Manage Your SPIF and Rebate Programs?
n Automated – tool runs calculations and
generates payment batches.
n Spreadsheets – manually calculated and paid.
38%
62%

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 Overall 37% say their MDF system IS NOT
integrated with other internal systems
• <$100M – about half integrated (53%)
• $100M to $1B – about half integrated (55%)
• >$1B – 70% integrated
SYSTEM INTEGRATED WITH OTHER SYSTEMS?
0% 5% 10% 15% 20% 25% 30% 35% 40%
If your MDF/Co-op system is integrated (automatically shares data)
with other internal systems, which ones is it integrated with?
n Not Integrated
n PRM/Partner Portal
n CRM
n Don’t Know
n ERP
n Deal Registration System
n Learning Management System (LMS)
n Other

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Key take-aways:
 Some old habits die hard…
• Use of volume rebates
• Complexity for partners
• Check payments
• Limited access to information
 Growing awareness of the importance of partner experience
 Telecoms slowly but surely gaining on software and
hardware in channel maturity
 Cloud models are now core to all tech channels
IN CLOSING
Key Take-Aways

43
Steven Kellam
SVP, Sales & Marketing
CCI | Global Channel Management
steven.kellam@channelmanagement.com
www.channelmanagement.com
Diane Krakora
CEO
PartnerPath
dkrakora@partner-path.com
www.partner-path.com
THANK YOU!
QUESTIONS?

Emerging Trends in Channel Incentive Programs

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