Emerging Trends in Channel Incentive Programs

Key Take-Aways from the 2015 Channel Incentive Benchmark Study

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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

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2

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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

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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 measurementImprove marketing execution by partnersImprove marketing support/program planningOverlay/ tie back sales data to Co-op/MDF spendClosed loop process tied to POS data and/or deal registrationFaster payment processImprove Partner support and issue resolutionIntegration with CRM systemRevise guidelines to better reflect company goalsGlobal standardizationStreamline administrationOther

Who We Surveyed

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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 SURVEYEDHardware

23%

Manufacturing22%

Software20%

Other18%

Telecom18%

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%)

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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)?

Optimism Varies by Industry

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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 theSame

HigherPercentage

of Total

LowerPercentage

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

True60%

False40%

My channel team members have adequate access to the program and partner data we each need to

make informed decisions on a daily basis.

True54%

False46%

Channel team member access to information by department.

True73%False

27%True55%False

45%

Channel Marketing Channel Sales (CAMs, etc.) Executive Team

True32%

False68%

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 5Don’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%

Pe

rce

nta

ge o

f P

artn

ers

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

Digging Deep into MDF/Co-op

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Which activity does not qualify as OPEX?

a) Trade Shows

b) Advertising

c) Demo Equipment

d) Direct Mail/Email

AUDIENCE PARTICIPATION

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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 REVENUESales 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

Yes77%

No23%

Organizations that offer MDF or Co-op funds, filtered by channel size.

Yes59%

No41%

Yes89%

No11%

Yes100%

No0%

Less Than $100 Million $100-$999 Million More Than $1 Billion

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Filtered by industry:

Software: More alternative routes to market

Hardware & Telco: More physical constraints and commoditization

MDF/CO-OP FUNDS

Yes67%

No33%

Yes89%

No11%

Yes79%

No21%

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/ webinarIn-Person Events: Industry Conferences, Workshops, etc.Funded Headcount/ Brand Champion expenseDemo EquipmentSales and technical training /certificationsOnline webinar eventsEmail marketingOutbound Sales Calling/TelemarketingProduct CatalogsNewsletter/email campaignsOnline AdvertisingCo-branded merchandise/ Promotional ItemsThought Leadership content developmentPrint AdvertisingPDF Collateral/Case Studies, Pre-recorded sales/marketing videosDirect MailPublic RelationsWebsite Development and managementSocial Media Enablement/SyndicationBroadcast AdvertisingOther

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?

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How does the IRS define a SPIF (as opposed to a Rebate)?

a) Reward for selling something

b) Reward for buying something

AUDIENCE PARTICIPATION

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Do you offer SPIF, Rebates, or Loyalty Rewards?

Filtered by industry:

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

Yes73%

No27%

Yes52%

No48%

Yes90%

No10%

Yes64%

No36%

Software Hardware (High-Tech) Telecommunications

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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

Yes50%

No50%

Less Than $100 Million $100-$999 Million More Than $1 Billion

Yes79%

No21%

Yes97%

No3%

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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 theabove

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 specificsalesperson, sales engineer, marketer, etc).

How do you target incentive reward payments to partners?

The

Well-Rounded SPIF

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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%

Hardware80%

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

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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 ReloadableDebit Cards

Credit PointsRedeemable in

Travel andMerchandise

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%

Software Hardware (High-Tech) Telecommunications

The Automation & Integration Lag

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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 System48%

Spreadsheets46%

Not sure6%

Automated System

50%

Spreadsheets50%

Not sure0%

Automated System

43%

Spreadsheets52%

Not sure5%

Automated System

29%

Spreadsheets71%

Not sure0%

Automated System

67%

Spreadsheets33%

Not sure0%

Automated System

13%

Spreadsheets80%

Not sure7%

Less Than $100 Million $100 - $499 Million $500 - $999 Million $1 - $2 Billion Greater Than $2 Billion

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How do you manage your SPIF and Rebate programs?

Filtered by channel size:

• <$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 NOTintegrated with other internal systems

Filtered by channel size:

• <$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

Our Conclusions

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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

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Steven KellamSVP, Sales & Marketing

CCI | Global Channel Management

steven.kellam@channelmanagement.com

www.channelmanagement.com

Diane KrakoraCEO

PartnerPath

dkrakora@partner-path.com

www.partner-path.com

THANK YOU!

QUESTIONS?