In 1981, George Kriza was working as an outside sales rep in Chicago for Sony when an interesting opportunity presented itself. A cocky computer startup called Apple contracted Kriza to find a way to sell its products to a market that didn’t seem to want them. For 13 years, he roamed the U.S. and Canada representing over 200 major brands.
In 1993, Kriza left the sell side of the channel and entered the marketing side. He founded MTC Performance, a consultancy focused on helping startups and vendors create dynamic, successful channel programs. He’s seen a lot of trends in channel programs and incentives come and go during his more than 20 years in the channel. When he first entered the industry, for example, travel programs were prevalent. Then 9/11 happened, and the liability factor was too high. Vendors moved on to the next big thing.
“We saw a migration from travel being a being a showpiece to merchandise programs to prepaid card programs being strong,” Kriza says. “And those that originated around ’95 to ’98 continue to be strong.”
But perhaps the most surprising thing is not what’s changed, but what’s stayed the same. Avoiding channel conflict is still the biggest problem Kriza sees. Whether it’s vendors rolling out competing factions between their channels and their internal sales teams or a tug-of-war between marketing and sales over who’s going to head the channel program, a lack of clarity in terms of who’s doing what winds up creating a lot of tension, he says.
Internally, Kriza feels a manufacturer’s executive management is very involved in the idea of having a channel program, but not so much in helping shape, sell or execute it. “It often originates with a vice president at the sales level wanting an incentive program for the channel. Then it’s handed off to marketing to implement, and the day-to-day often resides at the channel marketing manager level,” Kriza explains. “It’s very rare for a channel chief or VP of marketing to deep dive into the results of the program. They may set a tone, but then they do a handoff.”
When the channel marketing managers get mired in the everyday tasks and minutiae, they wind up losing focus on the underlying strategies and business goals. There are a lot of missed opportunities because of a lack of focus on the bigger picture. Kriza advises program managers to take map out their channel program’s structure: Where they are today, where they want to go and how big their channel audience is. “The typical size of an incentive program is between 200 and 5,000 participants. There are way more channel partners than that. It’s just that they’re vastly underpenetrated.”
When a vendor doesn’t keep its eyes on the business outcomes they want from their program, it doesn’t cause confusion just inside their own operations. It stymies the channel partners and keeps them from reaching their full potential. When manufacturers use something besides business outcomes as the driving force behind their programs, no one wins.
“Some people even in the manufacturer community like the idea of a flat percentage to be allocated across all SKUs, but that’s a misguided idea,” Kriza uses as an example. “Instead, they should be looking at driving better business outcomes.” If you want to reward the best people, do you have a structure that is going to pay them great when they meet their sales goals? Or do you take this granular approach of every SKU gets the same small amount? The different structures drive different outcomes. You have to ask both the manufacturer and the reseller what they’re really trying to accomplish. Is it valuable only to sell core products? Are there suites of products? Are there cases where there are clear benefits when multiple manufacturers work together?
“The sad reality is that there’s too much focus on the prize and not on the business outcome and structure of the promotion,” Kriza says. “People launch a program and want to start simple, and it leads into the linear, non-creative and contained way of running the program. Everyone gets locked into logistics. There’s a bias for simplicity, which has a benefit, but tends to work against you in terms of accomplishing specific business outcomes.”
So what should channel managers do to optimize their programs’ chances for success? Kriza says the number one thing is to create one place where partners can go to understand all of their opportunities and educate themselves. There’s too much vendor noise in the partner world for the old methods to work anymore.
“When you think of traditional marketing communications strategies built around legacy methods like email, snail mail, launch kits and so forth, every time something new comes out, you create a specific piece announcing the program,” he explains. “But there are hundreds and hundreds of incentive programs pointing at individuals at any given moment. They’re overwhelmed with information.” The goal for vendors should be to get the salesperson’s attention in the moment and let them know exactly what to do right now to make money. If there’s an online environment where partners can go at their convenience to see the information that’s pertinent to them at any given moment, they’re getting the information they need on their own terms.
In the spirit of eliminating friction and increasing visibility between vendors and partners, Kriza says manufacturers need to decrease the number of rules they make partners follow in order to qualify for a program. “You’d be amazed to find out that the channel manager can come up with 30 to 40 rules for partners, and [partners] don’t know which end is up,” he says. “You’ve gone too far from simplicity and clarity.”
Too many vendors use management dashboards that are operational, but not strategic. These dashboards allow managers to keep an eye on the logistics, but not constantly calibrate the results to get the kind of statistics that are the most vital indicator of a program’s success. MTC’s tool for this is called SpiffCENTRAL, and there are others out there. The point is to use granular, real-time data to be strategic, otherwise vendors will allocate money for a program and it will do nothing.
“The big theme is agility. On the one hand, you want to be able to prove results. On the other, if you can’t prove it then you don’t need to wait. Make the changes you need to on the fly in order to get the thing humming.”