Effective Strategy for Volume Incentive Rebates (VIRs)
Volume Incentive Rebates have been around for a long time. VIRs are used to create dealer / reseller / distributor loyalty for achieving annual purchase thresholds, thereby improving profitability for these channel members driving high volumes.
The traditional method for implementing these has been rather static. Every year a series of reward tiers is created by product line, by volume targets.
Product Line A Sales Volume Annual Reward
$500,000 0.50%
$1,000,000 0.75%
$2,500,000 1.00%
$10,000,000 2.00%
Product Line B
$1,000,000 0.50%
$2,500,000 0.75%
$5,000,000 1.00%
$10,000,000 1.50%
$25,000,000 2.00%
Another variation of this strategy is to create this table account by account, and reward for growth only. This makes sense to many, although either structure is really a “math problem” that can be solved by adjusting tiers and rewards. In other words, a different table can be created account by account and accomplish the same thing. Either way works, and both strongly reward high volume business.
But now we have to address the much bigger “cycle time.” Cycle time is historically yearly, but business moves so much faster than it used to. Product cycles are faster. Market conditions change rapidly. The drivers of inventory movement are in flux. How can this be addressed?
Essentially, by applying the above methods in a much more agile way. Time windows that once belonged to normal sales promotions can now be applied to VIRs. So while there probably can and should be annual VIRs, the VIR strategy can be adjusted on demand as circumstances inflect strategy. Base level rewards can be kept moderate. Supplemental VIRs can be cascaded as needed based on real time sales rates. And VIRs can “interact.”
So, what do I mean by “Interact?” Very simply, product lines should be rewarded jointly as well as individually. Perhaps a manufacturer has five, six even seven or more product lines. Perhaps the average dealer carries two or all of the seven. Why not increase the profit for them if they carry and move multiple lines in volume? Remember, the goal is not just to land, its to EXPAND, and move numbers.
Agile strategies and tools can do just that. Specifically, automated incentive tools that work at the speed of today’s rapid cycle times. Automated incentive software can help organizations manage multiple VIR programs and can be adjusted and updated instantly. Agile incentive tools that make complex incentive programs move faster and provide better results are exactly what today’s large sales organizations need.
About George Kriza:
George has over 30 years experience in the personal computer and consumer electronics industries. Since founding MTC Performance, he has focused on web-based technologies designed to break new ground in facilitating the success of incentive programs.
About MTC Performance:
MTC Performance is a leading innovator of sales incentive management solutions for top Fortune 500 and growing middle market companies to more efficiently deliver exciting, effective programs that inspire success and reward results. We combine our high tech products with our high touch service to guide our clients, manage their programs and achieve their goals. For more information, please visit mtcperformance.com.
