Survey Says...

Compensation for channel partners is changing in response to competition and new product sets, according to results of PHONE+’s agent compensation survey, which received nearly two dozen responses. The poll reprises one conducted in fall 2002.

Respondents to the 2004 survey reported a majority of their revenue from network services with hardware and consulting typically running a distant second and third, respectively. They cited commissions ranging from 6 to 40 percent on voice services, and 6 to 30 percent on data and enhanced services. Average commissions were reported in the mid-to-high teens.

One agent, who did not want to be named, says carriers are restructuring payment in line with the changes in the competitive landscape and pricing reductions over the past few years.

“Voice is going down,” he says, adding, “managed services and enhanced features are rewarded with bonuses.” Convergent services, like VoIP, for example, typically offer a bigger return for agents as IP telephony players scramble for market share.

“VoIP services seem to be garnering higher commissions during what is generally a launch phase for most carriers,” says Emmet Tydings, president of AB&T Telecom. “This makes sense because it is important for both the carrier and the master agent to make as much impact in this area, as quickly as possible, to get into a leadership position.”

Geoffrey Shepstone, president of master agency Telecom Brokerage Inc., notes add-on products, such as conferencing, managed network services and software packages, also boost commissions.

Hardware also is a growing source of revenue for companies such as Broadline Solutions, which is seeing more commissions on equipment, such as business telephone systems, headsets, wireless nodes and cabling.

Consulting and project management are increasing revenue generators, according to one anonymous master agent. Several respondents noted the general trend away from front-loaded to residual models. However, this transition is not in place across the board.

“The compensation packages vary drastically between carriers,” notes Robert Goble, president and CEO of Venicom Inc. “[O]ne RBOC currently pays about $3 to $4 a month residually for a basic business line, and another RBOC is currently paying an upfront commission of $150. … These disparities between carriers seem to be growing each year as they struggle to handle their own balance of immediate profitability versus future market-share acquisition.”

Vendor compensation packages also vary by their approaches to two-tier distribution. Russ Madsen, president of Anavon Communications, notes that carriers seem to be using online data entry and quoting tools as justification for lowering commissions and bypassing master agents in securing business.

In contrast, master agency X4 Communications says from its perspective, carrier compensation is changing for the better. “We have experienced more and more carriers increasing their focus on the alternate channel and raising the commissions,” says Steve Braverman, CEO. “This is great for our agents since we pass on the increase.”

Similarly, master agency Spring Valley Marketing Group LLC (SVMG) has noticed carriers are leaning more on masters than on acquiring agents directly. “The carriers then compensate the masters to manage the agents,” says Doug Boyce, vice president of finance and sales for SVMG.

Spiffs, promos and bonuses also remain in vendors’ bags of tricks, but some agents say they aren’t always beneficial, noting incentives can distract from customer service. One survey participant says spiffs that drive new business lead to poor decision-making on the part of agents.

“Customer needs and long-term relationships should beat the spiffs in the end for all, but greed gets in the way,” he says.

When it comes to recommending one provider over another, most agents try to remain unbiased, but spiffs often make or break a deal, as evidenced in the survey responses.

“Spiffs can [be] the deciding factor especially when customer prices are so close,” says SVMG’s Boyce.

TBI’s Shepstone agrees. “If carrier A had a slightly lower price, but an agent could quickly earn an additional $750 upfront bonus from carrier B, we are seeing some agents pick the carrier offering the bonus,” he says.

Only five respondents said some providers are not more attractive than others because they offer new forms of payment such as fees and bonuses.