There are some vendors that are great to work with. They have excellent partner programs in place and their processes are streamlined and easy. Then there are the others… Their systems and processes are not well developed, their partner programs fail in some areas and, all up, they are generally harder to work with. As a channel partner, I’m sure this situation sounds familiar to you.
So, when trying to get your vendors to increase incentives on renewals to you, the answer depends on which of the above vendor categories they fall into.
To be clear, as part of the channel relationship, there is typically an accrued amount paid out on a renewal as part of an overall program, which is no different from a regular channel sales incentive. If the channel partner goes above and beyond the “norm” to secure the additional revenue for the vendor with little support or process in place from them, then I believe an added incentive is warranted.
In an earlier blog, I highlighted that channel partners should ask their vendors, before they sign them up, what their programs are for renewals management. This is an area we see missing from most vendor programs. There are exceptions, but renewals still remain a largely uninvested area.
As a result, the burden of processing and managing renewals falls to the distributor or VAR. Given this lack of support from the vendor, some level of investment (either by way of staff, systems or both) by the partner is necessary. It is therefore not unreasonable to expect an extra incentive or higher margin on the relevant renewal opportunity.
Accenture says that partner programs are becoming increasingly complicated and that channel incentives are typically the highest marketing expenditure for high-tech companies at approximately 3-5% of revenues. This suggests that the pie of channel incentives is unlikely to get larger, and that any new or additional incentive would potentially come at the expense of other initiatives.
So, is it likely that vendors will offer up these extra incentives?
It really comes down to the level of investment and success their channel partners have with renewals. Those distributors or VARs that can demonstrate greater bookings, on-time renewal and closure rates will be better positioned to petition for additional incentives.
And it’s definitely worth it. The value a distributor or VAR gains from an investment in renewals management comes from not only one vendor, but can be scaled quickly across all the vendors in their portfolio. The rewards will therefore accumulate so that if one vendor is not interested in incentivising your efforts you can de-prioritize its renewals and focus on those that provide the extra incentives.
As with any component of an indirect channel program, a delicate balancing act of expectation management is required across the relationship. And what works for one vendor is not always going to work for another.
The important thing is that both the vendor and the channel partner see short term and long-term value in their partnership. If this is the case, then an investment on both sides will naturally occur and an appropriate renewal incentive program will be agreed.