The State of Incentives and Promotions: 3 Big Takeaways
In the manufacturing and technology industries, sales contracts, pricing incentives and promotions all drive channel partner relationships. But these approaches don’t always work like they should, and common mistakes can take a heavy toll. In fact, a recent study conducted by Forrester Consulting on behalf of Revitas found that 37 percent of manufacturing and technology companies surveyed experienced revenue losses of 11 to 50 percent by overpaying on promotional incentives.
The study, titled “The Power of Three: The Benefits of an Integrated Approach to Contract, Revenue, and Compliance Management,” explores how the management of sales contracts, pricing incentives, and promotions impacts the effectiveness of channel partner relationships in the manufacturing and technology industries.
Forrester surveyed finance, sales, and channel management executives in the manufacturing and technology sectors to understand how they manage sales contracts, pricing, and promotional incentives. Here are just a few of the takeaways, and their implications:
- Companies in these industries rely on post-sales incentives–rebates, brand promotions, etc.–to drive sales through complex B2B distribution channels, earn channel sales loyalty, and move inventory faster. In fact, over half of the survey respondents use incentives on over half of their deals, a sign of how widespread their use has become. What does this mean for you? If your incentives are increasing in number and complexity, make sure that you can track, execute, and measure them accurately and effectively.
- Companies would like to introduce even more creative incentives, such as tiered rebates based on market share achievements, as a competitive weapon. But they don’t have the mechanisms to manage creative promotions because spreadsheets are too unwieldy and ERP systems are too limited. What does this mean for you? Better incentives attract top-performing channel sellers, so seek out solutions designed to help you create more valuable rebate and incentive programs — ones that drive market share and work with your ERP system.
- Companies are leaking money on the promotions they do use, up to 50 percent of their revenue, as we saw above. This is likely due to inefficient or error-prone manual systems that are often used to track incentives. What does this mean for you? The same solutions that help you create better incentives can also help align payouts to program performance. Adopt a solution that enables your rebate programs to drive better overall profitability.
The research report concludes that using an integrated solution to manage channel sales contracts and incentives offers substantial benefits for manufacturing and technology firms that want to get the most out of their channel sales partnerships. Such an approach enables organizations to use incentive programs as a strategic business lever, while eliminating revenue leakage and improving partner loyalty.
Do you agree? What is your experience with rebates, brand promotions, and other post-sales incentives? Do they help you drive channel sales? If so, how can you tell? Join the conversation by leaving a comment below.
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[A version of this post originally appeared on The Revitas Blog.]