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VARs suggest alternatives to rebate programs that complicate pricing

John Moore
Click here to read the first part of this analysis of channel rebates and their future.

Rebates can also complicate pricing, especially in dynamic or emerging

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markets, according to Rick Lindahl, president of Invictus Networks, a Lake Oswego, Ore. wireless reseller.

"Because of the volatility already in the pricing, it's hard to factor in the rebating," he said. "It's a difficult model to work with. I'd rather have straight-up pricing solid for the quarter and have a quote based on that."

Lindahl said only a couple of his regular vendors offer some form of rebate.

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But Lindahl said he has collaborated with BelAir Networks, using MDF dollars to participate in a trade show. He said the company has been "flexible in working with me."

BelAir Networks, a vendor of wireless mesh networks, launched a channel program in January that provides MDF funding, rebates, and lead generation for the program's top two tiers. BelAir Networks' rebates are based on overall sales volume rather than being tied to specific products.

"We wanted the program to be simple," said Jim Freeze, senior vice president of marketing and alliances for BelAir Networks. "We've looked at a lot of VAR programs today and they are quite complex."

Freeze said the company plans to offer VARs the ability to track their sales and MDF through the program's partner portal.

Lindahl, meanwhile, said he has encountered some deal registration programs in his market, but has mixed views on those.

On the plus side, deal registration addresses situations in which a reseller performs significant presales work, then loses the deal when the customer asks for additional quotes before cutting a purchase order, he said.

But deal registration can fall apart in some other circumstances as well, Lindahl said, especially with vendors such as Cisco Systems Inc. or Hewlett-Packard Co., whose product lines are very broad.

For example, a reseller could bring a deal to a vendor that involves a sale from one particular product line. A second reseller with expertise in another of that vendor's product lines, however, would be shut out of the registered account.

"I like the idea, but the reality of the management of the program is very difficult," Lindahl said.

Systems and Software: Varied Landscape

Alan Bechara, president of PC Mall Gov Inc., said the shift toward deal registration has been "prevalent among most of our partners." PC Mall Gov, a solution provider, represents a range of systems, networking, storage and software products.

Like Lindahl, Bechara said he believes deal registration can provide protection to resellers bringing incremental opportunities to a vendor partner. But he said the practice also increases the administrative chores for both reseller and vendor.

Traditional rebates, meanwhile, continue among systems vendors, Bechara said. But their use varies by vendor and product line.

Bechara said rebates have dwindled in the software sector as margin pressure squeezed out incentives.

Systems management vendor LANDesk Software, however, offers an MDF program and extends rebates on a targeted basis.

Rebates may revolve around add-on products such as security. In other cases, rebates may be associated with bringing new customers to the company, according to Bill Smith, LANDesk Software's vice president of worldwide sales.

"We use rebates for targeted objectives," he said.

LANDesk also offers deal registration, which provides deeper margins to resellers who are first to bring in a deal.

Rehabilitating rebates

Channel consultants contended that programs can be made more reseller-friendly for vendors who choose to stay with rebates

Lauffin said integrators would love to have an online capability that would let them keep taps of MDF funds -- much like the Web-based systems consumers use to check bank accounts and airline mileage programs. However, very few manufacturers have put those kinds of systems in place, Lauffin noted.

"The satisfaction of an integrator with the program is going to be entirely dependent on the accounting system of the person they are going to receive the rebate from," he said.

And even if a manufacturer opts not to notify integrators of expiring MDFs, they can notify an internal sales person so he or she can contact the integrator, Lauffin said.

In general, systems to support rebate programs can be structured to provide flexibility and expanded reporting.

Lauffin said the foundation of a flexible rebate system lies in three codes: a customer number, a program classification code, and a sales person classification code.

The program classification code lets vendors assign different conditions to each program. This gives vendors the flexibility to create different programs, without being tied into a single set of conditions for every rebate.

The salesperson classification code offers the ability to monitor and potentially award a sales person's performance, Lauffin said. In addition, data generated in the rebate system could be tied into an online reporting system that integrator executives could view.

Another way to improve rebates is to make them more specific, according to Schijns.

Deal registration programs can help in that regard, by providing insight into the sales pipeline, so vendors can determine whether rebates could help close sales for a specific solution, Schijns said. The result: a pricing strategy versus a wholesale rebate.

Schijns said rebates will evolve -- and perhaps even rebound this year -- as vendors begin to look at pricing strategies.

That said, resellers generally believe vendors could find better ways to invest in the channel, Schijns said. She noted that most reseller would rather have vendors focus on demand generation, sales support, or free training.

Bechara said he'd like to see manufacturers take care of building brand awareness, while resellers focus on delivering solutions to customers.

Instead of broad brush incentive or registration programs, he suggested a more focused marketing approach in which solution provider and vendor work together to identify "white space" in the market where the vendor lacks coverage and the partner can add value.

"I would go for a really simple program," Bechara said.


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