INCENTIVES: Every one a winner

It’s become the norm – promotions run by distributors and usually funded by networks or handset manufacturers, designed to encourage dealers to sell more. But is this the best way to find and keep more business? And how is the incentive idea developing?

A well designed incentive can work to everyone’s advantage. The network or handset maker that co-sponsors the package gets the extra business, course.

The distributor that implements and (probably co-funds) the incentive gets the business, but also an opportunity to build better relationships with the dealers.

And the dealers get the rewards if they’re successful, an incentive to improve their performance if they’re not, and an opportunity to build on their relationship with the distributor.

This is how Nigel Kaye of Yes Telecom puts it: “The synergy created from a sales incentive generates more sales. More sales and the chance to meet the dealer lead to improved relations. Improved relations in turn lead to more sales …. and so on.”

That’s the theory, at least. But what happens in practice?

Archer Young, a specialist in mobile incentive and motivation which has been responsible for several of the better dealer programmes, says it has seen a significant increase in interest from networks and handset manufacturers.

Here’s Archer Young director Natalie Gunson: “With such fierce competition for dealer loyalty and market share within the mobile industry incentive programmes are becoming the key to creating and driving communication and loyalty within their channel (distributors and dealers.)

“Where previously incentives were ‘a nice to have’, they now differentiate the network or handset from the competition and incorporate so much more than a simple reward programme.”

Spoilt for choice
But when practically every distributor runs regular incentives, dealers are spoilt for choice – especially when incentives typically run for only three months and so encourage switch sales. Alongside the fact that there are so many distributor travel incentives for dealers to choose from, this results in a diluted impact on sales volumes and retention.”

So dealers these days are spoilt for choice. Natalie Gunson notes “we are finding that some of the short haul incentive trips are not achieving the sales volumes due to the fact that they no longer have the wow factor”. It’s increasingly difficult for the distributors to set up incentives that both encourage the dealers and retain their loyalty.

It’s Archer Young’s pitch that it can combine “communication, business benefits and individual reward to ensure that our clients’ incentives become integral to the dealer’s business and its growth”.

Specific goals are important. “We always target our incentives entirely around what we need to promote at the time, “ says Emma Calland of Moco. “With quality being such an important factor this year, we are rewarding dealers in our strategic partner programme with increased commissions for secondary connections thus increasing ARPU and therefore the quality of the connection.”

Elite Mobile specifically aims for face-to-face contact. Barry Nash, Director of Sales & Marketing, says he aims to run at least two major incentives each year “to enable our best performing customers to meet with senior members of staff. This permits open discussion within an informal environment which we find an ideal way of assessing our levels of performance and sharing ideas that can generate increased business.

But measuring the results of an incentive doesn’t always mean the obvious –counting increases in connections or handset sales. Natalie Gunson of Archer Young recommends using additional measures alongside the sales volumes “such as driving new dealer recruitment, retention and returns or quality of sale”.

An example of this is Accelerate, an incentive Archer Young created for a major manufacturer. This featured a reward and recognition programme, with rewards that can be redeemed against vouchers, experiences, merchandise and holidays – but also business advertising, staff training and buying back product.

In addition though the company created a web portal with product information, online training, and a dealer recruitment function (to encourage new dealer participation). The aim: to win switch sales inn the short term, but to develop that into longer-term loyalty by emphasising business benefits.

“Incentives do work and will continue to work for all parties as long as everybody involved knows what the incentive will deliver from the outset,” says Gail Hollinshead, Head of Marketing at Mainline Digital Communications.

“All parties often have different interests – whether this be raising their brand profile or increasing penetration into the independent channel.”

With such fierce competition for dealer loyalty incentive programmes are becoming the key to creating loyalty within their channel

What prizes work?
Avenir Telecom has found that the most successful incentives are the simplest. “When initiatives become too complicated the overall message is often lost in complicated criteria and time-consuming administration. Activities that are network-lead often generate good results as they give clients more freedom to work with. Themed activities can also be a great way to bring together products with common elements.”

Val Haines of Avenir also points out the effectiveness of any incentive programme also relies on the momentum that is created by sustained promotion and communication of the initiative. “It is a common mistake to make a big splash around a programme’s launch and then do nothing. Maintaining interest and motivation is essential and clients should be encouraged and updated regularly throughout the initiative.”

Frequency Telecom to go for a highly targeted approach. Frequency’s Stephen Donovan says the distributor works with individual trade partners to design “sales development programmes that work with the structure and culture of each individual business.”

“Frequency develops its own programmes, which ensures that the objectives meet our needs and not that of a third party.”

The trick though is to establish what really motivates the audience, and sometimes it takes an outsider to make that call. This is one reason Archer Young gets so much business: it takes time to research the audience such that it can then tailor a portfolio of appropriate rewards.

Identifying those core interests is what it’s all about. Elite Mobile for one feels that dealers prefer volume-targeted incentives above staff or consumer offers, and indeed has some independent research to prove this.

But here’s another view: “Frequency Telecom doesn’t do the ‘all singing-all dancing’ incentives that some others do,” says marketing manager Stephen Donovan. “We simply don’t see that they work. Any increase in communication is going to increase awareness and raise profile, but many or our customers tell us that the big incentives actually turn them off.”

And Val Haines, head of marketing for Avenir Telecom thinks simple incentives have had their day – “they must complement wider business goals and be creative enough to really excite clients.

“Over the years we have seen the market become saturated with so many incentives that are being used as a ‘quick-fix’ to boost short-term sales figures rather than as carefully considered initiatives that aim to develop business and strengthen relationships. Offering rewards or ‘freebies’ is nothing new; and in some circumstances it can even be considered to be the norm, which limits uptake and commitment.”

Gail Holinshead agrees. “Mainline’s approach to incentives is that they don’t work just on their own – they need to form part of a very defined and tailored marketing mix.” Mainline feels it is unique in offering its Blueprint proposition to deliver “value-added marketing that makes the incentive work as part of that mix”.

Finding new ways to engage with the dealers is important. Val Haines thinks recent Avenir initiatives such as its Diamond Dinner and Building Success Together campaigns (with Vodafone and O2 respectively) struck the right balance – “offering innovative, exclusive rewards and also providing clients with the opportunity to secure mutual investment in their companies”.

Who wins?
There is a perception that the same handful of dealers are able to hoover up most of the incentives on offer. Stephen Donovan from Frequency Telecom acknowledges this: “At Frequency, the collective experience of those of us that have participated in incentives and those that have structured them is that there is always a group of habitual winners who enjoy competing and getting the rewards of their endeavours.”

And of course that’s not necessarily a good thing. “Loyalty will ebb and flow with the latest competition,” says Donovan. “Is it safe to rely on a small contingent for large volumes? Quality of connection may also be an issue when big prizes are being actively pursued.”

The best incentives don’t reward the same high-flying dealers every time – from the distributor’s viewpoint it makes better sense to encourage smaller resellers to raise their game.

Most of the distributors do recognise this and as well as outright volume will include other measures such as ‘percentage over target’ wins or ‘percentage increase month on month’. In many cases this has been structured into league tables, with dealers effectively competing against similar operations for the prizes.

Avenir says it tries to ensure that all clients have the same opportunities to excel within incentive programmes. “If targets and performance criteria are structured with the size and scope of different clients in mind, this can be achieved” says Val Haines. “The diversity of clients should not be underestimated and nor should they be penalised for their size. Quite often smaller enterprises can have a strong foothold in a specialist sector, and while they may not be able to deliver the same value or volume levels, their penetration, expertise and subsequent growth opportunities within an area are just as vital to building a robust client network. This in turn provides operators and manufacturers with routes to market that they otherwise wouldn’t be able to reach.”

Another alternative is simply to increase the number of winners – instead of going for one high-value prize, offer lower-value rewards to give more dealers a taste of success.

Yes Telecom’s first incentives were one-off trips and events for its top performing Business Partners. “As the number of Business Partners grew,” says Nigel Kaye, “we felt we needed to reward more than just the top few. We developed incentives that ran for months as opposed to one-offs; incentives with multiple prizes as well as an overall top prize; incentives with monthly spot prizes that meant any Business Partner could be rewarded. And we ensured our new Business Partners were instantly involved from the time they started working with us.”

Counting the results
Elite Mobile places a good deal of emphasis on targets and reporting. Says Barry Nash: “Weekly reports are provided for the sales teams detailing customer performance as a percentage of target. The success rates of all incentives are monitored, whether running for a week or a quarter.

Elite’s programmes are geared to variety of goals depending on the project, but they might include customer acquisition, converting customers to purchase genuine product, increasing volume, improving range, rapid take up of new products, and so on.

Val Haines of Avenir thinks performance criteria definitely need to be aligned with wider business goals in order to measure an accurate return on investment. “Objectives might have a quality focus, such as boosting the value of ongoing revenue and minimising churn. Alternatively, they might focus on one specific area such as increasing the up-take of data services.

“Essentially, they all need to provide additional business that would not have normally been achieved through day-to-day operations whilst rewarding and recognising the achievements of clients that can work towards these goals.”

An important issue right now is quality, and whether incentives can really deliver it. Avenir thinks it is achievable – “it just requires careful planning”, says Val Haines.

“As the market shifts towards long-term value over volume, quality simply must be at the heart of all effective incentive planning. One of the ways that we are helping to ensure this is through our ‘Building Success Together campaign. This offers funding and support to clients who also invest in the programme to meet agreed objectives; to build ARPU value, increase the volume of good quality B2B voice and data connections and to encourage clients to target their prospects and existing customers through innovative marketing campaigns.

“This approach from Avenir reinforces the message of building long term relationships with customers, networks, distributors, suppliers whilst providing clients with an exciting incentive that helps to take their business to the next level.”

 
 
The dealer’s view
In many respects it’s easy to identify the possible advantages of incentives for the distributors and their associated networks or handset makers. But by the same token, many dealers feel there are real disadvantages too.

Mobile Business columnist Faisal Sheik of fone doctors, for one, is a mite jaundiced about distributor incentives: “You can have the best cherry and icing in the world, but it’s gonna be wasted if the cake isn’t tasty! Sadly, that is the case with too many incentives. Too much fancy dressing on what is becoming an increasingly poorer package for dealers!”

It’s true that incentives can often be a distraction from the key issues. One dealer who wants to remain anonymous put it like this: “I’d be happier if they put all that effort into looking after every one of us rather than playing footsie with the favoured few.”

And here’s Gary Petrie of TruServe Communications putting it in a nutshell: “If the distributors, service providers and networks paid dealers better commissions and kept them consistent through out the year and paid the dealer on time, there would not be a need to set incentives.”

He also thinks many incentives are skewed. Since most are based on volume, only certain type of dealer will be able to win.

“On the flip side of that coin, some incentives are not judged fairly. They are used to reward dealers to stay with a distributor or to tempt a dealer back.”

Gary does like tariff promotions, but points out the practical drawbacks of monthly promotions – sometimes it’s just not possible to complete the connection in the month. “Of course many dealers would say well get your business connected in the same month; but it is not always possible if you are struggling to acquire PAC codes and so on.” A more reasonable option would be to run promotions over a quarter rather than a single month.

“I think incentives can work and build better relationships,” concludes Gary. “However if the industry focused upon quality and not quantity it would be a better world to trade in.’

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