Promotional Schemes: For Whose Benefit Are They?

There was a time when small and big dealers used to look forward to promotional schemes which motivated them to work hard to push products and earn those extra bucks. The back-end incentives, be they in cash or kind, came as the crowning glory.

But not any more. Majority of today's promotional schemes have lost their focus and have failed to attract the active participation of all channel players. In fact, partners have doubts on the actual beneficiaries of these schemes.

The current thinking of vendors seems to be that mega prizes lead to mega sales. That could be true from their perspective. But the developments within the channel community indicate that the very schemes that are meant to promote business are doing exactly the opposite. The schemes are killing channel business. 

The promotional schemes have led to rampant under-cutting, selling products below cost or cost-to-cost and stagnating stocks. The mega targets ensure that only the top players in the market would be anywhere near the finishing line. But in the process of reaching there, they would have done irreparable damage to smaller players.

When promotional schemes were worked around achievable targets, there was motivation for every dealer to push products as the schemes encouraged to achieve a broad range of targets. There were attractive incentives to smaller players as well, leading to healthy competition.

But a healthy competition has become a thing of the past with market players, lured by the temptation of mega prizes, have begun indulging in undesirable business practices. Everyone wants to go for the kill, without realizing that in the process they are hurting themselves and the channel community at large. 

The objective of vendors is very clear. They want to achieve sales targets by dumping huge volumes by hanging the carrot of promotional schemes. Their argument is that market forces will decide the winners.

But can vendors isolate themselves from market dynamics where the channel is allowed to bleed in its quest for mega prizes? Should vendors encourage such a business environment?

We do not think so. Vendors need to take responsibility for their actions and have to contribute to the growth of the business and not its demise. It is in the interest of vendors as well as channel partners to design practical schemes that offer incentives to all sections of the channel community. 

Surely, vendors would not like partners to suffer losses because of their promotional schemes? A free and frank dialogue between vendors and channel partners can help arrive at a consensus where promotional schemes could be put to good use for the growth of business of both the parties.

sylvesterl@cmil.com