Schemes Rule The Roost

Schemes and incentive-based programs have become a rule rather than an

exception in the industry. And monitors as a product category is not left

behind. Most of the schemes being run in the market today are point-based. The

reseller collects points for every sale made. These points are then redeemed for

either back-end incentives or gifts.

Mystery discounts



Vendors are realizing that handing out back-end incentives does not really

maximize the welfare of the channel community. The practice of discounting on

account of stiff competition passes on the benefit from the vendor to the

end-customer instead.

Vendors

are looking at including conditions in the schemes that curb this. The first

effort in this direction was rewarding the customer with mystery discounts on

successful achievement of targets. Says Anil Sachdeva, Director, Kadam Marketing

and President, DCTA, "Mystery discounts have in no way helped curb the

menace of discounting."

He went on to cite instances where partners discounted more than they got

back as a mystery discount, losing money in the process. He added, "They

benchmarked with the discount they had received for earlier schemes."

Samsung has taken the lead in trying to instill discipline in the market and

recently came out with a program titled "Score with Samsung". For the

first time, regularity of business has been made a basic qualifying criterion in

an incentive program. Says Sonal Anand, Country Product Manager, Samsung,

"A basic tenet of the program is to ensure that the channel does business

on a regular basis."

Also for the first time, Samsung has put an upper ceiling on the amount of

goods sold. Beyond a particular number of units, the partners will earn no

incentives whatsoever.

Satisfactory margins



Margins on monitors seem to keep the resellers satisfied. Says Sanjay Wadhwa

of Champion Computers, "The margins are satisfactory." Adds Anil Kumar

Singh, GM, LAMPO Computers, "We earn Rs 200 to Rs 500 per unit sale of a

monitor."

Margins in the case of monitors don’t get diluted because the after-sales

service of the failed units is taken care by the vendors themselves. So the

margins earned at the time of the transaction remain protected. Adds Singh of

LAMPO Computers, "Not much of the after-sales service is required, so the

margin is just perfect." Says Anand of Samsung, "We believe that it is

critical that the channel make adequate margins."

Says Pankaj Sharma, Head, IT Sales, Sharp Business Systems, "The margins

on LCD monitors are typically higher because of the low volumes today, they also

offset the need to run schemes on such products."

Under the ‘Score with Samsung’ scheme, the channel partners are obligated

to sell a certain number of high-end products to qualify for incentives.

Explains Anand, "This will ensure that the partners become ready for the

future for all high-end products today will become commodity products

tomorrow."

Delayed incentives



A gray area is the delay on part of the vendors in giving incentives to

their qualifying partners. The phenomenon of discounting in anticipation of

incentives to make good for the loss leads to a peculiar situation of negative

cash flow for the partners.

A situation that is not considered conducive in any business environment.

Going on the defensive, Sonal says, "Barring a few instances of delays due

to late submission on claims by channel partners - most of our scheme are closed

on time." Says a partner on the condition of anonymity, "It is

difficult to complain against any vendor, for they enjoy a clout in the market

and can make life tough for us."

Vendors also attribute delayed incentive to the submission of fake invoices

by the partners. The channel complains that when vendors don’t recognize and

reward less than 100 percent achievement, it becomes difficult to operate in the

market. "The partner has already discounted to get to, lets say, 90

percent, that non-achievement of 100 percent will threaten his very

survival," explains Sachdeva of Kadam Marketing.

A plausible solution to the problem could either be to put an upper cap on

the percentage of back-end incentives offered or offer differential rates for

different levels of target achievements. "The interests of the smaller

players in the market will also be protected in this way," said Sachdeva.

Warranty blues



Warranty is another issue that dominates discussions in the industry. More

and more vendors and distributors are realizing that the need of the hour is a

service infrastructure with greater geographical reach. Domestic companies are

also establishing service facilities in the upcountry markets.

TPV Technology, the owners of the AOC brand recognizes this and will leverage

on their distributor, Aditya Group’s infrastructure for the same. Says Mukesh

Gupta, Country Manager, TPV Technology, "Our warranty policies here are

like anywhere in the world."

In LCD monitors, the warranty policy becomes all the more critical as there

is not much that can be accomplished at customer site owing to the complexity of

the product. "You have to provide the customer with immediate replacement

and then take away the faulty unit to do the needful," says Sharma. And

most partners are satisfied with the levels of warranty that come on most

monitors.

MOHIT CHHABRA in Delhi with inputs from Sunila Paul in Bangalore