On the surface, reselling a vendor’s products is a relatively straightforward process. I source a lead, work through the opportunity with the appropriate vendor and then when the deal closes, I get paid a commission on the product and services I have sold as part of the package. It’s a nice reward for closing a customer.
When a vendor sources an opportunity, however, the VAR usually only comes into play when it benefits the vendor to bring them in for the implementation. Because of the timing (after the sale), the VAR is not positioned as truly adding value to the solution. Understandably, the vendor sourced the opportunity and therefore should reap the greatest reward.
VARs tend to see the vendor-sourced deals as missed opportunity for a much larger services opportunity. After all, when we sell a similar product, the ratio of services to product is much greater. So what’s the deal? Is it a case of the vendor’s sales force not understanding the VARs services, not being able to sell them, or not trying?
I believe it’s the latter, simply because there is no incentive for them to do so.
When a sales person tells me they don’t get paid any commission for selling services, I’m less surprised than I used to be. Incentives are driven by which offers have the highest margin for a company. For instance, if subscription software has a 60 percent margin, and services have a 40 percent margin, the sales team will be incented to sell subscriptions. If the sales team has no incentive to sell their own services, what are the chances they’ll be enthusiastically selling yours?
From the buyer’s perspective, they have a finite budget with which to solve the problem at hand. They likely don’t care if it’s 80/20 products to services or 20/80 as long as the solution is effective.
Is there a way to offer a real incentive?
After you pay your own sales team’s commissions, you are already dealing with a slim margin. If you were to offer a commission plan to your vendor’s sales team it’s unlikely to be compelling, and would be hard to manage. Furthermore, some vendors may object to a direct commission, but most will allow for promotional spiffs.
I’ve seen a lot of sales spiffs. Most offer some gadget for achieving some short-term goal. The challenge is that you are likely offering something the sales people don’t care about or already own. Additionally, you could simply be adding costs to deals that would have closed anyway.
The best promotions have a few common components:
• A competitive element – yes, there will be bragging
• A longer view – not just quarterly, but annual goals
• A great prize – like a vacation package
Here are a few ideas to try to make the most of your promotion:
1. Register to be eligible. Create a registration process so you’ll see which reps are interested, or might have opportunities that fit your profile. Make sure your reps know who is registered and ensure they reach out.
2. Send something small when they register as a desktop reminder – if it’s for a trip to Hawaii, send a snow globe.
3. Promote it at any joint event you have with that vendor. If you are at a user group, have something to hand to the sales people there about the promotion.
4. Publish a leader board at regular intervals.
5. Make a big deal out of this year’s winners for use in next year’s program.
What I like about this kind of program is that it rewards only the top performers and you can set your own thresholds and criteria. Most deals, most revenue, biggest deal, best single quarter, whatever categories you choose. Marketing must communicate information about your services to the vendor sales force on a regular basis. This type of program creates a theme and cadence that ties back to a sales goal.
Only testing over time will prove if you can influence the behaviors of your vendor’s sales team through incentive programs, but what if you can’t?
It’s all about perspective and perceived value. Did you get a deal from a vendor that’s smaller than it could be or did you receive a customer with the possibility for growth? Then you’ll need to ask yourself whether your marketing, sales, and services organizations have the tools and incentives to create greater customer value. Read my article on how to get what you need from your vendor. In the end, the ability to sell and deliver customer value is the key to higher sales revenues, for both vendors and resellers.
Ed Thompson is Director of Demand Generation for The Pedowitz Group (TPG), a demand generation company focused marketing and sales solutions that drive topline revenue. TPG helps clients become successful Revenue Marketers® please visit www.pedowitzgroup.com.
Contact Ed via email: firstname.lastname@example.org and Twitter: @edthewebguy.