March 30, 2018
The speed of business is at an all-time high in today’s digital economy and the implications of such a fast-paced environment are especially pressuring to manufacturers of high tech. New products enter the market daily, existing products have significantly shorter life cycles, customer expectations continue to climb, as do warranty terms, and a complex, multi-tiered sales channel is the new norm. All of this and more makes it difficult for high tech companies to effectively manage their inventories, control pricing and secure profitability.
There are many approaches to test out when it comes to smart inventory management, price control and of course, growing your profit. One important tool in your tool box that addresses all three of those issues is an effective channel management program.
Align Sales, Marketing and Contracting
There is a wide range of technology market data available today that offers high tech manufacturers a unique opportunity to quantify the impact of various channel and incentive management decisions on market access and profitability, including Price Protection, Stock Rotation, Volume or Growth driven rebates, and more. That being said, the cornerstone of any effective rebating program must be proper alignment between your commercial, contracting and marketing groups. This includes creating an effective route-to-market strategy, developing an integrated partner value proposition, and leveraging analytics and process best practices for an end-to-end quoting process. Your integrated go-to-market approach should include product, sales and marketing involvement with the ability to track, tailor and react promptly to any changes in the partner dynamics ecosystem.
While an integrated effort is best practice, the reality is many manufacturers isolate their contracting strategy from sales and marketing. A lack of communication between the sales, marketing, finance, and contracting teams causes many rebating programs to fail. It’s only when the contract management, rebate processing, and pricing teams work harmoniously together optimal efficiency and financial success can be achieved across the organization.
Most downstream issues such as inefficiencies in reconciling claims, excessive and unwarranted payouts, meaningless promo campaigns and unsuccessful inventory management across the channel are the result of teams working in silos. Failure to align with the needs of other groups affects processing speed, integrity, and accuracy. It wastes company time and resources, and more importantly significantly causes margin leakage and, at times, hefty compliance penalties.
More Best Practices
To integrate your channel management and pricing with overall sales and marketing strategy, start by tying compensation and commissions to rebate program effectiveness measures. Other best practices you might try include proactively identifying the best channel partners for both current and future products, balancing direct and indirect selling efforts in a consistent way, choosing the most appropriate sales channels by target customer and product maturity and adopting robust incentive management planning processes that include the different key decision makers.
Any combination of these approaches will give you a competitive advantage. You need to know precisely which players in all of your channels you need to work with; where, when, and how much you should rebate is key to ensuring long term profitability.
For more on optimizing profitability within high tech, check out Vendavo’s resources.