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When Incentives Become Disincentives

http://www.channeltimes.com/story/when-incentives-become-disincentives/

Principals regularly announce schemes and incentives to push sales. Nothing wrong with that. The problem arises when there are too many schemes running simultaneously.

This is especially the case during quarter and year endings. Agreed that manufacturers are under immense pressure to meet their quarterly or annual sales targets and hence offer highly tempting discounts and incentives to push sales. And despite their misgivings, the channel generally laps up these schemes - the incentives on offer are usually too enticing to pass up.

The problem arises when the manufacturer is not able to meet its commitments. Most manufacturers have multiple product lines catering to different customer segments. The issue gets complex when the manufacturer has multiple schemes running for each of its myriad SKUs. And the larger the manufacturer the more complex the situation! When thousands of claims pour in from all corners of the country on a daily basis, and each claim has to be verified and then processed, one can get an inkling of the humungous task faced by the manufacturers.

And when the claims are not settled at the appointed times, channel partners accuse the manufacturers of making empty promises. While this may not be entirely true, the channel is justified in its criticism. Manufacturers need to ensure that the schemes are kept simple in order to cut short the lengthy verification process involved. Also, it is important to continuously monitor and fine-tune the incentive structure to ensure that it is in tune with market developments. Pushing the channel to sell a product for which there is no customer-pull will only result in a blockage in the movement of stock.

If the current market scenario is a sign of things to come, then it won’t be long before the incentives offered could well end up as a disincentive for the channel.

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