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Channel Matters Blog > February 2015 > Are You Duplicating Commissions?

Are You Duplicating Commissions?

by Jan de Leon
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prospecting.jpgOne of our customers recently brought up a concern that's often on the minds of executives who sell through multiple channels: 

Question — How do I avoid paying commissions to both the channel and my direct force for the same opportunity?  

 

Answer — Are you paying for activities or results? 

 

Answering the question with a question is more than just a rhetorical trick used to dodge a tough question. Duplication of commissions creates a lot of angst for sales leaders, and they really need to think it through. Let's examine the issue. 

 

Simplifying sales to its lowest level, there are two sides to generating new business: finding new opportunities (prospecting) and managing new opportunities (selling). Granted, there are nuances to these activities as well as post-sale activities involved in customer management, but right now, we're focused on driving new business. 

 

Based on what I hear from my customers, most channel partners have a hard time prospecting. They'd rather sell to their existing customer base. It's easier, and their cost of sales is generally lower than when closing new business. When we as vendors expect them to sell outside their base they expect one thing in return from us — leads.  

 

That's fine so long as we're okay with our team fulfilling the prospecting end of the equation and bringing partners in to help close the business. The problem is that closing the business is the fun part for most sales professionals and where all the glory lies. It's rare for an ambitious sales professional to be happy generating opportunities and then sharing them with partners on a regular basis. They might as well have taken a job in marketing! 

 

So the question becomes, how do we get our partners to prospect? This is where our initial question as to whether we're paying for activities or results comes into play. If we're only paying for results in terms of sales, we always run the risk of duplicating commissions. If we try to avoid duplication, we can easily discourage cross-channel collaboration by not paying the commissions either channel thinks they are due 

 

However, if we pay for activities, we can avoid duplicating commissions. Prospecting is all about activities. If a channel partner is good at prospecting, why wouldn't we pay them for that activity even if they aren't involved in closing the opportunity? On the other hand, if they are good at closing but not at prospecting, why pay them the same as if they generated the opportunity themselves? And if we pay partners for prospecting, might we encourage some of them to hone their opportunity generation skills? 

 

As I alluded to before, prospecting is only one of the activities we need to encourage partners to do more of. When you consider the whole product you're delivering to your customer, during the sales process and after, you may be able to create a list of a dozen or more activities.  

 

Of course, some partners will be better than others at each item on the list. Instead of shoving partners into a tiered partner program based on sales volume, why not create a program that rewards partners for the activities they perform? That requires taking the time to look at partners as individual organizations with unique strengths and weakness, but at the end of the day, you'll get more growth by paying for activities that don’t duplicate efforts. 

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Last modified on 2/17/2015 7:28:18 AM
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Comments
Prasantr13
I am completely agree on this article about the incentives being given to partner on their activities rather than the end results. Some times it is does not look attractive as the sales cycle is very long and they lose the interest in between. So if the kind can be worked out at each steps it will encourage them to bring more leads.
3/2/2015 1:10:56 AM