The latest "Channel Pulse" survey from 360insights suggests that there's at least one spending category from which companies aren't retreating: channel incentives. Conducted in December 2018, the survey of more than 1,000 senior-level channel-management professionals found that over 60 percent of companies plan to spend the same on channel incentives in 2019 as they spent in 2018. Of those that saw their budgets changing, the report found, nearly three-quarters (73 percent) predicted spending on channel incentives would actually increase.
"The worldwide economy clearly began to soften in the fall of 2018. With this backdrop, it seemed appropriate to ask what, if any, impact this would have on channel incentive budgets in 2019," according to the report's authors, who acknowledged that companies typically take one of two approaches to downturn preparation: Either they increase spending on incentives to combat declining revenue, or they reduce spending on incentives as a means of reducing operating costs. "At a high level, the number of respondents indicating budgets will stay the same indicates conservatism looking forward," the survey noted. "Those predicting a change appear to be aggressively using incentives to address potential revenue challenges in the short term."
When asked to indicate which channel incentive yields the biggest return on investment, a majority of respondents said volume incentives, which outranked the next contender - sales performance incentive funds (aka SPIFFs, short-term payments aimed at getting reps to sell a specific product or service) - by over 25 percent. Trailing both volume incentives and SPIFFs were rebates, market-development funds (aka MDF/CO-OP, funds provided to channel partners to allow them to better sell products or create local awareness) and sales allowances, with point rewards trailing in the rear.
Not surprisingly, companies said they plan to increase their use of volume incentives, providing extra commissions for sales reps who increase the amount of the brand/manufacturer's products sold, in 2019, although they plan decrease their use of SPIFFs. Also expected to receive increased attention this year are MDF/CO-OP and consumer rebates.
"We suspect the uptick in consumer rebates might be tied to the economic outlook and the need to offer more incentives," the authors explained. "This is a development we'll watch closely as we move through the year."
A final area on which survey respondents were asked to comment was visibility: Only 15 percent of executives said they had good visibility across their channel activities, while 18 percent said that visibility is low and two-thirds that visibility is fair to average.
"This overall response is not surprising as historically, expectations of channel visibility have been low across most industries," concluded the report, which stated respondents most wanted better visibility of market demand, followed by better visibility of sales execution, incentive performance, enablement, price execution and supply-chain management. "There's no surprise that market demand and sales execution, which go hand-in-hand, are the areas where senior channel executives would like to gain more visibility," the report said. "The pairing has always been the white whale of the channel, and the response to the 'Channel Pulse' almost reads like the age-old question: 'Is market demand soft, or is the channel executing poorly?'"
To read the latest "Channel Pulse" report in its entirety, download it from 360insights' website.