Distribution & Reseller Promotions
Before reviewing the promotions, it is important to note that there are often problems with reseller promotions–specifically compliance. I have paid for endcaps for the entire month, that wasn’t set up until the second week. I have paid for ads, only to have the wrong product or the wrong price listed (one time my “special” price was double the normal store price).
I even received a notice from a reseller (CompUSA – out of business now) that said that, because of the administrative effort, they were no longer sending proof of compliance (i.e., no copy of the ad)–of course I responded by saying that without proof of compliance, I was no longer sending the MDF checks (it seemed to work).
Understanding the possibility of reseller promotions noncompliance will help you keep a watch out to ensure you get what you paid for. This is important since you must get a positive ROI (rather than “just” a better rapport with the store) to justify the expenditures. Also, I found that many reseller driven promotions drop cash to their bottom line, while hardly showing an increase in sales, while a few are worthwhile.
The following are some of the most common retail promotions that can be executed through resellers to customers.
Retail – Reseller Promotions
- End caps. An end cap is a shelf at the end of each aisle. It is supposed to be a high visibility, high traffic location that can showcase your product, separate it from the competition, and is charged a premium. I have found an increase in sales by purchasing an end cap (actually a series of end caps for the entire chain). However, the spike in sales has seldom surpassed the cost except once, with Netscape.In this case, with the #1 best-selling software product in the world, we kept running out of inventory. The end cap was the only way to prevent being out of stock, and it actually increased sales to finally justify the $36k to $70k expense. Otherwise, they have a negative return. One concern about end caps: you have to request that it doesn’t happen, is that is they should NOT move ALL the product from the regular shelf to the end-cap, otherwise a “branded” prospect can’t find you in the regular section, may not notice your end cap, and purchase a competitive product.
Even within the end cap, there are different purposes (and value of placement)–the top sets the theme, the middle is the actual product that sells, and the bottom is the extra inventory–but the volume of product gets attention. If there are multiple products, the one at eye level has the greatest value. You may wish to view the Pepsico Encap Optimization study on the distribution effect (more product) and the advertising effect (more awareness).
- Run of Press (ROP). A ROP is typically a small 1 – 2” add that highlights your product. It works OK if you combine it with an aggressive promotion–either a price reduction or rebate. It contributes to their store traffic and often spikes sales (but it depends on the promotion and the product (those with MAP pricing (same everywhere) can advertise when they finally have sales–so they should be considered for these occasions.
- Rebates. I have had success with rebates, but only temporarily–if they run too long, the customers consider the pricing permanent and you lose the advantage of an impending event. I always prefer mail-in rebates, finding that for any amount under $30, I get a 10-15% redemption (they influence every sale, but only cost for the few that bother to send in the rebate). In-store rebates affect every sale–I sometimes use them when I am not competitive on price and want to equalize the playing field.
- In-store Signage. I’ve been hit up by some chains to pay for my name on the light panels around their store. I have never done it, so I don’t know if it works–it would be hard to track, and I require an ROI for all promotions–so I wouldn’t do it unless I find out from someone else if it works.
- Standup Displays. These can work like permanent end caps. However, I find that most displays are set up away from the main product category, and so they may make it difficult for someone to find you. Just like endcaps, the inventory should be EXTRA inventory, not a relocation of inventory from the normal section to the display. The following are samples from In-Storefocus.com.
- Kiosk. Some locations have terminals where you can actually try the software before you buy it (especially the game consoles), but also for hardware. I would also put on-site demos in this category–critical for consumer electronics (watches, smart speakers, speakers, and big-screen TVs. It is easy to test the effectiveness of your product by finding two similar stores with similar volumes from the same chain. One has the display, the other does not. The delta is the difference to determine ROI.
- Spiffs. Spiffs get the sales reps to pay attention to your product if it is new and seems best if they have to complete a questionnaire (paper/fax or on-line) to ensure they know your product’s key selling points. However, the results are short-lived–lose the spiff, lose the attention. But they work best when you have a new product and have to ensure your resellers even know about it–and the selling points (especially since it will influence the Reseller Recommendation Rate). By the way, watch the store guidelines for spiffs–some are not allowed–in which case I give away merchandise (software, T-shirts, etc. instead of cash).
- In-store Training w/seed NFR copy (Not for Resale). This is one of the most effective approaches to get long-term buy-in from the sales reps. A salesperson sells what he knows, and knows what he uses–so get them to use your product. They should get your product at a massive discount (but not for free–since they will not value it as much, and the install rate goes down significantly for free, versus a small cost). I typically sell the NFR copies for $10 to $20 (unless it cost less than that–in which case I give it away–but I usually require they answer a quiz (some skin in the game) so they feel like they had to earn it (plus they learn the selling points). This is by far one of the best uses of my funds. See the rep firms that do training if you need help with these.
There are other types of “payable” reseller promotions such as a contest, product highlight while on hold, etc.
VARs and System Integrators
Spiffs and especially training w/seed copies are often my most effective promotions within VARs and System Integrators. I’ve also had success with bundles and impending event product or support and customer training discounts that they can pass along.
There are promotions for the customer to pull sales, and promotions to the sales reps to push sales–it is important to leverage both push and pull to maximize sales. Whenever working with sales it is important to run the right kind of sales incentives that have the maximum motivational impact. I learned early in my sales management career that approx. 30% of the motivation is setting the goal, while 70% of the motivation occurs by the recognition and reward after a sale or goal is achieved. The degree of motivation by sales is determined somewhat by the faith they have in your integrity–keeping your promise to deliver the award. This requires meticulous and timely follow-up to reward good behavior.
It is easy to follow-up timely with a few salespeople, but difficult when you have thousands–especially indirect reports, like resellers. It is times like this that a system comes in handy (CRM or PRMs help). It is also important to know all the methods to have sales incentive success.
Following are three of the seven secrets to making sales incentives work (see the Motivation section):
- Cash is not king. Maslow knew how to motivate a sales team. It is important to note that we work for what we need, we work harder for what we want.
- The A-B-C’s of motivation. Motivate the middle to maximize results.
- “What’s in it for me?” Make your rewards personal.
- Check out the Motivation section within the Management Training section to see how to motivate sales and channel partners.
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