1. Relationship
Enhancing the
Vendor / Reseller

2. TABLE OF CONTENTS
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Survey Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
How Vendors and Partners See Each Other: Duel or Dance . . . . . . . 7
Sales Incentive Programs: Motivate or Salivate . . . . . . . . . . . . . . . . . 13
The Information “Chunnel”: IsThere Light at the End?. . . . . . . . . . . . 30
Summary and Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
2

3. Introduction
3

4. INTRODUCTION
4
Standing out from the crowd is a challenge for any
business. No less so for a manufacturer wanting to
distinguish itself among its many channel partners.
Fanciful marketing programs with little substance no
longer cut the mustard. For a manufacturer to stand as
“hero” in a complex distribution channel, the first step
is knowledge. What works, and what doesn’t?
How do channel partners view their vendors? How far
can manufacturers see down the channel to the end-
customer? Which incentives motivate partners, producing
revenue for both parties?This insight comes from a
probing look into manufacturer/partner relationships.
A survey conducted by an independent research firm,
Silicon Valley Research Group, asked these questions and
many more.The questions were put to CEOs, officers,
directors and managers of Fortune 500 and mid-size firms
in the IT space, whose business depends on channel
partners.The results are telling.
In this eBook we’ll explore what vendors and partners
say about the complex dance between channel
participants. Some of what we learn is conventional
wisdom. But we also draw an unconventional
conclusion—that fresh, accurate channel data can
be the differentiator between a mediocre program
or relationship and one that is highly profitable and
mutually beneficial.

5. 5
Survey
Methodology

6. SURVEY METHODOLOGY
6
The survey from which our conclusions are drawn
included a total of 295 Fortune 500 manufacturing
companies, and 195 of their U.S. channel partners. All
the companies were in the high tech industry, with
average annual revenue of $848M and staffs averaging
5,859 people. Companies included an even mix of large
and mid-size business-to-business firms, with sales,
marketing, and channel operations throughout the
Americas, Europe/Africa/Middle East, and the Asia-Pacific
region. Over half the companies derived more than
60% of their revenue from channel partners. Channel
partners included a mix of Value Added Resellers (VARs),
distributors, and direct marketing retailers.These firms
averaged $125M in revenue and 75 employees.They
sold systems, sub-systems, software, and components,
and their vendors included companies such as HP, Cisco,
Microsoft, IBM, Dell, and Apple.
The survey was conducted among owners, presidents,
CEOs, vice presidents, directors, and managers, and
included both qualitative and quantitative methods.
Qualitative, in-depth interviews provided insight
and commentary, while the quantitative methodology
provided results that can be projected to the larger
population.The margin of error is +/- 9.7% at the
95% confidence level and +/- 8.1% at the 90%
confidence level.

7. 7
How Vendors and Partners
See Each Other: Duel or Dance?

8. HOW VENDORS AND PARTNERS SEE EACH OTHER: DUEL OR DANCE?
Is the relationship a duel? A dance? Or worse yet, is
the manufacturer getting the cold shoulder?
As noted in the survey methodology section, more
than half the companies surveyed realize more than
60% of their revenue from their channel partners.
That’s a nice chunk of change. So it behooves
manufacturers to court those partners who put forth
the greatest effort and generate the best results.
But which ones are they?
8
That’s the essential question that an effective
channel data management program can answer.
First, however, let’s look at what the survey says
about the expectations that manufacturers and
channel partners have regarding each other.
There are certain characteristics that manufacturers
expect from channel partners as a given:
• Technical Expertise
• Customer Relationships
• Local Market Knowledge
Likewise, partners have their own set of
expectations from manufacturers:
• Sales Leads and Best Practices
• Sales/Marketing Support
• Technical and SalesTraining
• Market Research
“Manufacturers
need be upfront,
provide a timeline
and then deliver
on what is
promised.”
– VAR Manager

9. WHAT IS CHANNEL DATA MANAGEMENT?
9
The survey data took a deeper dive into the traits that partners consider important and effective to be successful.
These traits are listed inTable 1 below.
WHAT IS IMPORTANT?
High Quality Products
Vendor Reputation in Marketplace
Competitive Pricing
Sales/IncentiveTracking/Reporting
Good Marketing Support
SalesTraining and/or Sales Materials
Good Incentive Programs
TechnicalTraining
Competitive Benchmarking Reports
Breadth of Product Line
FaceTime with Vendor Personnel
Sales Leads
Social Media
WHAT IS EFFECTIVE?
High Quality Products
Vendor Reputation in Marketplace
Competitive Pricing
Sales/IncentiveTracking/Reporting
FaceTime with Vendor Personnel
Breadth of Product Line
TechnicalTraining
SalesTraining and/or Sales Materials
Good Marketing Support
Sales Leads
Good Incentive Programs
Social Media
Competitive Benchmarking Reports
Table 1

10. 10
HOW WELL DO MANUFACTURERS SUPPORT THEIR PARTNERS?
When asked how well manufacturers support their partners
(see Fig. 1), some activities and traits scored highly both in
importance and ability to motivate, including:
• High Quality Products
• Vendor Reputation in Marketplace
• Competitive Pricing
Good tracking/reporting ability held the middle ground,
followed by:
• SalesTraining
• Marketing Support
• Good Incentive Programs
Social media was the outlier, ranking near the bottom in
both importance and performance. However social media is
on the rise with savvy B2B buyers who are turning to search
and social media for business recommendations.

11. 11
HOW WELL DO MANUFACTURERS SUPPORT THEIR PARTNERS?
Figure 1

12. HOW WELL DO MANUFACTURERS SUPPORT THEIR PARTNERS?
12
For a manufacturer, traits such as product quality, company
reputation, and competitive pricing are what it takes to
get into and stay in the game. Going beyond these traits,
best practice in creating an effective manufacturer/ partner
relationship involves setting clear expectations, aligning
goals, and setting up rules for communicating regularly.
As Debra Delaney, President and CEO at CCI, states in
her post “What Makes a Partnership Work?” from her
blog Channel Marketing Strategies for Success, “What
does matter is that you have mutual respect, and that you
support each other’s goals and values…. Best practice is to
establish simple rules around how often you communicate
to make sure you are staying on track and not drifting
apart. …Equally important is establishing how each partner
will be rewarded.”
And that brings us to the issue of sales incentive programs.

13. Sales Incentive Programs:
Motivate or Salivate
13

14. SALES INCENTIVE PROGRAMS: MOTIVATE OR SALIVATE?
When was the last time a channel partner drooled
over your incentive program?
The sad fact is that many sales incentive programs
are largely ineffective.The survey probed both
manufacturers and partners to determine what works
and what doesn’t when it comes to sales incentives.
Table 2 describes which incentive programs rank most
important among partners.
14
“The most effective sales
incentive program helps
support a good product
and vendor, and as a result,
increases sales.” – Executive
Director, Distributor

15. SALES INCENTIVE PROGRAMS: MOTIVATE OR SALIVATE?
15
Which Incentive Programs Are Important to Partners?
WHAT IS MOTIVATING?
Big deal discounts
Performance based
MDF
Short-term price-based
SPIF
Volume rebates
Non-payment incentive
WHAT IS EFFECTIVE?
Performance based
Big deal discount
Volume rebates
Short-term price-based
SPIF
Non-payment incentive
MDF
Table 2

16. SALES INCENTIVE PROGRAMS: MOTIVATE OR SALIVATE?
16
In the qualitative research, partners had a mouthful to say
to manufacturers about sales incentive programs. Here
are some dos and don’ts gleaned from these interviews:
What to Do:
We love it when you provide cash incentives.
Cash is king.The more cash the better.
• Create progressive incentives.
• Make goals realistic and attainable.
• Pay consistently and quickly.
• Communicate program details and success
tips clearly and simply.
• Respond in a timely way to calls and short
shipping times.
What NOT to Do:
• Don’t make incentives too small.
• Don’t overlook the need to market the program.
• Don’t create confusion with complexity.
• Don’t rely on prizes.They are not universally
appealing and present tax complications.
• Don’t ignore outstanding partner successes.
Doing so will hamper participation in future
programs.

17. SALES INCENTIVE PROGRAMS: MOTIVATE OR SALIVATE?
17
Do Sales incentive Programs Really Increase Sales?
When done properly, the answer is yes.You can
change partner behavior with a well designed
program that incorporates the dos and don’ts noted
above, especially these:
• Use cash, not prizes
• KISS (Keep It Super Simple)
• Clearly communicate program details and
success tips
• Automate to ensure fast and accurate payments
Which Incentive Programs Work Best?
The survey probed respondents about program
effectiveness by type (see Figure 2). Channel
partners rated the following types of programs
as most effective:
• Performance Based
• Big Deal Discounts
• Volume Rebates
The programs most likely to motivate partners
included the following:
• Big Deal Discounts
• Performance Based
• Market Development Funds (MDF)

18. 18
SALES INCENTIVE PROGRAMS: MOTIVATE OR SALIVATE?
Figure 1

19. SALES INCENTIVE PROGRAMS: MOTIVATE OR SALIVATE?
19
Manufacturers were also asked to rank their rebate programs on the basis of four criteria (see Figure 3).
93% of manufacturers rebate programs are performance driven.
Manufacturers favored performance based programs,
for example, those using metrics such as year-over-year
growth or sales quotas. An example of an objective based
program is one using new customer acquisition as a metric.
Programs that allocate MDFs are an example of activity-
based programs, while a ranking system such as Platinum/
Gold/Silver describes a program based plan.
“We want MDF funds that
we can use for custom
programs.”
– Manager, Retailer

20. PERFORMANCE METRICS
20
When manufacturers were asked how many of their incentive programs met or exceeded their revenue
performance goals, 86% said that “All, Most, or Some” of their programs did so (Fig. 4). However, Only 28%
could answer “All or Most.”
86% of incentive programs meet or exceed incentive goals.
How many of your incentive programs meet or exceed revenue performance goals?
Table 4

21. SALES INCENTIVES MEAN REVENUE AND PROFIT
The survey indicates that sales incentives programs contribute significantly to channel partners’ sales and
profits. Incentives can boost both these metrics as high as 40 percent (see Figure 5). In fact, channel partners
depend on various types of incentive programs for revenue (see Figure 6).
21
Figure 5

22. SALES INCENTIVES MEAN REVENUE AND PROFIT
22
Channel partners rely significantly on incentive programs from the manufacturer for revenue.
Average Impact on Revenue
Back-end Rebates 18.4%
Revenue Rebates 17.3%
MDF 16.6%
Deal Reg 14.8%
Co-Op 14.0%
Figure 6

23. LATE PAYMENTS CAN DAMAGE THE RELATIONSHIP
23
Partners want prompt and accurate payment for fulfilling their end of the bargain in an incentive program.
Yet only 7% of manufacturers pay incentives in less than 14 days (see Figure 7). Additionally, only 40% of
manufacturers calculate and process incentive payments automatically all or most of the time.
7% of manufacturers pay incentives in under 14 Days
How many days does it take to
process and pay partner incentives?
What percent of incentive payments are
calculated and processed automatically?
Figure 7
# of days to pay
Resellers are likely to remember late payments. And they may perceive “late” differently than the vendor
because of the time difference between claim submission and payment. For example, if it takes 45 days to
get a claim submitted and processed, and another 45 days before that claim is paid, that’s 90 days. In the
reseller’s mind, that’s a late payment, which may feel like a burr under the saddle of the relationship.

24. AVOIDING INCENTIVE OVERPAYMENT
25
The survey found that respondents run an average of 21 channel incentive programs annually, costing on
average 11% of their annual channel revenue (see Figure 8). Among survey respondents, this figure amounts
to $31,800,000.The survey also found that 6% of channel incentives were believed to be overpayments (see
Figure 8), costing vendors approximately $2.1M.
Average Incentive overpayment is 6%
Figure 8

25. AVOIDING INCENTIVE OVERPAYMENT
26
These survey results indicate that an otherwise
successful incentive program could be overshadowed by
a number of administrative problems, such as:
• Slow manual processes
• Late program analysis
• Calculation inaccuracies
• Program abuses
• Duplicate claims
• Partner frustration due to slow payments
The results further emphasize the need for a fully
automated system to gather timely, accurate, and reliable
data to manage incentive programs effectively.

26. IMPORTANCE OF INCENTIVE PROGRAMS
27
How do manufacturers know what they are getting out of their incentive programs?The survey indicates that
38% of manufacturers calculate ROI on their incentive spend (see Figure 9).
38% of manufacturers calculate ROI on Incentive Spend
AreYou Getting the Most Out ofYour Channel Incentive Programs?
Figure 9

27. IMPORTANCE OF INCENTIVE PROGRAMS
28
When asked about the importance of various criteria relating to their
incentive programs, respondents rated the following as somewhat or very
important (see Figure 10):
• Testing and modeling of incentive programs before launching (64.7%).
• Real-time visibility into the performance of incentive programs (81.4%).
• Ability to compare performance against preset program goals (85.3%).
• Identification of over/under performing incentive programs (78.4%).
• Speed of incentive payment (64.7%).

28. IMPORTANCE OF INCENTIVE PROGRAMS
29
Incentive Programs - All Respondents
However, only 34% of respondents on average were somewhat or very satisfied with their ability to meet these
criteria.This discrepancy between importance and satisfaction spells opportunity for manufacturers who can
put automated information systems into place to improve satisfaction levels.
Figure 10

29. The Information
“Chunnel” is there
Light at the End?
30

30. THE INFORMATION “CHUNNEL”: IS THERE LIGHT AT THE END?
31
Preposterous!That’s how the idea of a tunnel under the English Channel was first received. It’s also the way
some manufacturers may think about their ability to see down the sales funnel to the ultimate end-customer.
Survey respondents were asked about their ability to identify the end-customer in their indirect sales channel,
as well as market segmentation data concerning that end-use customer (see Figure 11).
Only 34% of Manufacturers have actionable-end customer dataFigure 11

31. THE INFORMATION “CHUNNEL”: IS THERE LIGHT AT THE END?
32
From the 67% of respondents who reported that they
can “Usually or Always” identify the end customer,
51% of those can usually or always identify the
end-customer market segment (see Figure 11).
This means only 34% of manufacturers have
actionable end-customer data, meaning the ability to
know not only who made the purchase, but also what
was purchased and where.

32. THE INFORMATION “CHUNNEL”: IS THERE LIGHT AT THE END?
33
Among respondents, 87% were confident in their ability to identify their channel revenue by partner type.
However, 54% could not segment their channel partners by the market segments they serve (see Figure 12).
54% of Manufacturers know where their partners are, but do not know who they serve.
Figure 12

33. THE INFORMATION “CHUNNEL”: IS THERE LIGHT AT THE END?
34
As to the source of their information, manufacturers rely heavily on self-reporting or their own internal
research to identify end-customers (See Figure 13).
54% of manufacturers rely heavily on self-reporting & 57% on
costly internal research to identify end-customers
What is your source for end-customer segmentation information?
Figure 13

34. THE INFORMATION “CHUNNEL”: IS THERE LIGHT AT THE END?
35
Given the variety and complex nature of today’s sales incentive and rebate programs, and the millions of
dollars being paid out to channel partners, manufacturers cannot afford to rely on partial or inaccurate data.
Nor can they afford the cost of manually processing data, which leads to problems such as the following:
• Calculation inaccuracies
• Resource intensive claims processing
• Incentive program fraud and abuses
• Inability to adjust course while a program is underway
• Inability to guarantee accuracy when paying earned rebates or MDFs to partners
• Inability to ensure timely payments to partners

35. THE INFORMATION “CHUNNEL”: IS THERE LIGHT AT THE END?
36
Best practice dictates an automated data gathering system that ensures accuracy, timeliness, and
transparency for both vendor and partner.
43% rely on POS from the partner & 24% from a 3rd party
What is your source for channel partner segmentation information?
Figure 14

36. THE INFORMATION “CHUNNEL”: IS THERE LIGHT AT THE END?
For channel partner segmentation data, 74% of
manufacturers rely on self-description by channel partners.
Also, 43% of manufacturers depend on channel partners for
point-of-sale (POS) transaction data (see figure 14).
Traditionally, the manual processing of claims and rebates
has placed a huge burden on the partner.To claim benefits,
the partner must track sales and submit claims with proof
of performance.
The manufacturer must then manually verify these claims.
This often leads to requests for more information and
delays before claims are finally paid out.
37

37. THE INFORMATION “CHUNNEL”: IS THERE LIGHT AT THE END?
38
Best practice in gathering POS data to support incentive programs calls for an automated approach that can
accomplish the following:
• Automatically evaluate POS data to determine which transactions meet
• eligibility requirements for each rebate program
• Automatically calculate rebates across all programs
• Automatically process claims without the need for partners to submit paperwork
• Automatically eliminate errors that are inherent in manual processing
• Eliminate the need for “shadow” accounting by channel partners, leading to improved relations
Automation ultimately leads to reduced costs by eliminating overpayments and mistakes, and by reducing
administrative costs.The result: more dollars available for programs.

38. PARTNER SEGMENTATION AND TIERING
39
PartnerTiering – All Respondents
What do manufacturers think about the value of tiering or classifying channel partners? On average, 66%
considered end-customer and partner segmentation issues as “Important or Very Important” (Figure. 15).
Figure 15

39. PARTNER SEGMENTATION AND TIERING
40
Following are the reasons that manufacturers value tiering:
• Prioritize channel partners to invest in (47%)
• Prioritize channel partners to retain (46%)
• Prioritize channel partners to drop (40%)
• Determine optimal partner coverage by market segment (42%)
• Target incentive programs to reach specific end-customer segments (31%)
• Compare end-customer segment growth to industry benchmarks (29%)
However, only 39% of respondents on average were somewhat or very satisfied with their ability to do so.
Craig DeWolf also notes: “Assuming you have a means for measuring performance at the partner level, you
have the basis for your partner scorecards.”
In other words, once criteria are established, measurement is the key. Here again, best practice calls for an
automated system to gather the needed data reliably, accurately, and in a timely fashion.

40. PARTNER SCORECARDS
41
Setting up a partner scorecard is a best practice that can
address many if not all the reasons noted above.
What goes onto the scorecard depends entirely on the
nature of the manufacturer’s business and that of the
channel partners.
According to CCI Global Channel Management, below are
the top ten scorecard metrics:
1.Total Sales Revenue
2.Technology Expertise
3. Operational Efficiency
4. Mindshare
5. Sales Metrics
For more information on Scorecarding, please see:
Key Scorecarding Practices for Channel Success
|Top 10 Scorecarding Metrics”
1. Current Revenue Model
2. Vertical Expertise
3. Company Health
4. Business Plan
5. End-User Satisfaction

41. PARTNER SCORECARDS
42
Some basic information to consider is provided in a post by Craig DeWolf entitled “Creating Partner Scorecards”
from the CCI blog, Channel Marketing Strategies for Success. His list includes the following criteria:
• Minimum number of new deals registered per year (per sales rep)
• Utilization rate for Co-op/MDF spending
• Close/Win ratio of all deals registered
• Average time to close for all deals
• Close/Win ratio for all leads distributed to the partner
• Minimum attachment rates for specific products or service packs
• Year-over-year revenue growth
• Support calls received, or received without escalation
• Average gross margin per sale
• Average deal size/value

42. Summary and
Conclusions
43

43. SUMMARY AND CONCLUSIONS
44
Following is a summary of highlights from the research regarding channel partner and end-customer segmentation:
• Only 34% have actionable end-customer data
• 54% rely on self-reporting for identification of partners and end-customers
• 87% can always or usually segment their channel revenue by partner type
• 54% cannot identify partner market segments.
• 66% believe it is important, or very important, to use partner and end-customer data in planning
and decision-making
• Only 39% are somewhat or very satisfied with the data available
Regarding incentive programs, these highlights emerge:
• 93% of Rebate Programs are performance-based
• 38% calculate ROI on incentive spend
• Fewer than 7% pay rebates in less than 14 days
• 6% of incentives are overpaid
• 75% consider incentive program Best Practices to be important or very important
• 33% are somewhat or very satisfied with incentive program Best Practices implementation

44. BEST PRACTICE RECOMMENDATIONS
45
For PartnerTiering
• Develop reliable end-customer segmentation data
• Segment resellers based on POS transaction data
• Use segmentation to prioritize partners to invest in
• Compare end-customer sales to industry benchmark
• Target incentive programs to specific
end-customer segments
• Determine optimal partner coverage by market segment
• Prioritize channel partners to drop
• Prioritize channel partners to retain
For Incentive Programs
• Calculate ROI on incentive spend
• Speed incentive payments
• Validate accuracy of incentive payments
• Gain real-time visibility into incentive
program performance
• Identify over/under performing programs
• Compare performance against program goals
• Test and model incentive programs before launch
For Both
• Rate your importance and satisfaction for each
practice on a scale from 1 – 5:
• Importance Scale: 1 Very Unimportant;
5 Very Important
• Satisfaction Scale: 1 Very Dissatisfied;
5 Very Satisfied

45. MOVING FORWARD
46
This independent survey sheds invaluable light on the current state of affairs between manufacturers and their
channel partners in the high-tech arena. One might reasonably assume that similar results could be derived from
vendors and resellers in other industry segments.
One insight gleaned from the survey is that respondents seem aware of best practices regarding sales incentives
and partner segmentation, but don’t always have the means to practice them! Satisfaction levels lag behind
performance on a number of criteria.The antidote: fast, accurate, timely, reliable channel data to help
manufacturers better manage and enhance their partner relationships.
CLOSING NOTES
The content presented in this eBook is intended to provide foundational information to
help with channel partner management, as well as provide best practices for channel
data management.
To assist your effort further, this information can be supplemented by other best
practice white papers offered by Model N including:
1. Best Practices in Channel Partner Data Collection
2. Best Practices for Using DataTo Drive Channel Sales Growth
3. Best Practice in Channel Point-of-Sale forTimely Incentive Rebates
Additional reference materials may be found at www.modeln.com