Here is a video of our CEO, George Kriza, explaining the benefits of Spiffs.com for hardware manufacturers and software publishers.
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So you’ve got a Spiff program and a barn full of products to move. What next? Lot’s of manufacturers jump into the spiff promotion with both feet, spiffing everything that isn’t nailed down. Is that the best approach? Or are there other approaches that can yield considerably better results with the same budget dollars?
First, it pays to give yourself a little time to consider your business goals before putting a pencil (ok a spreadsheet) to designing your program. What’s important? Here is a list of things that MIGHT be important to you:
- High margin products / low margin products / strategic products
- End of life products / new line introductions / new premier products
- Rewarding volume sales
- Rewarding product education
- Growing the customer base
- Selling follow on products to the installed base
- Selling more products at the time of the initial sale
Other considerations might include:
- How do I fund my spiff budget?
- How do I keep my program fresh?
- What can I do to gain rapid market adoption?
- How can I rise above the noise?
Lots of considerations and questions… so we’ll throw out a few ideas to get you thinking.
High margin products / low margin products / strategic products
Every company has products that are money makers, and others that it simply has to carry to complete the line, yet others to attract end users or consumers attention. Sell up, sell down, give the buyer somewhere to go to find just what they need. Great, but how does that play into a spiff strategy?
We can assume that you have good data on the selling rates of each sku in your line, cross checked with the manufacturing schedule and product availability. All things being equal, if products with low and high margins are moving at the same rate, it would seem reasonable to spiff the higher margin products with a larger dollar amount than the tight margin pieces. The only exception to this is when you’re in a market share battle, in which case you might want to hit the “market maker” products with the biggest spiff dollars to make sure you are perceived as a leader in the category.
End of life products / new line introductions / new premier products
Where a product is in it’s life cycle may be very meaningful as to the spiff strategy. Some products at end of life may need to be blown our. In many cases, until the old inventory is gone from reseller inventories, new product introductions may have to be delayed. If old products are in inventory, they become rapidly stale. Especially in technology, Moore’s law is alive and well. And dead inventory can only go two ways… swapped for new stock (particularly ugly) or less onerus but still ugly, price protection. Manufacturers that maintain healthy reseller groups (channels) always take care of them, so these are real problems. The better answer is balanced promotions, including POS spiff promotions, to regulate the flow of inventory through the channel, accelerating adoption at time of introduction, accelerating liquidation at end of life.
Rewarding volume sales
Almost every manufacturer wants to cultivate large customers. Unless you are boutique product line, this is generally true. So, do you want to pay the same spiff amount per unit on a large sale, more, or less?
If you answered yes, that may be valid, but it doesn’t encourage large sales. If you answered yes, you may also be a beliver in capping the maximum spiff. Not motivating, but their may be a business case for it. On the other hand, you may believe that a larger sale should merit a higher per unit rate. Whatever you believe, the answer is not a one size fits all spiff rate. The answer lies in Tiers or Plateaus, which are not the same thing. And even after you understand the difference, there are complexities in their implementation.
Tiers are defined as defined levels where rewards change. For example
1 or more units: $5.00 each
5 or more units: $6.00 each
10 or more units: $7.00 each
25 or more units: $10.00 each
250 or more units: $12.00 each
Plateaus, on the other hand, might look like this:
1-4 units: $5.00 total
5 -9 units: $9.00 total
10 – 25 units: $25.00 total
25 -250 units: $40.00 total
250 or more units: $500.00 total
In the latter plateau case, you would use your strategy to control the maximum payout so that it would not be unlimited. By declaring it this way, you are way ahead versus summarily instituting a cap when some salesperson knocks it out of the partk unexpectedly. By the way, they largest spiff we have ever paid on one sale was $300,000.00. And the sponsor never at any time tried to reneg on the program. On the other hand, if an outcome like that is not welcome, a plateau program would keep it under control.
Rewarding product education
Salespeople sell what they know. Spiff them for taking quizzes that build product knowledge. It absolutely works.
We’ll continue this theme in our next blog post. Thanks for dialing in to the Spiff Riff!
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Over half the discussions I have with IT manufacturers eventually lead into the fundamental question—Why do I want to participate in Spiffs.com when I already have a Channel Program??
The answer is really quite simple.
First, market research shows that IT Channel salespeople involved in spiff and incentive programs are highly attracted to a single portal that would allow them to take advantage of promotions and spiffs in the channel.
Second, for the manufacturer or software publisher, it’s all about diversifying and identifying new partners who can make a contribution by selling their product. Quite simply… it’s all about partner growth!!
Spiffs.com is gaining participation daily, contact a member to see how Spiffs.com can benefit you!
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For years incentive companies have pitched the “trophy value” of merchandise incentive awards. The essence of the argument is that people remember tangible prizes and trips far longer than cash rewards. There is some merit to this line of thinking. Many years ago I was in a program run by Apple Computer that gave out merchandise prizes from a beautiful catalog. I picked a Hartman Briefcase, and used it for several years. I was really proud of that briefcase.
But keep in mind that many incentive companies have an ulterior motive for recommending merchandise. They make much more money that way. Margins for incentive merchandise are 25% and often more. Most incentive houses merchandise their catalogs for 30% to 35% margins. Costs for running debit card programs are dramatically less, and companies that offer this method of delivery do so at far lower profit margins. Expect to see overhead to manage card programs in the neighborhood of 2/3 less than merchandise programs.
So which is more effective?
At MTCPerformance we have talked to thousands of program participants, and they have a simple, oft repeated answer: Cash is King!
Why would that be? Several simple and important reasons.
1. Rapid Reward Cycle: Get Paid FAST!
Typical merchandise programs last several months, even a year. Points have to accumulate. It is likely that many months will pass before participants receive their prize. IF they get enough points, which they may not know until the program ends. Then they have to wait for delivery. Sometimes the product they desired is discontinued and they have to make another choice. Other times it’s back ordered and they have to wait. Delays create dissatisfaction. The prize could be defective or damaged in shipment. There could be a limited selection. And did we mention that participants will get a 1099 for a price that is likely 30-50% higher than the price they would pay for that product at the local big box retailer or warehouse club? If all this sounds a bit counter productive and non-motivational… that’s because it is.
2. They’ve Got Bills to Pay
As much as you might like the idea that your participant wins a memorable prize, memorable prizes don’t pay the bills. A prestige prize to show off while you can’t make ends meet may not have the desired effect.
Here’s today’s reality: Most people spend more than they earn. Most people carry credit card balances, often on multiple cards. Often, they pay only the minimum payment. That’s been true for 20 years now at least. To make it a bit more current, they can’t make their mortgage payment. The use of discretionary funds on a debit card puts the purchasing power just where its needed or wanted.
To drive the point home…here’s one perversely amusing merchandise incentive horror story we know to be factual… Somewhere a well intended marketing manager created a program where the grand prize was a Hummer- 8 of them to be exact. Yes, the 8 top performers would win a trendy 4×4 that cost the sponsoring company about $80k each. I have it on good authority that 5 of the 8 Hummers were sold by the winners in less than one week. While the program may have been high profile (I call that a hype promotion) we might imagine that the Hummers were sold for $50k each or maybe a bit more. That means that about $240k worth of promotional dollars were completely wasted. And yes, the winners had to pay tax on an $80k prize. At a 25% nominal tax rate, that’s 20k in income tax. That takes the value received down to $30k per person for everyone who sold the car. Spending $80k to give $30k of value. Sounds like a home run, doesn’t it?
3. Participant Nirvana: Buy what you want when you want it and where you want to shop.
Simple isn’t it? Check your balance on line, and then get the exact item you want, on sale. You control the playing field. It’s a winner, every time.
4. Perhaps Most Importantly, The Pavlov’s Dog Effect
We admit it, conditioned response is what we’re shooting for. Sell something, get paid. Get the money on the reloadable card in two weeks. Spend the money. Sell more of the same product line. Get paid again. Refill the card. Repeat at will. IT WORKS, and has become the standard and most effective motivational method in the incentive industry.
At MTCPerformance, we’ve been doing this for over 10 years now. Years ago, program sponsors liked to change up their incentive program every year to keep them fresh. Know what’s interesting? Our clients have stuck with these reloadable debit card programs year after year. And as you’ve learned above, the reasons are simple and powerful.
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Welcome to Spiffs.com! I’m very excited to talk about what Spiffs.com can do for you.
Spiffs.com is the first and only online community bringing together the entire IT channel for sales incentives. Vendors promote their products and spiff programs reaching more salespeople, resellers increase their sales and profits with a motivated sales team, and salespeople earn more cash rewards.
Our goal is to provide one place where an IT salesperson can come and see all the different sales incentive promotions, otherwise known as spiffs, that are currently being offered by all the various computer hardware manufacturers and software publishers. With all the those spiff opportunities, we want to make it easy to search and find what’s appropriate for you. Then make it really easy for you to submit claims for those spiffs. And finally, make it simple to track all your rewards because they’ll all be loaded onto one Spiffs.com Visa Prepaid Card.
We hope you’ll find Spiffs.com is your one place to go for all your sales incentive needs. As we grow and continue to add vendors, we want to hear from you on how to make Spiffs.com even better!
If you haven’t joined yet, please signup. It’s free.
If you’re already a member, thanks for joining our community. We look forward to serving you and hope you have a rewarding experience!
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