Are SPIFFs Necessary?

In the indirect channel, there is a frequent debate about MDF and SPIFF. MDF is the marketing funds that vendors give partners for events, advertising, lead gen, collateral printing or other marketing needs that will be a benefit for the vendor specifically from the partner.

The SPIFF is the bonus money given for sales – and sometimes just for registered leads. In place of – or in addition to – SPIFFs vendors have sponsored President’s Club for partners who are sales leaders or held contests for trips, electronics or the lease on a Tesla (like NICE INContact is currently doing and Spectrum VoIP did a few years ago.)

It has been debated that after the pandemic, vendors will pull back on MDF. MDF has gone towards event marketing in the past, but in 2020 there weren’t events. The monies got re-directed to other ways to market to partners. However, with Zoom fatigue being a real thing, webinars, virtual conferences and anything that can appear unnecessary/unproductive/no ROI*, has had limited attendance.

When things open back up, the flow of MDF will resume into in-person events. By all accounts, the indirect channel brought in a ton of revenue in 2020. For vendors that pull back on MDF, another vendor (competitor) will send in the check and take the attention away.

On SPIFFs, there is a discussion going on LinkedIn: What if technology vendors/suppliers stopped offering SPIFFs? Most partners don’t choose by SPIFF. They try to choose the best solution to make a lifetime, happy customer. There are various factors that are considered including price, service delivery, features and vendor’s ability to deliver. There is also the demo and sales process of the vendor. I can tell you from Secret Shopping providers that it varies greatly!

That being said, this is a business. The sales commission and bonuses are used to keep the lights on, payroll, and more. It is a tough spot to be in.

I know partners who have been influenced by SPIFFs. Yet I can tell you that in all likelihood the vendor chosen was going to help the customer. (If you can distinguish the differences between the CCaaS or UCaaS providers, please write an article doing so for the rest of us!)

Why do we see SPIFFs so much today? Incentive! And they work! Commissions are low. Even 20% of $1000 is just $200 per month. VARs, MSPs, and other non-telecom agent partners come from a different business model. An inter-connect (PBX partner) has a legacy business model wrapped around selling a big box for $50K, installing and maintaining that PBX, fees for MAC/Ds, and maybe a referral fee on the PRI. The 4% maintenance fee is off the $50K. The partner business has technicians on payroll to maintain customers and equipment. These partners also need to keep their vendor status to continue to service legacy customers. All of this will not work when you sell a $500 (that is the average ARPU of a UCaaS deal) per month deal at 20% commission. How do you even pay the sales rep on the $100 commission? How do you cash flow the business on $100 commission you get AFTER you did all the project management? And let’s not think for a second that the partner doesn’t have pre-sale and post-sale project work to do — all paid by the commission!

Mitel mentions the obvious: “The days of large, upfront payments from capital expenditure investments have largely disappeared. In their place came recurring revenue, smaller amounts that would take time – years, even – to amount to the commission on a one-time deal.” And there in lies the problem for cloud providers.

And that is why SPIFFs are needed. Heck, network operators should be paying SPIFFs since telecom is so broken that it takes 500 emails to get one 10MB pipe to work!!!!

SIDE NOTES:

*By the way, master agencies fib about the number of partners [HERE] – which doesn’t help the MDF ROI for vendors. With 2700 or 4000 agents, the $20K is about $7 or $5 of marketing expense per partner. When the number of agents getting checks from the master is more like 270 or 400, that $20K is $74 and $50 per agent. A little different.

*Except for sales meetings, prospecting calls, QBRs and one on ones, attendance is down because the ROI of these Zoom calls is low. It is mainly vendors and master agency personnel yakking. It is hardly ever a partner discussing the steps to close business. It is theory and pundits — and people so far removed from a sale as to be irrelevant. The sales process & buyer’s journey has changed a lot in the last 14 months. What we sell, to who and what we sell have changed. The #1 rule of a Zoom call should be: what one take-away can the attendee have that will produce results for him/her?

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