Strategic value of Dealers incentives
As markets evolve and reach a saturation level, operators must relay on improving customer ARPU in order to continue to grow. Incentives management can be a valuable tool to motivated dealers to push the operator most valuable products and services.

In a developed and sophisticated market, the telecom operators have to find differentiating characteristics that allow them to answer to the pressure of competition and market changes in a fast and flexible way.

In this challenging environment, the sales network (direct or indirect distribution) has an increasingly important role. They are the face of the organization to the customers.

In the case of operators where there is a significant weight of the sales network, this issue becomes even more critical. Lets take as an example a major European mobile telecom operator, where:

• The commissions paid to the agents represent one third of the CAPU (Cost of Acquisition Per User),
• 80% of the gross activations have originated in the indirect distribution network,
• 60% of the subscribers were acquired by the distributors, (indirect distribution).

This scenario clearly indicates the need to develop a strategy, which optimizes the incentive process and reduces operational costs on one side and, on the other, brings agents closer and enhances their loyalty by providing them with a better service.

The answer to these challenges lyes on the development of incentive management solutions that support all the complexity of a sales environment such as this, a marketing tool that implements compensation schemes in a competitive and innovative way.

A well planned incentive policy allows shaping the sales network according to the operator’s objectives. By changing the way commissions are established, the operator may exert influence upon the sales process and focus the sale forces aligned with its objectives.

Equally important is the need the telecom operators have to create strategies to enhance the satisfaction, motivation and loyalty of their agents network according to their potential and profile.

Gartner Group estimates that between 3% to 8% of the commissions paid to agents are excessive. This situation represents an extremely high financial burden and may originate in one of the following:

The commissions’ calculation was incorrect, either due to a bad configuration or a data processing error. This situation is common to operators that compute the commissions using archaic and inadequate tools, which are therefore unreliable.

Commissions systems that do not have anti-fraud mechanisms make the organization vulnerable and allow the agents to explore the flaws of the operator’s commissions strategy. For example, an agent sells a high tariff plan and receives a generous commission, however, one week later the customer switches to a cheaper plan. If there were no anti-fraud mechanisms, the operator would have paid an unduly high commission, which does not reflect the effective profitability of the customer.

Due to a very aggressive competition and to a dynamic market, the operators must have the capacity to react quickly to their competitors’ actions but that answer should not be only launching customer oriented marketing campaigns, as it has been the case so far. An integrated view should be applied when launching a new campaign, developing at the same time a strong value proposal for the customers and creating conditions to motivate the agents to participate in that campaign, since they have an important role in its success or failure. Therefore, the commission models must be highly adaptable and have a low impact on the system.

For all the above reasons, the commission systems are increasingly becoming strategic tools at the telecom operators’ service and have a prominent role in the business and sales strategy. The main benefits for the business may be summarized in the following points:

• Support of an innovation strategy

A commission system should enable several types of commissions to allow a large negotiating flexibility and also include several incentive forms, depending on the channel, dimension and geographic distribution.

• Flexibility to adapt to new market realities

Capacity to react to market/competition changes. Allow facing or surprising competition and promote agents’ loyalty.

• Cost reduction

Since many of the tasks are automatic (data integration, computation, report printing), the system’s maintenance has a low resource allocation. Furthermore, the integration with the operator’s payment and management systems helps to control which payments are to be made and which are to be retained.

By creating new ways of better servicing the agents, telecom operators are developing partnerships and motivating their distribution channel, which will represent, in the short run, more revenues and enhanced network loyalty.

Due to their potential, the commission management applications form a new approach to the agents’ remuneration issue, representing an innovative and efficient way of interacting with a critical element such as the sale forces.