Wireless Dealer Survey: 56% Prefer Combo Structure of Upfront and…

For wireless retailers, a big portion of revenue is drawn from carrier commissions.

The 2011 Channel Partners Compensation Survey (available for free download here) recently polled “master agents, independent agents, subagents, brokers, dealers, VARs and system integrators about how and how much they are paid,” according to a description of the survey.

“This year, Channel Partners added a series of questions about how compensation influences sales efforts. The responses provide deeper insight into a sector of the communications industry that continues to experience the direct effects of an increasingly complicated and challenging marketplace.”

According to the survey, the bulk of compensation comes in the form of residual commissions every month, followed by the next most popular arrangement, a mix of monthly and upfront commissions (see Figure 5, below).

“Not surprisingly, residual commissions are the favored structure for 69 percent of respondents,” the survey said. “However, 56 percent of partners are partial to a combination of upfront and residual commissions. Another 30 percent said they prefer the upfront model.”

I also spoke with iQmetrix Customer Success Manager Ryan Donald about the survey. Ryan has been discussing compensation issues with RQ4 users for several years now.

The following are Ryan’s interpretations of the 2011 Channel Partners Survey results:

Survey: “While SPIFFs (Sales Promotion Incentive Funds) impact agents’ and VARs’ decisions to a degree, they don’t appear to be as much of an influence as vendors might hope.”
Ryan: “I think many clients in our space have moved to being exclusive or single carrier. So a SPIFF that was traditionally seen as motivational is now seen by those people as a bonus.”
Survey: Master Agent vs. Subagent Commissions – “The majority of masters share at least 50 percent with their subs, agents said, although one respondent reported a 10-20 percent range. On the high end, one master agent allocates 90 percent of the cut for the subagent. But moderation seems to prevail among most master agents, serveral of whom determine a subagent’s commission percentage based on the amount of support required, involvement in the sale and overall volume.”
Ryan: “The talk on master agents versus subs is interesting. In the last year, I have seen a massive upturn in clients of mine that were independent before but have now become part of a master agent program. I used to see a lot of one- or two-location guys that were subs; now you will see subs that have 10 to 12 locations. Part of the reason we are hearing this more now is that they are a client of the master agent, but it seems that a lot of subs coming out of the woodwork.
“This factor may influence a lot of these compensation satisfaction statistics, as many of my clients that are subs feel vastly underpaid.”
Survey: “Forty percent of respondents said their revenue outlook for 2011 matches their expectations. That’s a much higher figure than a year ago, when just 28 percent of companies looked forward to an on-target year. As for firms whose sales will come in slightly behind projections, the number dropped somewhat in the latest survey, from 23 percent in 2010 to 11 percent for 2011. Meanwhile, 36 percent of partners are bringing in more revenue than they forecast so far in 2011 (see Figure 3).”

Ryan: “Seems the outlook on revenues (Figure 3) is much higher than last year. This is in line with what I am hearing. A couple years ago commission payments took a steep downturn but seem to have stabilized or even come up in the last 18 months or so.
“Almost all carriers have eliminated hardware subsidies without increasing the one-time commission enough to offset it. This makes the add-ons (features, data packages, VAPs and accessories) even more important for profitability on the invoice itself.”
Survey: Factors Impacting Compensation –“Regardless of how compensation arrangements may be changing, the way partners increase that amount is not. Volume commitments continue to be the key determinant; 72 percent of respondents said this is how their agreements are structure, compared to the same percentage last year.”
Ryan: “Volume bonuses are huge. I think this is the reason for the apparent increase in master/sub relationships. Some of my clients have told me that for the one-time payments, the volume incentive can be what makes or breaks them in a given month.”

As a wireless retailer, what are your initial reactions to these or any of the 2011 Channel Partners Compensation Survey findings? Please post your comments below.