EDITORIAL: On the dole

EDITORIAL: On the dole

Access to co-op marketing funds - be they through rebates, discounts or by application and approval - is a contentious issue for all levels of the channel.

These funds, which are crucial to helping channels raise awareness of a particular product or service in the marketplace, are increasingly coming under scrutiny by the vendors and distributors that dole them out, as marketing budgets feel the razor.

ARN's investigation into the murky world of co-op dollars has revealed alarming levels of misuse, redirection and downright deception concerning these funds, which are intended for marketing purposes only.

There is nothing new about income received for use in a specific area being funnelled into consolidated revenue to be used in any way seen fit by the recipient. Governments are perhaps the champions of this deception. Just look at how they go about spending the taxes we pay.

Australian motorists, particularly those in rural areas, know a thing or two about paying for one thing and receiving very little in return. The billions paid in road and petrol taxes, licence fees and toll charges - and don't forget the GST on all of those - is raised in the name of road safety and traffic congestion relief.

Unfortunately, it is then dispersed towards other budgetary items or marginal electorates rather than on the quality of roads or lifesavers like train crossings and bridges. Ditto for accumulated tobacco and alcohol levies and the less-than-full allocation of them to health services and health education.

Distribution of marketing funds in the IT industry is a slightly greyer area. It can be the difference between which vendor a channel partner chooses to align themselves with and champion in the marketplace in various product categories.

History records that marketing is one of the first expenses to be given the chop when revenues stagnate. This means vendors and distributors that are dispensing marketing funds will be looking to either cut them off altogether or pay significantly more attention to what is happening to those funds.

I suspect any organisation that has been relying on co-op dollars to artificially keep prices low or to prop up other expenses in the running of their business is in for a rude shock.

As ARN's News Analysis (page 1) this week shows, there are some strange practices going on that are simply unsustainable in the current economic environment. Already under increased scrutiny, marketing funds allocations are about to become even scarcer and channel partners will no longer be able to use them as they please.

While this will be a thorn in the side to some, it will be a welcome development to resellers that have been doing things by the book and not using them to keep an extra salesperson or to win a deal via a lightly lower price.

Of course, ARN has a vested interest in the debate, as some of the funds allocated by vendors to distributors end up as advertising in this publication. But that doesn't mean we are feathering our own nest by exposing what is happening, as opposed to what should be happening.

It is important for channel players to understand that, under pressure from declining revenues, vendors and distributors are reducing rebates and other incentives. They are much more discerning in how they are allocated and far more thorough in following up how they are being spent.

Therefore, if you are using these marketing funds as "consolidated revenue" or for anything other than what they were intended, be prepared to be brought to task in the near future.

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