Soft-dollar programs are as old as the trees, and usually about as useful for motivating partners. They cause confusion ("What's the difference between co-op and MDF?"), accounting difficulties ("Should soft dollars be reflected as a reserve against revenue or an expense?"), and arguments between partner managers and resellers ("Why can't I use my remaining funds to pay for an executive golf day?"). As a result, vendors are constantly asking, "Should we discontinue our soft-dollar programs and put the money to better use somewhere else?"

This situation is shocking when you consider how much money is spent on soft-dollar programs by technology vendors. According to CCI, a leading provider of software and professional services for companies that sell through direct and indirect channels, technology vendors spend more than $1 billion annually on soft-dollar programs every year but have had little or no ability to measure the impact on consumer demand, channel success, or market share. When co-op or MDF funds are claimed, resellers seldom use them to support a coherent and effective market development or revenue growth strategy.

This significant waste could be averted if vendors took the time to work through the following seven "best practices" for soft-dollar programs. More and more companies are following these best practices with increased measurability of their programs - and with the extra benefit of having established some of the internal controls and process that are required by FASB and Sarbanes-Oxley. The seven best practices for soft-dollar programs are:

• Keep it Simple - Keep it Going
  Claiming funds or getting approval for investments should be fast and easy. Guidelines should be clear enough that everyone knows what is covered and how the reseller is going to be reimbursed. Funds must be available through good quarters and bad. Increasingly, being "easy to do business with" is a key criterion for vendor evaluation by the channel, and soft dollar programs can become overly difficult very fast.
• Set Clear Goals and Objectives
  There are as many suitable objectives as there are market conditions, but any objective should support your primary corporate and channel goals. Some examples:

1. If the product or program is new, vendors may set soft-dollar goals designed to recruit new and desirable partners (i.e., partners get soft-dollar bonus for signing up).

2. If a highly-trained and skilled channel is critical, a vendor may allocate a 70/30 soft-dollar split between technical training and market development for resellers.

3. If a product has been on the market for a long time, a vendor might shift funding to new products to increase profitability.

• Select Participants Carefully
  The 80/20/80 rule is very appropriate in Co-op/MDF programs; 80% of the revenue is generated by 20% of the partners who in turn should receive 80% of the soft dollars available. There is no such thing as a good one-size-fits-all program. The best solution is to have a soft-dollar program that permits the participants to plan and execute activities that fit their particular business needs - under the control and authority of program guidelines and their partner manager.

• Push Training Whenever Possible

Use a portion of soft dollars specifically for supporting partner education. Ensure that partners have easy access to program and product information. Use online tests and rewards to be sure all partners have the information and skills they need to represent your products and services to your standards.

• Track, Measure, and Automate
  To get the best results from their soft-dollar investments, companies need to know which countries, partners, or programs are performing better than others. Also, they need to know which partners still have funds available so they can promote usage. Automated systems exist which make program management and this performance tracking very simple.

• Make the Content Easily Available

Put all the approved logos, fonts, colors, trademarks, text, layouts, and other usable materials into a common repository, and allow partners to easily pull from it and build their own co-branded marketing materials. Specialists companies can provide content management software that allows companies to create pre-approved marketing templates that can quickly and easily be co-branded by partners and downloaded in a print-ready format. This is a low-cost, Internet-based alternative, and your partners will love how easy it is to use.

• Constantly Evaluate Program Performance

Measure how soft-dollar activities have done against the goals, and then make adjustments to each fund on a quarterly basis. Also, review the goals and make changes to the program every fiscal year to ensure they continue to support the company marketing strategy and primary goal.

Vendors with successful soft-dollar programs use them to extend their marketing (and demand creation) through their partners, while monitoring results and making changes quickly. Vendors who are still managing spreadsheet-based programs have likely given up on the concept that their co-op or MDF programs could become a competitive weapon. That's a mistake. As soft dollar programs become more automated, aggressive partner managers are finding new ways to make them pay off. And the channel is responding with increased investments on their side as well! ◊