In our cover story this month, writer Bob Andelman uses an excellent analogy when talking about whether direct sales on the Web will eventually affect companies' incentives. "Not long ago, a generation of architects scoffed at the notion that their entire industry would shift from pencils and slide rules to CAD software," he says. "They were still standing on the tracks staring into the oncoming headlights when the e-railroad ran over them."
The bullet train is heading this way. Take Annuity Scout.com (www.annuityscout.com), a site that's offering six no-load variable annuities that are normally sold through financial planners at a commission. By cutting out the middleman, AnnuityScout estimates its distribution cost to be about a tenth of face-to-face broker distribution. Those savings are being passed on to the consumer.
What's happening is channel conflict, resulting in a reshaping of the relationship between dealers/distributors and corporations. "Sellers are going to be looking for further services, or [an answer to] why shouldn't they do it themselves," says Karen Peterson, an analyst with Gartner Group, Stamford, Conn. "And buyers are going to be asking, "Why should I pay an increment to my standard cost if I can buy directly?"
This has already begun to filter down to how - and whether - companies incentivize certain channel partners. At CarlsonGroup, Minneapolis, Minn., which has many clients in the automotive and high-tech fields, senior director of channel marketing John Farrell has seen a shift in the incentive goals at companies that are adding an Internet component. The dealers still deliver the product bought online, still train users, and still service the product. But the incentive programs are now based on the timeliness of that delivery, the accuracy of the training, the efficiency of the service, and overall customer satisfaction - not just sales.
The game in the future is going to be all about adding value - and incentive structures will reflect this. Where the end of the line is for the bullet train, no one knows.