The SPIFF War

Peter : On Rad's Radar?
Peter
| Peter Radizeski of RAD-INFO, Inc. talking telecom, Cloud, VoIP, CLEC, and The Channel.

The SPIFF War

Money is practically free, so why not use it for a land grab? This is the premise behind the industry consolidation. It is hard to grow organically, so grow inorganically by buying competitors or new markets (like Vonage and Nexmo).

But eventually you think out the herd of competitors that you can afford to buy and now you have the real revenue growth numbers staring at your face. UGH!!! How do we buy more growth? Advertising won't work. It has rarely ever helped the CLEC industry. I remember Paetec ads about technology. XO was a big sponsor at the Tampa Bay Lightning hockey arena and yet no one I ask knows who they are.

So if the awful advertising CLECs did won't work, how do we get growth? Well, we could innovate and make a really cool product but that seems unlikely. We are in a me-too industry that since the pin dropped was all about Saving the Customer Money! We can't change that now by making a product that people would seek out - like say Slack!

Nope. How about buying sales? That we can do!

Hence, the SPIFF wars of 2016. Every other day I get an email with a new SPIFF announcement. Most are from Hosted VoIP companies. These SIFFs include SIP trunking much of the time. It is getting crazy as it is well past 3x MRC for any SPIFF.

There are two reasons this war is occurring: the market is such a bloody red ocean (hyper-competitive) that providers need to get attention or the sales are slow coming in. It makes me wonder how soft the market is. Very few VoIP providers are public, so revenue numbers - real numbers - aren't reported.

As an agent, I like SPIFF money, but I don't like when carriers say that is the component I use to decide who to sell. It is kind of insulting.

On a 20 seat deal at $25 per seat, it is $500 in MRC, which is the minimum sales size for some of the SPIFFs (some require $1000+). At 20% I get $100 per month. Do you think I want to TRY a new provider? Do you think there is room in there for me to blindly trust a new provisioning team or deployment method?

I won't sell SIP trunks OTT because the call quality is questionable enough that I don't want to be bothered with the headache. OTT Hosted PBX has a higher churn rate than reported because they leave out the first 30 or 60 days.

How many customer calls can I take for $100 per month?

Certainly there is a percentage of partners selling on both price and compensation. And that allows a provider to buy market share. But at what cost to the partner's business?

How about a we won't screw it up guarantee? Or we pay a SPIFF if the customer isn't happy? That would work but it would need to be more than 6X MRC because I will lose the customer forever.

It will be interesting to see if year over year sales growth for Hosted VoIP goes up more than the 26%. I am betting it won't.



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