Notes for owners · Channel and customer growth
How to create dealer incentives without damaging margins
Most dealer schemes buy volume the dealer would have bought anyway and become permanent discounts. Reward the behaviour you are short of, not the billing.
The GullySales team · Updated 15 Sept 2026 · 6 min read
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Most dealer schemes lose margin because they pay for volume the dealer was going to buy anyway. The dealer times his order to the scheme window, bills the same annual quantity, and pockets the difference. Then the scheme repeats until it becomes a permanent discount nobody can withdraw. The fix is to design each scheme around a behaviour you are actually short of, cap it, and measure it against secondary sales rather than billing.
What are you actually trying to buy?
Write this down before designing anything. Manufacturers usually want one of six things, and each needs a different scheme.
More total volume from a dealer who is under-buying relative to his market. This is the only case where a straight volume slab is the right answer.
Range selling, where the dealer moves your two fastest items and ignores the other twelve. Volume schemes make this worse. You need a scheme that only pays if a minimum number of items are billed.
Wider counter coverage, where the dealer sells to forty retailers in a market of two hundred. Reward new counters billed, not tonnage.
Faster payment, where the money is stuck at 75 days against an agreed 30. Reward days, not quantity.
Display and visibility at the retail counter, where your competitor owns the shelf. Reward verified display, with a photograph.
Season shifting, where you need stock in the channel before demand arrives. Reward early ordering with a clear end date.
A manufacturer running a volume slab when the real problem is range selling is paying to make the problem worse.
Which scheme type fits which problem?
| Scheme type | What it rewards | Margin risk | Use it when |
|---|---|---|---|
| Volume slab, quarterly | Total billing crossing a threshold | High, pays for existing volume | The dealer is clearly under-buying his market |
| Range or assortment scheme | Billing a minimum number of items | Low | Two items sell and the rest sit |
| New counter incentive | Verified new retailers billed | Low | Coverage is the constraint, not depth |
| Early payment discount | Payment inside agreed days | Moderate, but funds your working capital | Overdues are chronic |
| Display or merchandising support | Verified shelf space, with photographs | Low, a fixed cost | Competitor owns the counter |
| Free goods on a slab | Volume, at your cost price not your selling price | Moderate | You want volume without touching the price list |
| Non-cash reward, such as a trip or gold coin | A stretch target, personally | Low, fixed and budgeted | Owner-driven firms, annual targets |
| Price protection on a price rise | Holding stock through a change | Necessary rather than optional | You raise prices on a stocked channel |
Notice how many of the low-risk options are ignored in practice. Most manufacturers reach for the volume slab because it is the easiest to calculate and the hardest to argue with.
Five rules that protect the margin
Cap everything. A per-dealer ceiling on scheme quantity stops the partner who loads six months of stock in the final week and then discounts it into a neighbouring territory.
Pay on secondary sales where you can. If the reward is for selling rather than for buying, dumping stops being profitable. Even partial verification, such as a stock statement plus a photograph of the register, changes behaviour.
Stagger the window. A quarterly scheme that requires a minimum in each of the three months prevents last-week loading.
Set an end date and honour it. Schemes that quietly continue become the price. If you must extend, change the structure so the dealer cannot treat it as permanent.
Settle claims fast. This one costs nothing and matters more than the scheme value. A dealer whose last claim took five months discounts the next scheme in his own mind before he even reads it. You paid the margin and got no behaviour change.
What quietly destroys margin
Scheme stacking. A quarterly volume slab, an annual turnover discount, a festival scheme and a special negotiated rate all applying to the same invoice. Very few manufacturers calculate the total landed discount per dealer. Do that calculation for your top five dealers and the result is often uncomfortable.
Negotiated exceptions. One large dealer argues for two extra points and gets it, the market learns within a month, and every other dealer asks.
Unclaimed and disputed schemes sitting in the books. These are a liability and a relationship problem at the same time.
Rewarding the dealer who was always going to hit the number. If 80 percent of your dealers qualify, it is not a scheme, it is a discount with paperwork.
A worked example
For example, imagine an auto parts manufacturer in Bengaluru selling brake components through 40 distributors across south India. The details and figures below are illustrative. Two items, one brake pad set and one disc, make up most of the billing. Ten other items sit in the catalogue and barely move.
The old scheme was a quarterly volume slab: 2 percent extra on crossing ₹20 lakh, 3 percent on ₹30 lakh. Thirty-one of forty distributors qualified every quarter, which means it was a discount.
The replacement has three parts. A range scheme paying 2 percent only if at least eight of the twelve items are billed in the quarter, with a minimum quantity on each. A new counter incentive of a fixed amount per verified new retailer billed for three consecutive months. And a display support payment for counters carrying the brand board, verified by photograph.
The volume slab stays for the six distributors genuinely below their market potential, capped, and reviewed annually rather than assumed.
For example, the old scheme cost ₹90 lakh a year and paid for volume that existed anyway. The new structure at ₹70 lakh buys range depth and coverage instead, and the figures here are illustrative. What is transferable is the test: if most of the network qualifies automatically, redesign it.
What to do next
Calculate the total discount, including every scheme, turnover benefit and negotiated exception, for your five largest dealers as a single percentage of their billing. Then ask what behaviour each component bought this year. Anything that bought nothing should be redesigned before the next quarter starts.
If you want that review done with you, along with a look at how your channel is performing by territory, tell us what you need.
