Dealer schemes: the settlement problem that quietly kills them

A scheme that pays late is worse than no scheme at all. The dealer has already discounted their expectation, told their staff not to count on it, and stopped changing behaviour for the next one. You have spent the money and bought nothing — because the value of a scheme is not the payout, it is the belief that the payout will arrive.

Most scheme problems are not design problems. They are settlement problems.

Where does the time actually go?

Ask a manufacturer how long settlement takes and you will hear a number. Ask a dealer and you will hear a longer one. Both are describing different parts of the same process.

Stage	What happens	Where it stalls
Earning	Dealer buys, entitlement accrues	Dealer is not sure what they have earned
Claim	Dealer submits with documentation	Claim window closes before they notice
Verification	Sales team checks against records	Sits with one person during month-end
Approval	Authorised internally	Waits for someone travelling
Settlement	Credit note issued or payment made	Batched into a finance cycle
Reconciliation	Dealer matches what arrived	Amount differs, nobody can explain why

The last row causes the most lasting damage. A dealer who receives a different amount from what they expected, with no breakdown, concludes the scheme is arbitrary. From then on they discount every future scheme, which is precisely the behaviour change you were paying to avoid.

Why do dealers not know what they have earned?

Because in most businesses the entitlement is calculated after the period ends, not during it.

That is exactly backwards from an incentive point of view. A scheme is meant to change buying behaviour while the period is running. A dealer who cannot see they are two hundred bags short of the next slab has no reason to place the order that would get them there.

Running balance visibility — this is what you have earned, this is the next threshold, this is the gap — turns a scheme from a retrospective bonus into an active incentive. It is usually the single highest-return change you can make, and it requires no change to the scheme itself.

What makes schemes hard to systematise?

They change every quarter. This is the defining constraint. A system where scheme rules are written in code means waiting on a developer every time marketing designs something new — so people go back to spreadsheets, and the system holds a version of reality that is out of date.

They stack. A dealer may be eligible for a volume slab, a seasonal offer, a new-product incentive and a regional push simultaneously. Whether these combine, override or exclude each other is a commercial decision that has to be expressible, not hard-coded.

The base is disputed. Gross or net of returns? Invoiced or delivered? Including freight? Every one of these is a question someone will raise at settlement, and the time to answer it is when the scheme is defined.

Exceptions get promised verbally. A regional manager tells a dealer they will be looked after. It is not recorded, and at settlement it either gets honoured off-system or denied. Both are bad.

What does a scheme system need to do?

• Let you define a new scheme without development. Thresholds, products, regions, dates and rate as configuration.
• Show a running balance to the dealer while the period is live.
• State the calculation basis explicitly in the scheme definition itself.
• Handle stacking rules — combine, override, exclude — as a stated policy.
• Track claim status visibly, so “where is my claim” is answerable without a phone call.
• Produce a breakdown at settlement showing how the figure was reached.
• Record exceptions with who approved them.
• Report the real cost of each scheme against the volume it actually moved.

That last one is missing almost everywhere. Most businesses know what schemes cost and assume they worked, because the volume went up during a period when there was also a scheme.

How do you tell whether a scheme worked?

Not by looking at volume during the scheme, which will almost always rise.

Look at the period afterwards. If dealers loaded up to hit a threshold and then bought nothing for six weeks, you did not create demand — you moved it forward and paid for the privilege. This shows up clearly if you can see secondary sales, and barely at all if you cannot, which is one of the better arguments for capturing it.

Also worth comparing: dealers who qualified against those who nearly qualified. If the near-miss group behaved similarly, the threshold was not doing the work you think it was.

Common questions

How quickly should schemes settle?

Faster than your dealers expect, whatever that currently is. The precise number matters less than predictability — a scheme that always settles in six weeks is trusted more than one that usually takes three and sometimes takes twelve.

Should settlement be cash or credit note?

Credit notes are cheaper for you and tie the dealer to the next purchase. Dealers generally prefer cash. If you use credit notes, be aware you are reducing the perceived value and adjust the scheme accordingly rather than pretending the two are equivalent.

What about schemes for retailers below our dealers?

Harder, because you have no transaction record with them. It usually depends on the dealer reporting, or on the retailer claiming directly with proof of purchase. Both have leakage, and both need the claim process to be simple enough for a small retailer to complete on a phone.

Can we run schemes without a system?

Up to a point, and many businesses do. The failure comes with scale — once claims outnumber what one person can verify in a month, the queue lengthens and the trust erodes. That threshold arrives sooner than most expect.

More on this: managing dealer credit and tracking secondary sales. For how we work with the channel, see cement & dry mix.