First, it is essential to understand what channel incentive programs are and why they are crucial to a successful company’s marketing strategy. An underdeveloped and poorly implemented program can underwhelm important partner channels that are vital to you meeting company business objectives. It is surprising how brands fail to consider or successfully execute an indirect go-to-market approach that uses channel partnerships to help scale, expand into new markets, build brand recognition and enhance product value. Below are some essential ideas to help energize partners and increase sales.
Start with the Basics
What is a channel partner incentive program?
A channel partner incentive program motivates your product partners (your resellers and distributors) to engage in certain behaviors by offering valuable rewards and incentives that help them grow their own business.
Channel partners often vary in shape and size depending on your market and don’t necessarily have to be in your industry to be successful. They can be affiliates, resellers, distributors, independent retailers, and even value-added providers.
Anyone that sells your brand and doesn’t work directly for your business is a potential channel partner—the best way to ensure that your brand stands out above the competition is through well-executed channel partner incentive programs.
What is channel incentive management?
It is the management of the Channel Incentive program’s promotion rules, reward allocation, validation, distribution, tracking, and reporting of financial incentives of a product partner ecosystem, including market development funds (MDFs), sales performance incentive funds (SPIFs), co-ops, bonuses, rebates, price protection, channel sales compensation, and loyalty programs. It includes behavioral tactics such as gamification, micro-incentives, and nonmonetary and motivational incentives.
Benefits of channel partner incentives.
The right channel partner incentives will encourage brand partners to sell more products and be loyal to you over a more extended period. Channel partners could boost sales, decrease go-to-market costs, and provide access to new markets. Well-executed partner programs can increase profits for both parties and are more than a passing thought for channel partners. Partners often rely on the extra support and revenue generated to grow their business.
Incentive programs build value – listen to the experts.
A recent case study featuring a Fortune 500 manufacturer and distributor illustrated how non-cash channel programs can have a tremendous financial impact once implemented. The incentive program produced a 32 percent increase in total revenue, a 30 percent increase in market share, and a 19 percent increase in net operating income. These results are supported by research conducted by the Silicon Valley Research Group, which found that incentives boost partner sales and profits by as much as 40 percent – Incentive Research Foundation (IRF).
Types of Channel Partner Incentives
6 types of channel partner incentives
Sales Performance Incentive Funds (SPIFs)
SPIFs are used to inspire your channel partner’s sales team to help promote your brand over others with the promise of a reward. These incentives go to the actual sales rep (not partner).
SPIFs are a great way to encourage your channel partners to strive for higher performance, during off-seasons or slower times. The goal is to know how to use them correctly, and which sales incentives are most appealing to drive specific sales behaviors. Award examples:
- Gift cards
- Prepaid Visa – Reloadable
- Entertainment tickets
- Tech gadgets
- Weekend getaway
- Lunch with executives
There’s a ton of ways to reward sales efforts. It comes down to building a flexible incentive program to keep you team motivated and striving for better performance.
Rebates – A volume-driven promotions is a rebate and encourages your channel partners to sell more of your product. Rebates can be categorized by customer type and business objective. Partners get a percentage of the sale back as the reward.
- Growth rebate
- Mix rebate
- Volume rebate
- Retention rebate
B2B rebates are a little different and are often volume based, meaning your partner has to sell a certain number of units to receive the incentive. After this they may pass it down to their customers.
Market development funds (MDF) – Marketers within your channel partner teams use MDFs for a wide range of initiatives, often with the goal of increasing their local brand awareness. Examples of how a company might use MDFs:
- Get a booth at a trade show
- Fund webinars
- Launch a marketing event
- Radio spots
- Truck wraps
MDFs are resources that you provide to your channel partners to help them with their sales and marketing efforts. These incentives can be knowledge-based or funds.
Discounts on Wholesale Products – A channel partner might ask for you to offer a quantity-based discount depending on how much demand your partner is experiencing. You would set up pricing tiers based on the total order, or total value, of your ordered goods. For example:
If they buy more than 300 units, they pay $11/unit.
Purchasing more than 600 units allows them to pay $9/unit.
If they buy more than 900 units, they pay $8/unit.
Offering higher discounts for larger quantities encourages channel partners to place larger orders. This is because they’ll enjoy increased savings per unit. With B2B wholesale incentives, you deal with a wide range of customer types. Considering that, your incentive program should be slightly different for each type of customer. Most companies base channel partner program incentives on their purchasing frequencies and volumes.
The best way to keep track of the different packages is to create pricing lists and terms for each customer or persona. This will help you ensure you’re always providing your partners with the right pricing.
Co-Op funds – CO-OP funds are great types of channel partner incentives
Cooperative funding (also known as CO-OP funding) is a way for companies to help channel partners achieve their marketing goals. CO-OP funds are earned over long periods of time, rewarding your partners for their loyalty and continuing to purchase from you.
Traditionally, CO-OP funds are given as account credits. But a lot of manufacturers have realized that credits don’t necessarily create a mental link between your partners and your brand.
A more modern CO-OP approach is to allocate your credits as part of a loyalty or rewards program.
CO-OP funds are directly linked to sales, and you only pay out when a partner’s customers purchase from you, guaranteeing a positive ROI.
Referral deal registration
Reward your partners with cash for identifying potential customers and referring them, if those leads eventually buy your product. (Essentially, a partner referral program with a referral fee or finder’s fee as the referral program incentive.)
Channel partners register the potential deals online, the awarding company checks the lead quality to either approve or reject the lead. If approved, the registering partner has a set time frame to close the deal before they lose their incentive. Always remember it takes two for a partnership to work. You should always provide support to your partners during this period in helping them close the deal.
Deal registration programs are a great way to analyze buyer behavior to identify and optimize a good sales cycle. Gathering early insight into your sales cycles in new markets can help you manage your direct and indirect pipeline. It also drives accountability for those registering for the incentive.
Channel Incentive Program Best Practices
Top Channel partner incentive program best practices
- Choose the right behaviors
- Reward with cash-back or cash
- Incentive program is easy to understand
- Rewards should be attainable
- Reward accurately and on-time
- Track point of sale data accurately for all partners
- Automate your program with incentive management software
Channel Partner Incentive Software
Types of Loyalty and Incentive management software
Understanding the differences between a Platform and a single application can help minimize the pain of implementing a system that stakeholders initially supported but, within the time they learn it does not meet the organization’s short and long-term incentive objectives. The primary difference between an incentive management platform and a single applications solution lies in flexibility and scalability. Read Loyalty and Incentive Technology Overview: Platform Vs. Single Application Solution for an in-depth view of the differences.
Platform solutions offer a robust technical foundation of several application solutions supporting different channel engagement use cases that can roll out across various channels quickly and simultaneously. In contrast, solutions for single incentive applications can tackle a specific incentive and reward processing and fulfillment.
Partnering up with one or more channel partners can be one of the best ways to scale your company and accelerate sales. Once you’re ready to explore different routes to market your brand, there is a broad spectrum of channel partner types for you to explore. Each channel has pros and cons. It’s essential to start by understanding the limits and advantages of each kind of channel so you can implement the ones that align best with company values and with your business goals.
If you are beginning to utilize a channel, do not add new ones until you spend the necessary time and align with the partner that best complements your brand and will help your business scale. Focus on what’s best for your company to implement first.