Channel Incentive Programs 101
If you want to grow your business and stay competitive, it’s time to start using channel incentives.
An effective channel incentive program motivates more than just sales reps. It also creates a long-term relationship with partner brands in order to create brand ambassadors who go above and beyond what commission-only models can do.
Depending on the business or structure of your company, these programs are known as loyalty programs (or reward programs), reseller/agent reward programs, dealer/distributor incentive plans.
Rise up from the traditional commission model by using incentivized marketing techniques that motivate partners to highlight new products and liquidate old inventory while identifying market opportunities for leads or increasing sales.
What Are Channel Incentive Programs?
A channel incentive program is a strategy where distributors or resellers are incentivized to sell products through a specific distribution channel. The distributor (or supplier) rewards the sales representative (or partner) for products sold through their own channel. This can include sales through social media, website, email list or in-store.
Whether the wholesaler in a warehouse or a sales rep in person, channel partners influence end customers’ purchasing decisions. Partners advise customers on products and help them narrow down their options to eventually make a purchase. Channel incentive programs influence sales and marketing efforts and can increase your overall sales volume.
Different Types of Channel Incentives
Sales-based channel incentives are the most common type of partner incentive. They can take the form of reloadable or single-use debit cards for short-term promotions, points-based rewards for travel and merchandise, as well as gift card rewards. Partners who reach a certain margin, volume or exceed goals set for incremental growth receive rewards such as points they can spend in an online merchandise catalog, travel opportunities, or gift cards in addition to an accelerated payout cycle that makes it easy to cash out.
Channel rebate programs are often used to generate demand and influence buyer preference. Partners receive these rebates based on the frequency or size of their orders, usually for a specific product. These usually take the form of debit card rewards to help channel partners reduce overhead costs.
Sales performance incentive funds (or SPIFFS) are a type of channel sales incentive program that directly rewards sellers based on the percentage of their sale. SPIFFs emphasize short-term growth or increased sales, typically with cash or cash-equivalent rewards such as reloadable debit cards.
An incentive program can help educate your value added resellers (VARs) about your products and motivate them to incorporate the product in their resale solutions. A powerful tool for manufacturers or distributors to expand their reach or market penetration, an incentive program can be very beneficial.
Warranty registrations and bundling
Warranty registrations and product bundling are valuable sources of end-user data that parent companies can use to improve their sales and marketing efforts. Warranty registrations increase the value of a sale for manufacturers, wholesalers, and distributors.
Referral incentives are a valuable tool for expanding customer reach. They work by rewarding channel partners for referring new buyers. Referral incentives take different forms depending on what is best suited to your business needs; it may be gift cards, debit cards or travel promotions instead of just points-based rewards.
Enablement and training incentives
It is manufacturers’ responsibility to ensure that channel partners are knowledgeable about their products. Providing incentives for passing online quizzes or earning certifications can help in training them. Oftentimes, channel partners sell for various brands- and they will be more likely to sell whatever they know best.
In addition to sales volume, companies also need to maintain long-term relationships they’ve built up with their partners. Once your best partners have achieved maximum sales, incentive programs can shift from rewarding growth to retaining those high-performing channel reps.
Why Use a Channel Incentive Program?
A channel incentive program is a great way to incentivize your team and drive sales. After all, who doesn’t like getting a reward for performing well? Incentives encourage your team to sell more and learn about your brand.
The goal of an incentive is not just to give people something in return for doing their job; it’s also about making sure that they’re invested in the product and intrinsically motivated to succeed. It’s important that they’re going above and beyond because they want to help their customers succeed as well.
How to Implement a Successful Channel Incentives Program
Even though the channel incentive program is a flexible strategy, there are a few things to keep in mind to ensure the best results.
Customize your message: While the foundation of the program is rewarding partners for pushing products through a specific channel, the message needs to be tailored to the audience. In other words, your reward messages should be specific to the partner’s location and situation to make the most impact.
Focus on your partner’s motivations: When developing your program, focus on your partner’s motivations. Why do they sell? What are their challenges? What are the benefits of being part of your program?
Create a compelling offer: Once you understand your partner’s challenges, you can create a more compelling offer that addresses their needs. This can include multiple rewards, cash incentives, free products, etc.
Channel partner incentives, by the numbers
Channel partners don’t offer their loyalty easily or cheaply. This is hardly news to IT brands, who for decades have sought to earn their partners’ loyalty through a variety of partner incentives, including rebates and marketing assistance.
Traditionally, partner incentives have been offered as rewards for partners hitting sales targets, but increasingly brands are finding value in offering partner incentives to encourage certain behaviors, including lead generation and deal registration.
The main takeaway is that partner incentive programs matter. A whopping 81 percent of partners say they’ll remain loyal to a brand that offers a partner incentive program and 71 percent say they are likely to focus more resources on selling a brand’s products if a partner incentive program is in place.
40 percent prefer incentives in the form of marketing services
When it comes to which incentives partners value, opinions are more varied. Two-thirds said that monetary incentives are a key motivator, while 40 percent said that marketing services are likely to make them more loyal to a brand.
It’s hardly a surprise that most resellers would look favorably upon financial incentives — it’s hard to turn down cash. But it’s perhaps more notable that a third of resellers didn’t describe cash incentives as likely to make a difference for them. Some of those partners are the ones who don’t care for partner incentives at all, while others are interested in different types of partner incentives.
Brands would be wise to pay attention to the 40 percent of partners who cite marketing services as a key loyalty motivator. This group of partners represent a key constituency that many brands are neglecting. Partners looking for marketing help tend to be small to mid-size (SMB) players, since the largest partners already have in-house marketing operations. SMB partners are more likely to be loyal than their larger counterparts, who tend to use their size to extract price concessions from vendors.
The traditional form of marketing assistance isn’t enough
It’s also important to note that many partners may not appreciate the offer of marketing services because their experience with brand-supported marketing has left a lot to be desired. Traditionally, brands offer partners marketing help in the form of collateral or content through a partner portal, but still leave it up to the partner to craft and execute the digital marketing campaign, something that small and mid-size resellers simply don’t have the time or expertise to do.
To get more partners to appreciate the value of “marketing assistance,” you have to offer much more than access to a partner portal. You have to instead offer to conduct marketing on their behalf. The most efficient way to do that is via a through-channel marketing program.
For most small and mid-size partners, a brand-funded through-channel marketing program provides them with something that they’ve never had: professionally-crafted marketing. In all likelihood, their marketing up until this point has been nonexistent or erratic simply due to time and resource constraints. Therefore, from the perspective of a channel partner, a through-channel marketing campaign presents a major value-add at no cost.
Many channel partners are desperately seeking marketing help and through-channel marketing is the best way to give partners that help. You might be picking up the tab, but partners will be sure to pay you back with increased sales and, more importantly, their loyalty.
Our through-channel marketing programs achieve high ROI
Our channel marketing programs yield an average ROI of 22:1. Sound too good to be true? It isn’t. Contact us to learn more.
Our incentive programs contribute to high ROI
Our channel marketing program yields brands an average ROI of 22:1. Sound too good to be true? It isn’t. Contact us to learn more.