Do Channel Partner Incentives Really Work ?

Manufacturers and brand owners spend a huge amount of money towards incentives to channel partners. They know that partners are crucial to their success and help their product reach the end customers faster. When rewarded appropriately, the channels are capable of bringing business through huge demand from customers. The more the manufacturer produces, the more revenues they can generate. According to a report by Deloitte, channel incentive programs can generate more than 75% of brand owners’ (technology companies) revenue.

Undoubtedly, incentives to channel partners do work. However, how would you ensure if they are working for your business, too? You should be aware if the incentives make good business sense by evaluating the return on investment. Accordingly, you need to have incentive program software that aids you to determine the feasibility and profitability of the incentives to the partners. Besides, there are always going to be smart alecs or manipulative people who abuse incentive programs.

Let’s discuss few key things while designing an incentive program.

Besides performance, factor in other parameters for incentives

Most incentive programs only incentivize performance, usually measured in sales numbers. While this is effective in the short term and helps focus all energies of partners / employees to the last goal of sales; sales numbers based incentives alone become a bad idea in the long term. Other parameters like retention, same store growth, depth of knowledge about downstream customers should also be integrated in some manner in the design of partner incentive programs. Hence, the software should be flexible enough to allow these parameters to be factored in. Rather than team performance, manufacturer-sponsored incentive plan should focus on individual performance. The brand owner needs to have excellent incentive program software that tracks individual performance through various data sources like billing or activation systems and rewards them based on their performance accordingly.

Communicate benchmarks and evaluation metrics.

Programs are usually short term and in partner/ channel relationships, short-term approach is counter-productive. Thus, communication should be around benchmarks, evaluation metrics, etc. Nonetheless, if you want to go ahead with a program, clearly communicate what you want out of the program in straightforward and easy to understand words. The communication needs to be clear and concise. Also, open and honest communication with channel partners instils confidence and belief in the program. Ensure the channel partners have understood what is expected of them to achieve the incentives.

Treat channel partners as your employees and extended sales force.

Needless to say, channel partners help you sell your product. If you produce in massive amounts every year, directly selling to the end customers is a risky affair. Having channel partners is comparatively cheap. How often and how well you reward your channel partners will ensure how good your channel partners are. Just like employees, your channel partners need to be rewarded adequately and reasonably for keeping their morale high.

Yes, they buy volumes and resell to distributors. However, other manufacturers can lure them with lucrative incentive plans, and this could hurt your sales. In such scenario, partners would more likely work harder and sincerely for other manufacturers. Hence, you need to have effective partner incentives that help you and the partners to grow and benefit. You benefit due to more profit, and partners get rewarded for reselling vast quantity of stock.

It goes without saying that the incentives and awards announced needs to be worth the effort channel partners and their employees put to achieve the task put forth. Additionally, if the target is unachievable, it could lead to falling in sales. In other words, it could prove counterproductive to the channel partners. Therefore, you should be able to evaluate and measure the efficacy of your incentive program. The best way to evaluate is to invite feedbacks from channel partners.

In order to monitor individual performance at channel partners, communicate objective of your incentive program clearly, evaluate the worthiness of incentives and treat partners as extended sales force, you need to have a solid incentive software program. Channel partner incentives actually work if you have a versatile and intuitive incentive software program that lets you track the performance of each individual down to the level of each store. Also, one which can prevent the incentive programs from abuse.

Constructive suggestions from Partners

Ask for productive suggestions from partners to help you sell more. The marketing material provided by the principal company may not be sufficient as it may be useful to the end customer and not to the partners. Pushing irrelevant marketing material isn’t a good idea and you run the risk of losing partner’s trust. Ask partners to provide their inputs and create material that can help them sell more to the end customers. Open communication will help them gain confidence in your product. Make them feel important and valued, and they will participate more in channel partner programs.

Empower Channel Managers

Channel managers are the one to provide partners with the tools and resources they need to make the most of the brand’ marketing material. Show the benefits of programs to channel managers and provide them with the means using which partners and value-added resellers can be engaged and kept interested. The more programs promote, the better it is. This will invariably lead to more leads, more sales and of course, better ROI. In order to create partner loyalty, partner commitment is crucial, and this is the most important factor. A well-thought and implemented channel partner program is what encourages the partners to remain committed and motivated. Empower channel partners and let them be experts on your products and solutions. This will help them represent your products with confidence leading to increased revenues and generate enhanced ROI.

If you put this list of channel incentive scheme to use smartly, you can encourage partners to buy more and put their best foot forward. It’s time to revisit your channel incentive schemes and customize them to suit your objectives and of course make partners motivated and keep them in high spirits.