By Christine Rodriguez, Head of Channel, Blackhawk Network
Motivating indirect sales channels has always been difficult. After all, your channel partners are not your employees, and as a result they aren’t easily influenced by your wants and needs. They have their own businesses to run and may not feel the need to subscribe to your agenda. What’s more, your channel partners are inundated with new products and news from other vendors —making it more difficult for you to earn the attention you might deserve. To help drive mindshare and channel engagement, vendors offer a variety of channel incentive programmes, including: SPIFs, MDF and Co-op, deal registration incentives, quarterly rebates and more.
Many vendors treat these purely as “check boxes”. They are offers designed to “compete with the competition” when talking with their channel partners. These channel incentive programmes are often ill-conceived and without a strong strategic foundation. As a result, poor ROI is often associated with such activities, and they are dismissed as the cost of doing business.
My insights below will provide best practices for channel incentive programme design that will help you to measurably improve both the effectiveness and efficiency of your channel incentive investment, thus creating a competitive advantage.
How do I get the most impact from my channel incentive programme?
As a sales or marketing manager responsible for moving product through your indirect sales channel, you are often faced with management’s challenge to generate more sales, but with no additional budget to deliver the incremental performance. A channel incentive programme is often the answer.
Ask yourself, “Where do I get the best return for my incentive investment—SPIFs, MDF or rebates?” If you can’t answer with confidence, or don’t fully understand the ROI of your options, read on. It’s my goal to help you understand how best to answer that question.
These recommended best practices will be most useful for high-value products which tend to be considered purchases, particularly when the sales representative (direct sales or indirect channel sales) is a key influencer. In those instances, these insights are applicable whether the vendor is a large or small company, mass market or niche product, category leader or laggard.
Introducing incentive engineering
With few exceptions, most channel incentive programmes focus on post-sales rewards in the form of SPIFs (targeting sales personnel) or rebates (rewarding channel partner companies for attaining sales goals). These strategies can be ineffective for two reasons:
• You are rewarding for run-rate business, instead of focusing rewards on incremental and consistency in performance.
• In many cases, these types of programmes are short-term, tactical initiatives. As a result, they are inefficient because they take time and money to implement but lack the desired sustained change. They may drive quick results, but they have limited impact on your overall long-term performance.
Ideally, your incentive strategy should have the flexibility to drive long-term incremental performance while providing levers that you can use to adapt to business challenges as they arise. In a perfect world, such programmes would be designed so that they are simple to administer (for you and your participants) and flexible enough to accommodate changing market needs or priorities.
What is incentive engineering?
Incentive engineering shifts the focus from incentivising sales alone, to rewarding the behaviours that result in more sales.
If you’re involved with your channel partners—whether your role is sales or marketing—you know who is successful and who is not. What’s more, you likely understand the characteristics of successful channel partners. It is precisely those traits that you want to replicate across your broader channel universe.
Expand the focus of your incentive strategy beyond sales. Consider rewarding your channel for performing the behaviours that generate mutual success.
Why is incentive engineering important?
You can use channel incentive programmes to change partners’ behaviours, since it is the collective impact that drives sales success. Behaviours are easier to track individually, making it easier to calculate ROI whilst generating long-term change and adoption.
Which types of behaviours drive your business?
Start by making a list of the key behaviours practiced by your most successful channel partners. Then add the rest of the behaviours they’ll need to achieve for your go-to-market objectives, including training or improving pipeline visibility through deal registration and more.
Below is a list of sales-effectiveness activities that are commonly used by our clients for incentive-focused programmes. This list is divided into pre-sales and post-sales activities.
Not every item on the list may apply to your business, so use them as a starting point, adding others that apply to your channel activity. Next, assess the relative importance of each behaviour and the desired frequency for that activity. Now you have the foundation for allocating your incentive budget. Remember, the reward value for each behaviour should align with the effort.
Behaviours should be relatively easy to track, but the data may be dispersed across several systems. It is essential that you track each incentive behaviour. Ideally, all these behaviours would be managed in a single channel platform. If not, you may need to use a system that validates each claim before a reward is issued.
Popular, rewardable pre-sales behaviours
• Sales training
• Technical/product training
• Marketing training
• Advertising/marketing and promotion
• Performing lead generation activities
• Customer event hosting
• Joint business planning
• Participation in vendor marketing programmes
• Attendance at vendor events
• Vendor SE engagement
• Follow up on leads
• Portal engagement
• Community engagement
• Deal registration/deal management
• Social media participation
• Proof of concept via demo or seed unit placement
Popular, rewardable post-sales behaviours
• Net new business or clients
• Sales to targeted verticals
• Sales of new solutions or products
• Cross-sell or upsell existing client
• Closing sales opportunities
• Sales growth
• Deal conversion percentages
• Lead conversion percentages
• Customer satisfaction
• Overall sales targets
• Subscription renewals
What are your channel incentive programme options?
Now that your list of key behaviours to measure and incentivise performance has been defined (with relative weights assigned), the next step is to determine who you incentivise and how you offer that incentive. The following summarises your options:
Gone are the SPIFs (Sales Promotion Incentive Fund) that have long been the cornerstone of sales incentive programmes. Generally short-term, SPIFs target sales representatives and tend to focus solely on post-sales rewards. The big advantage of this programme type is that the rewards are focused on the greatest point of impact—the person in charge of the sale. However, they are challenging to deploy because it takes time and money to build programme awareness in the channel. Plus, the managers of those channel companies often resist participation because they do not want suppliers/vendor partners influencing their sales staff. To address these challenges, longer-term channel incentive programmes should focus on loyalty and be designed to reward both sales and non-sales activities (behaviours).
Let’s look at some other characteristics of individual reward programmes.
• Rewards are no longer just for sales personnel. Individual rewards are issued for behaviours performed by other roles in a reseller organisation, including advertising and marketing, programme administrators, SEs and more.
•An individual reward website is “sticky,” allowing manufacturers to create a 1:1 relationship and provide a user experience tailored to specific roles within a channel organisation. They are no longer short-term programmes, but rather long-term programmes designed to build a dialog with each individual.
• Loyalty programmes are long-term, but reward activities and associated values are modified over time to adapt to changing business needs through new product introductions, competitive threats, and other changing conditions.
• Because individual rewards are focused on behaviours designed to improve overall sales productivity, they are more likely to be embraced by reseller management.
Unlike individual reward programmes, dealer incentive programmes are typically paid to channel partner companies. Dealer incentives were conceived to help maintain street price. In other words, if the product were simply discounted in advance by the amount of the rebate value, many channel partners would reduce the resell price. After pricing is reduced and margin disappears, it’s hard to reverse the trend. Dealer incentives can also be used as growth incentives because the value can escalate based on achieving specific target objectives or tiers.
Here are some of the key trends in dealer incentives.
• Use rebates to reward for incremental business, such as setting goals based on the performance relative to a prior business quarter or time period. Of course, incremental behaviours can be rewarded for non-sales activities, too.
• Include the behaviours as qualifiers for rebate participation, or to provide accelerators if certain behaviours were performed during the rebate period.
• Leverage individual rewards (and the behaviours they drive) as the means to achieve rebate targets. Essentially, if key individuals employed by your channel partners are performing certain behaviours company-wide, the company will be more likely to earn a rebate.
As a category, promotional allowances are better known by their more common names—MDF (Marketing Development Funds) or Co-op programmes. These programmes were conceived as a way to compensate channel partners for advertising or marketing your products. However, for many marketers, these funds are being used to compensate a wide range of activities which may increase the overall sales effectiveness of a channel partner versus traditional advertising alone.
Consider some of the things these programmes can do:
• Provide a jumpstart allowance for new partners to offset the expenses required to train and onboard sales staff or get them started promoting your product.
• Reimburse for near-sales activities that are proven effective to close more deals, such as the placement of seed units or demo units into qualified prospects.
How do behaviours align with channel incentive programme options?
Ease of Doing Business (EODB) is a hot topic for marketers today. In a Europe Channel Partner business model and loyalty survey, Forrester® reports that EODB is the number-two consideration when evaluating which supplier your channel partners will choose to represent. It’s just behind the strength of the supplier’s brand. Keeping things easy benefits you too with lower costs of systems to support and programmes to administer, for example. We are advocates of minimising the number of programmes you offer your channel, but make sure the chosen channel incentives influence as many behaviours as possible.
As you focus on both pre-sales and post-sales incentives, remember that recipients can be individuals or the company itself. Using the three different programme types—individual rewards, promotional allowances and partner rebates—you can build an effective and affordable channel incentive programme based on best practices.
Ensuring the success of your incentive strategy
To drive success, how you implement your programme is just as important as your strategy. Properly designed and executed, your channel incentive programme will help improve loyalty and provide a competitive advantage. Follow these six guidelines to help create a successful programme.
- Adjust your incentive strategy to align with each channel segment
All channel partners are not created equal. The distinction between the unique go-to-market characteristics of each channel segment or geographic region may require you to adjust the programme to better align with your mutual goals.
- Run a pilot programme to test the outcome and forecast results
It is difficult to project the cost or the business impact of a channel incentive programme unless you have prior history. Running a pilot with a limited set of representative partners is a great way to assess administrative processes and channel receptiveness. We’d be delighted to talk about setting this up for you - just fill in the form to your right.
- Develop a strong communications strategy
The launch of your programme requires three things: that your partners know about it, that they understand its benefits and that they participate across its lifecycle. Your channel partners are focused on running their own businesses and may be inundated with new programmes and messaging from multiple vendor partners. Don’t underestimate the challenge you might have in getting their attention and maintaining momentum.
- Keep it simple
Your channel incentives programme should be easy to join and easy to administer, so it benefits both you and your channel partners. There is often a desire to “over-engineer” programme administration, resulting in extra steps in the approval process or increasing the burden for participants. Cumbersome processes will not only suppress participation, but it may also cause partners to lose interest prematurely.
- Flexibility is vital, so keep it fresh
Make sure your programme has the inherent flexibility to adapt to changing market needs, whether those needs arise from competitive pressures, economic conditions, or revisions to your own go-to-market strategies. Refreshing your channel incentive programme with new, rewardable activities (or adding short-term events) will help you build momentum and interest from participants.
- Choice is key
Provide rewards that don’t second-guess your recipients. Our Select eCodes and One4all gift cards are great examples of how you can satisfy the need for variety.
To learn more about our approach to Channel Incentives at Blackhawk Network take a moment to visit our Channel Solutions page or complete the form to the right , and one of our Channel Sales team will get back to you shortly.
Christine Rodriguez started her career with a global IT manufacturer, where she spent over a decade building expertise in the channel network’s role in a vendor’s route to market.
She has been working in the incentives and rewards industry for almost 14 years, helping clients meet their engagement objectives for their own employees, customers and partners.
Christine joined Blackhawk Network in 2019 and leads a team that works with vendors and brands to achieve their partner incentive goals.