In this four part series on channel incentives we’ll uncover the benefits of a channel incentive programme, the challenges to consider and the best practices used by some of the most successful programmes.
Channel partners are extremely valuable to many vendors and manufacturers; in fact they can generate more than 75% of their revenue according to a report by Deliotte. Therefore it’s no surprise that channel incentives play a significant part in the marketing and promotion strategy of vendors and manufacturers who this distribution channel.
Channel incentives offer your channel partners, distributors, and customers an incentive that motivates them to deliver specific results or encourage a specific behaviour.
Channel incentive programmes (also known as dealer incentives) usually focus on a specific product, service or behaviour over a set period of time. As well as improving sales, effective programmes can help vendors create better distribution channels, reduce costs, improve partner relationships, create loyalty and create a stronger, more profitable brand.
A successful channel incentive programme creates a virtuous circle where both the vendor and the channel partner collaborate together to improve performance that will help them both achieve their business goals.
2. The psychology of channel incentives
We live in a culture where almost everyone likes to be recognised for their contribution and effort. This is especially true when it comes to sales reps, who like to receive to very public recognition of their achievements, as it puts them in the spotlight.
However, there are many different reasons why we do things. Sometimes we are motivated intrinsically by our own internal desires and wants, and sometimes we are motivated extrinsically by our desire for a particular reward.
Channel incentives focus on extrinsic motivation by pulling people towards particular behaviours in exchange for a positive reward. They also satisfy the underlying ‘what’s in it for me’ thought.
3. Do channel incentives work?
Many studies show that channel incentives are a major influence on the willingness of dealers, partners and sales reps to sell that vendor’s products or services. Additionally, these programmes also improve the relationships between the vendor and the dealers, partners and sales reps, which can help improve the businesses of both parties.
Statistics show that most channel incentives can increase performance by 22 – 45%.
However, there are some pitfalls. If you don’t plan your programme properly, you could waste thousands of pounds on incentive rewards, for sales they would have made even if the incentive had not been available. Therefore you need to plan objectives and targets carefully.
In some industries, dealers, partners and sales reps are usually part more than one channel incentive scheme. In some cases they can have the opportunity to participate in up to six different channel incentive schemes. This means your programme needs to stand out from the crowd.
Rewarding only top performers can become ineffective, and even demotivating for others, especially if it’s the same top performers are rewarded time and time again. Your programme should avoid this.
It’s also important to note that there is not a one-size fits all approach to channel incentive programmes. Ensure you consider your own objectives and audience/participants when planning your programme.