Issuu on Google+


Channel Incentive Strategy What makes a Channel Incentive Program Successful? A Business Process Best Practices Perspective

  Effective channel relationships are often the lifeblood of manufacturing and services businesses, particularly in such verticals as the IT, mobile telephony, financial services, automotive and electronics industries. Channel partners go by many names – including distributors, dealers, franchisees, brokers, resellers, VARs, VADs, SPs and ISVs. But regardless of what they are called, in the eyes of the vendor they are commonly regarded as a critical extension of the sales force. Common though it may be, working through channels can be challenging. To build an effective channel, you must build relationships based on trust and openness, build partnership credentials, and deliver empathetic messages that demonstrate your understanding of the channel, while at the same time driving performance and engagement by delivering incentives that empower your channel partners to do their job. As more and more vendors shift resources from their advertising budgets to below-the-line trade and channel marketing activities, we are seeing many examples of wasted resources and bad practices in companies’ efforts to earn their channels’ loyalty. This white paper, sponsored by the Grass Roots Channel Team, outlines the diverse challenges of channel relationship management and presents best practices for implementing multi-market channel incentives as part of an integral channel relationship program. Our observations and recommendations are based on intensive analysis of 22 channel incentive programs managed by Grass Roots during a period of 12 months, as well as a survey of our channel subject matter experts. The study objective was to identify key drivers for success in channel incentive programs. During the process we also identified several trends indicating that the market is maturing, and that the relationship between vendors and channel partners is becoming increasingly integrated and synergistic.

Methodology: An evaluation of 22 channel incentive programs forms the basis of this study. In order to compare and assess the success of these programs, Grass Roots developed a list of 10 key factors contributing to program success. We then rated the programs on each of these factors using a three-point scale, where 1 = did not meet expectations, 2 = met expectations, and 3 = exceeded expectations. The ratings were examined in aggregate as well as individually, and used to measure and compare how the programs rank in each area and to identify which benchmarks make some programs perform better than others. In order to protect the privacy and confidentiality of our clients, participating vendors’ names are excluded. The following table lists the factors examined, the aggregate ratings for each category, and the considerations behind them.

1 / 16


Grass Roots’ Channel Incentive Program Benchmarking

Client: XXXXXXXXXX

Evaluation Date: 3/15/2010 Score

Factor

1

2

3

x

Considerations Does the Vendor have influence over the partner? Does the Vendor understand the many issues impacting his partners? How strategic is the relationship?

1

Channel Relationship

2

Ease of Doing Business

3

Program Credibility

x

Does the program provide partner and individual rewards? Are there enough earning and redemptions opportunities? Are rewards relevant and fulfilled on time? Have we balanced volume with value? What is the participation %?

4

Program Funding

x

Does the program provide tangible benefits? Is the program properly funded? Is there alignment among MDF, Rebates and Incentives in place? Is money not being wasted.

5

Program Management

x

Is there a designated Vendor champion? Is there a designated Vendor team? Are internal departments responding to the champion or team?

6

Systems and Tools

7

Program Communication

8

Enablement and Education

9

Organizational Commitment

10

Measurement

Do partners access the program through the partner portal? Are the rules easy to understand? Is the sales claim simple? Have we minimized complexity? Are we integrated for POS data collection?

x

Is the incentive program integrated to a global partner portal? Is the vendor using different vendors for LMS, MDF, Rebates and Incentives? Is the incentive program running in more than one region and more than 3 languages?

x

Is communication about the incentive program personalized, inspiring, and passionate? Are we using SMS, WAP and Social medial? Have we included a traditional print component in our communication n?

x

Are we rewarding education about the program? Are we rewarding product and solutions learning? Have we built a holistic approach to enablement?

x x x

Is there support fro the CEO down? Are sales and marketing aligned? Are the other critical internal departments aligned? Are we communicating internal wins and success stories? Are there strong metrics and reporting in place? Are these metrics actionable? Are we using these metrics for internal communication? Are we providing partner feedback via a dashboard?

Taking all factors into account, six (27%) of the programs exceeded expectations overall, 10 (45%) met expectations, and the remaining six (27%) fell short of expectations for program performance.

2 / 16


Channel Incentive Strategy What makes a Channel Incentive Program Successful? A Business Process Best Practices Perspective

  1. Channel relationships Our research found that the most important factor behind the success of a channel incentive program is the vendor’s level of understanding of the issues impacting its channel partners. This category also achieved the highest overall rating among the programs assessed, with an average total score of 3. The six top-performing programs all exceeded expectations for channel relationships, and of most the 10 programs that met expectations overall also 3 Average score rated well on this factor with an average score of 2.6. 2.5 The six low-performing programs, on the other hand, rated an average score of 1.7 for channel relationships. 2 1.5

The top-performing programs share certain traits in the area of channel relationships that contribute to their 1 success. These programs run mostly through strategic 0.5 (smaller) partner groups; they have clear rule structures 0 built around two or three specific behaviors, identified Top-performing Programs met Low -performing by the vendor team, that produce one specific programs expectations programs performance improvement; all align to the partner group business model; and all are considered mutually beneficial to the vendor and the partner. This group of vendors saw a strengthening of their partners’ loyalty, attributed to the incentive program. Vendors who were rated in the middle (met expectations) typically were looking for mutually beneficial outcomes and were incentivizing behaviors that accelerated the desired result (for example, deal registration). However, these programs were not necessarily strategic to the partner. Nonetheless, these vendors were able to earn their new partners’ willingness to engage in business with them, where they had not done so in the past. Those vendors who rated the lowest in our study had complex rules structures and not very engaging communication schemes (e-mail). Moreover, these vendors were actually criticized by their partners for trying to incentivize outcomes that were not mutually beneficial. This finding begs the question: should the vendor run an incentive program through that specific partner profile?

It’s tough out there in the channel: A typical channel partner works with 21 different vendors and participates in 10 vendor programs. On average, just two of those vendors are considered strategic for the channel partner. Nevertheless, every vendor wants its channels to recommend and focus on its own products and services, competing with other vendors to drive mind-share and influence. In an effort to make them strategic, 55% of vendors offer incentives programs, and 64% have some form of deal registration program. To make matters more complicated, more than half of all vendors don’t maintain a clear set of rules structures, and each program’s registration and claim procedures are different, making these programs appear tedious and complex to most channel partners. Not to mention that with most unmanaged partners, the engagement is conducted through a cluttered vendor partner portal.

3 / 16


Identifying exactly who the participants are and what drives their behavior: Vendors are sometimes criticized by channel partners for pushing (and incentivizing) outcomes that are not mutually beneficial. To avoid this issue and to reach the target performance metrics, vendors need to fully understand their partners’ different business models, segment their incentive programs accordingly, and do some research to recognize top channel performers and their specific best practices in order to build on those teams’ successful behaviors. It’s also important to maintain an accurate profile of the channel organization, especially in the unmanaged channel. Elements to include in the profile include contact details, partner type, purchasing behavior, training, specializations, accreditation, certifications, status, job role, and opt-in preferences for all participants. The goal is not to build “monthly specials”-type incentives, which simply reward the existing top performers and are more tactical than strategic. Instead, by identifying those best practices that already exist within your channel organization, and then by encouraging those behaviors across the board, you will raise the overall standard of performance and create positive changes that last. The key is to identify two or three behaviors that consistently provide one specific result (improvement), and subsequently define the length of your program by determining the associated frequency of that behavior. You then attach a consequence to those behaviors (rewards and recognition), with the result of driving performance improvement consistently and successfully across your channel. Understanding what drives behavior empowers you to recognize and reward not only achievements, but also efforts that accelerate the desired results. Without visibility into the behavior of successful partners, programs can only be judged by tactical measurements, instead of how well they support the real goal of increasing partner performance.

What drives the right behaviors then? Program success depends upon participants’ clear understanding of what you expect of them, knowing exactly and simply how you want them to behave. It is a worthwhile effort to actually educate your partner’s sales representatives and sales engineers on these behaviors, then measure the results, and communicate individual and team performance metrics, providing them with feedback and reinforcing the desired behavior (so it will be repeated). This process encourages continuous behavior and improved performance. Once they understand which behaviors will make them successful, you need to introduce the participants to your own currency, which should be so motivating to your partner’s sales people and management that they will be called to action and increasingly be motivated throughout your program’s lifecycle. A business owner is best motivated by financial incentives that directly impact his bottom line. However, your partner’s sales teams are more motivated by an award selection of name brands, experiences, and “Life Style Award” options, which will virtually offer an endless array of awards that they will remember long after the program is over. Trophy value rewards as opposed to cash awards certainly have a longer lasting impact and accelerate results. For one thing, participants are already getting cash as a reward from the partner in the form of commissions. Besides, you really don’t want to use rewards that may later be considered an entitlement. (Consider what happens when you take away your cash incentive.)

4 / 16


Channel Incentive Strategy What makes a Channel Incentive Program Successful? A Business Process Best Practices Perspective

  2. Organizational commitment 3

Getting company buy-in on the vendor side is the next most important element of a successful channel incentive program. Again, the six top-performing programs all exceeded expectations for this category, and the 10 programs that met overall performance expectations rated an average of 2.7 in this area.

Average score

2.5 2 1.5 1 0.5

The six low-performing programs, on the other hand, 0 rated an average of 1.3 – falling well short of Top-performing Programs met Low -performing expectations – for organizational commitment. programs expectations programs Programs gained both internal buy-in (from their CEOs down) as well as external buy-in from their channel partners. They also made the incentive program core to their channel marketing strategy for the period. This approach was consistent across the spectrum of partners who exceeded expectations with their incentive programs, demonstrated by a consistent performance rating of 3.0. Vendors who did align their sales and marketing teams, together with operations and finance, made their programs successful (earning an average of 2.7 on their performance rating) and actually earned new business from new partners. These programs were further boosted by placing the right incentive on the right products or services, and having good channel sales management communication. Our study revealed that 27% of vendors had not properly gained buy-in from their sales and marketing teams. This lack of commitment, combined with (and as a result of) having the wrong incentives, resulted in a lack of channel sales management participation, negatively impacting the incentive program outcome and actually hurting their relationship with their channel. Gaining internal and external buy-in Start at the top, and it will trickle down. The more confidence a CEO has in his/her channel incentive strategy, and the more he/she demonstrates that confidence by helping to get the message out to partners about the incentive program, the more confidence partners will have in that vendor’s program. Engage your top-level executives, align sales and marketing, and win the heart of internal operations, finance, and IT teams. Getting these teams on board means that your program becomes core to your company’s winning strategy for the future. Remember, it is also most important to involve your channel partners early on in defining the program and concurring how the incentive should work, making it mutually beneficial. This is, after all, the group for whom the program is being developed. Engage your partners and make use of their perspective in the research process. Include the full range of partner types, including distributors, VARs, VADs and resellers, to identify key issues and determine best ways to address those issues. This outreach strengthens consensus within your company and boosts your ability to deliver a successful channel incentive program.

5 / 16


C-Level Strategies: Put executives in the channel partners’ shoes. You may be surprised how disconnected upper-level management can be from actual channel partner touch points, even within their own companies. Show executives the actual pain points inside the channel, and how your incentive program will help change behavior towards the desired outcomes. If you can explain how your channel incentive program can effectively help correct those issues, you can really drive home the value proposition. Secure Channel Management Involvement: Many resellers tell us that their relationship with the vendor depends in great measure on their local relationship with their channel manager. Once top sales and marketing management get involved with your channel incentive program, and actively preach the benefits internally to channel managers and to all channel partners, mass usage will usually follow. For this to happen, you need to make sure sales and marketing are aligned at the top. Use Peer Pressure: Another good way to open management’s eyes to the benefits of an incentives program is to have them talk to industry peers, who have successfully implemented a similar incentive strategy.

3. Program credibility 3

Average score

2.5 2 1.5 1 0.5 0 Top-performing programs

Programs met expectations

Low -performing programs

Program credibility is equally important to organizational commitment in the success of an incentive program. We listed this factor third, however, because you cannot really establish program credibility without buy-in. Programs that met or exceeded overall expectations scored very well in this category, with an average score of 2.8. Lowperforming programs, on the other hand, earned only a 1.3 on average for program credibility.

The study shows that those vendors whose programs exceeded expectations overall had a set goal to establish credibility early on during the user adoption stage. This credibility was achieved by ensuring that all stakeholders (partners, sales representatives and sales engineers) involved derived tangible benefits through earning and redemption opportunities that aligned to the partner’s business model, and it generated an incremental shift in partner behavior. The programs that met expectations overall also had partner and individual benefits built-in, and they communicated success stories frequently and shared best practices among the participating partners. However, the biggest driver of success for this group was derived from the tangible benefits provided to the sales and sales engineering teams, as the program rewarded individuals for behaviors and teams for results. Vendor programs that did not include individual rewards for the sales representatives and sales engineers did not meet expectations, as there was no alignment at the partner level. Individuals at these partners did not feel the program was fair; after all, they were the ones doing all the work. Not having individual rewards hurt the credibility of the program. 6 / 16


Channel Incentive Strategy What makes a Channel Incentive Program Successful? A Business Process Best Practices Perspective

  Take the carrot and stick approach Channel incentive programs place a carrot in front of your channel partners, their sales representatives and their sales engineers. Many partners are going to tell you that they can make a larger benefit without participating in your program, or by participating at the partner level only. Regardless, you need to stick to your strategy designed around partner, individual and team incentives, as this total inclusiveness is the only way to get participation in your program to increase and to really make your incentive program perform to your expectations. Further, participating in your incentive program should be the only way for your channel partner to receive incentives from you. This rule must apply for your partner organization as well as for individual sales representatives and sales engineers, and it means that partners who chose not to allow their teams to participate also may not benefit from rebates or Marketing Development Funding (MDF). To enforce this practice, you consolidate existing rebates and MDF programs, as well as incentives and spiff programs for partner sales teams, onto your incentive platform. Build credibility through engaging and relevant awards and timely fulfillment Perhaps the best tool to establish program credibility is timely reward fulfillment, as delays in reward delivery hurt credibility and disengage audiences. Chose rewards relevant to your audience, making sure the reward selection provides them with choices that are engaging and appropriate for each participating country. Cultural nuances must be taken into consideration. For example, it is not unusual to find clocks featured as part of reward portfolios in European countries, but in China, clocks are associated with funerals and death.

4. Program management

The next most important element of a successful incentive program is program management, determined largely by whether a program has designated a champion. Top-performing programs rate very highly in this category; programs who meet performance expectations overall also meet expectations for program management, whereas programs that fall short overall also fall short in program management.

3

Average score

2.5 2 1.5 1 0.5 0

Among those vendors whose incentive programs exceed performance expectations, the road to success included an individual within their organization who drove the initiative: a single manager responsible, accountable and incented to achieve the desired results.

Top-performing programs

Programs met expectations

Low -performing programs

7 / 16


Those vendors whose incentive programs merely met expectations had two or three individuals in charge of the program, each tackling a different aspect of the incentive strategy. While this approach provided the desired results overall, it did not result in the program exceeding expectations, as each manager mostly focused on their own objectives and not on the overall goal. The programs that did not meet expectations lacked both the single and multiple managers in charge of the initiative. Rather, these vendors expected the agency to drive their program from the outside. Lacking an internal champion driving the program, this practice did not prove to be effective. Finding a Champion All the strategies identified in this study might work toward getting your company’s buy-in into your channel incentive program, but ultimately, there must be someone in your organization driving the initiative. By finding a manager who really “gets it” – someone who understands and believes in the value of the program – you can set up a champion who actually sees that all aspects of the program are accomplished and who strategically drives the initiative both internally and external to the vendor organization. The right individual driving your incentive strategy must have “skin in the game” – that is, he or she must be accountable and have some form of profit and loss responsibility – and he or she must clearly understand your company’s vision and core strategy. This individual is typically an articulate change agent, who takes risk and is empowered with the authority to make changes. He/she has access to the executive management team, understands how to drive buy-in, and clearly knows the channel and speaks the language. This champion is the one who will lead the research needed to identify the partner groups within your channel that can impact the “desired outcomes”, and who will review the associated metrics and interview the top performing partners to identify those desired behaviors. He/she will also work closely with the chosen agency to support your incentive program, and be the driver behind the advertising of internal successes such as market-share gains, increases in sales of specific products or services, love mail from participants, and more. This individual is your single neck accountable for the success or failure of your incentive program.

5. Program measurement

3

Average score

2.5 2 1.5 1 0.5 0 Top-performing programs

Programs met expectations

Low -performing programs

Keeping track of metrics is also important to the success of an incentive program. The top-performing vendors in our study had very clearly defined performance metrics ahead of time, before program launch. Moreover, they obtained buy-in from their internal teams on the key performance indicators they were going to be measured against, which were aligned to the overall vendor strategy. These benchmarks were simple to understand, traceable from a data perspective, and were used to accelerate results, which in turn contributed to the program exceeding expectations.

8 / 16


Channel Incentive Strategy What makes a Channel Incentive Program Successful? A Business Process Best Practices Perspective

  The group of vendors whose programs met expectations also had clearly defined performance metrics and internal buyin. However, these vendors fell short with regard to making managers accountable, and this lack of accountability caused issues in such areas as product availability, lack of training resources, and slow funding of financial incentives. While the program metrics provided visibility into these issues and enabled them to be corrected, they did not help to accelerate results in these cases. The low-performing group of vendors could not organize around the key performance indicators, were always pushing for additional reports, and did not hold managers accountable. Some also had issues with their own consolidation and analysis of point-of-sale data, in addition to not being organized around their most profitable customers.

You cannot improve what you do not measure. What gets measured gets managed, and what gets managed gets done. Holding team members accountable for getting the expected results is essential. Measuring whether and how channel marketing investments are really driving indirect sales is a challenge, so you must present a business case which identifies very specific performance improvement metrics, outlines detailed ways to measure those key metrics, and assigns who will be responsible for reaching them. For channel managers to sign on to the program, they have to be sure that those leading the campaign are going to keep close tabs on the process. Getting your key performance indicators and metrics right is vital to drive your program. It is also critical to defining profitable behavior, as well as setting realistic goals that are actionable, measurable, and aligned to your partner’s business models. Well-designed incentive programs will make vital data about your channel partners the heart of the earn-and-redeem value proposition, combining tools such as communications, recognition, enablement, rewards, and partner benefits to drive desired behavior measured against clear and quantifiable business goals. Our experience has shown that the basic set of reports that drive key performance indicators (KPIs) include the following metrics: Participant details: Registrations and activations Earning activities: Details and summary Training activity: Details and summary Referrals Sale details: Including top earners by company and top earners by participant Points Balances Redemptions details: Including redemption by product Search capability: By company and participant These metrics, along with a dashboard that graphically represents all the reports, comprise at least 80% of what is needed to evaluate a partner incentive program.

9 / 16


6. Program budgeting

Proper incentive budgeting also has an effect on the success of an incentive program. In our study, the topperforming programs all exceeded expectations in this area, while the other programs’ scores were, on average, commensurate with their overall performance. Determining incentives

3

Average score

2.5 2 1.5 1 0.5

Interestingly, our research contradicts the common assumption that a high incentive payout yields a high performing program. Rather, the findings point to other factors, such as those described in this study, as major forces contributing to the success of a particular incentive program.

0 Top-performing programs

Programs met expectations

Low -performing programs

Incentives are a main area where programs can generate considerable waste, as channel marketing teams allocate more dollars to their incentive programs without a clear understanding of what really makes them successful. This risk is especially true with rebate programs that pay partners on specific product volumes without consideration of partner engagement. We learned this lesson from data gathered from our customer support teams who service these vendors, when they report a high percentage (10% to 15%) of partners calling in to find out why they received the payment to begin with. The truth is that you can’t really buy your partner’s loyalty, but rather you need to earn it. There are obvious implications for spending too much on your rewards program (set expectations that may be hard to maintain), or spending too little (your program may become irrelevant). Balance is the key to properly budgeting for your incentive program, and budgeting is another key issue that needs to be addressed in the initial planning stages. You will need to budget accordingly for platform design and setup, which will produce deliverables such as a solution scope document. Best-practice on channel incentive budgeting spend is to allocate up to 25% of your total budget for services, and allocate the balance for rewards on a first-year basis. On an ongoing (second year and beyond) basis, you should budget at least 15% of your annual budget for changes and upgrades, and another 10% for ongoing program management and support. Most vendors in our study allocated between 0.5% and 2.25% of captured revenue to incentives and from 2% to 5% to rebates. Some utilize a flat percentage against the unit dollar value, while others use a range of percentages against variables such as quotas, target volume, bundling, or other measures. Getting the various internal groups to fund your project is also important, as is to keep accounting rules and practices in mind. Current the Generally Accepted Accounting Principles (GAAP) rules discern services and rewards spend to marketing and sales accordingly. Therefore, the rule of thumb is to fund your rewards budget on a contra revenue basis (this occurs only 50% of the time in the real world), and your services spend against your marketing budget. This is another reason why aligning sales and marketing is critical. You don’t want to find yourself with a successful program and then run out of your rewards (marketing) budget. Of course, this consideration depends on your type of product and/or services, and internal finance policies. Ensuring timely flow of monetary resources is critical, as reward delivery requires funds to be available on time, or ahead of time if you are considering cash equivalents. Also, vendors should agree on a process when buying goods 10 / 16


Channel Incentive Strategy What makes a Channel Incentive Program Successful? A Business Process Best Practices Perspective

  and services in different currencies around the world, as exchange rates tend to be more flexible than budgets. Account for variances in the Value Added Tax (VAT) rates and the fact that in some countries it may be difficult or impossible to reclaim the VAT.

7. Ease of doing business

This factor largely refers to keeping a program simple 3

Average score

by minimizing complexity. From the perspective of program success, ease of doing business actually ranked relatively low in order of importance. While other factors may be more strategic and channelbusiness-related, however, this ranking does not necessarily reflect the level of importance that keeping it simple has in partner engagement.

2.5 2 1.5 1 0.5 0

The top-performing group of vendors made accessing and signing up for the incentive program as easy as logging into their partner portal and accepting the program terms and conditions. These vendors also presented a straightforward rule structure and a simple claim process by having consolidated POS, even for alliance partners who provided part of the solutions sold. Top-performing programs

Programs met expectations

Low -performing programs

Vendors with programs that simply met expectations designed their programs very similarly to the top performing group, but did not integrate the incentive program to their portal. With this seemingly minor distinction, 40% of those programs failed to exceed expectations for this category. A unique set of login credentials makes a world of difference for your partners. The same is true for validation and claim procedures. Keeping it simple Although financial incentives might push your channel partner into taking the program seriously, a simplified approach to delivering those incentives can make a big difference. Setting the right framework by integrating your incentive program to your partner portal will keep login and password policies under one simple set of credentials, making it easy for partners to engage. Profiling the partner through the single sign-on, and making certain the enrollment process is uncomplicated by pulling existing data from your partner portal, further simplifies participation for your partners. Finally, making sure the terms and conditions meet all local legal requirements is another basic step in getting your partners to engage in your program. Once your partners are enrolled in the program, continue to focus on simplicity to keep them engaged and encourage them to actively participate in the different activities and behaviors you have built around your goals. This aim requires that you maintain clear rules of qualification and engagement, with long-term rule structures (gains mind share), and shorter approvals and escalation paths (MDF and Rebates).

11 / 16


The planning stage is also a good time to demonstrate your understanding of the issues in the channel, by balancing volume reward programs with value reward programs. This means that you will reward value partners, while cutting back rewards that go to volume partners who simply take orders. You must also provide quick and easy methods for partners to communicate with the program (two-way communication) and real-time channel support. A live chat support application is a perfect and cost- effective example of two-way communication. Plan validation and claim procedures according to POS data availability Your partners really need a simple process for validating and claiming their rewards if they are going to engage in your program. Moreover, they would rather have claim and validation procedures that are the same as the “other” vendor; even those procedures objectively seem less simple. Current best practice is to develop an integrated sales claim process where the emphasis can be placed on one to three different approaches according to market context: The first approach, “Sales Allocation”, feeds validated sales data directly from your deal registration system into your incentive program at the individual level. This automated approach incentivizes deal registration, deal accuracy, and deal closing – all efforts that accelerate the desired results. Most vendors today are using the SFDC Deal Registration system which already includes Application Programming Interface (API’s) that make it easy to integrate into any channel incentive platform. This approach will cover about a third of your POS transactions, mostly solution sales. The second approach, “Sales Claim”, includes assigning sales to each partner company from the distribution sellout data, for the partners’ sales representatives to claim. Participants can then visit the program site, search for available sales, and claim their individual sale(s) by entering the distribution sales order number(s) in order to be assigned the corresponding amount of points to their accounts. This process should notify participants if the sale has already been claimed, and provide a report with the name of the representative who previously claimed the sale. This process obviously requires a reversal mechanism in the event of erroneous claims. The best practice here is to empower the partner with the tools to manage and track its own sales team’s claims. This approach works well with spiff-type efforts, and hopefully covers another third of all POS transactions. The third approach, “Register Sales”, requires that sales representatives look up the SKU sold, enter a quantity and their invoice number (for tracking purposes only), and then provide a serial number (such as a license number, IMEI number or other code) in order for the system to validate the sale against a vendor’s own database. This approach should cover the rest of available POS data available through sellout from distribution.

12 / 16


Channel Incentive Strategy What makes a Channel Incentive Program Successful? A Business Process Best Practices Perspective

  8. Program communication - More than half of the programs analyzed included new methods of communication and engagement with their partners.

In this day and age, e-mail communication has become less effective, as partners receive massive amounts of e-mail communications from their vendors, leading partners’ sales teams to pay much less attention to it. You need to be creative and use every tool at your disposal. Webcasts, for example, present an opportunity to truly engage those participating in the call by providing executive reports that highlight best practices and showcase early indicators of success. These calls can also be used to invite discussion with the partner’s top management. Social media has also become an effective method of communicating with your target audience. More than 75% of incentive programs currently in the definition phase will include social media and SMS usage to more effectively communicate with the targeted audience. We are not talking about building a social media strategy, as there is still little evidence of social networking best practices, but rather using social media to communicate: for example, tweeting weekly top performers, uploading brief video interviews of collaboration and teamwork wins, and broadcasting milestone achievements. Also still important are traditional print communications and trophy-style communication pieces. Messages that arrive in the appropriate context and are aligned to a lifecycle will be far more motivating and thereby more likely to be acted upon. Vendors should also ensure that all launch and ongoing communications campaigns are engaging and reach all participants, together with frequent online postings of representatives’ performance to encourage competition and the right attitude! Fun, lively communications keep the program top-of-mind and engage participants. Make use of performance dashboards that communicate in a graphical manner, making them easier to understand than reading text.

9. Systems and tools More and more vendors are consolidating their incentive programs and leveraging a single platform to avoid platform cost duplication, to reduce operational and administrative costs, and to gain control of strategy, messaging and performance tracking. From the 22 programs analyzed, five leveraged a single incentive platform across as many as 135 countries. Of programs currently in the discovery process, 80% include more than two regions of the world and more than four different languages; this wide scope is also true of 70% of programs currently under the definition phase. Deploying a core incentive and reporting platform across different territories, regions and/or countries delivers stability and scalability, and it drives incentives in a uniform and global manner. You can then allow for region-specific functionality, which in turn will allow your local country/region/territory managers the flexibility to manage their own individual promotions and initiatives. This global approach is easier said than done, as local (country) channel managers will almost certainly be contaminated by the “not-invented-here syndrome”. To avoid this risk, your platform must provide local managers with some controls that make them feel they can actually drive the program in their regions their way, and obtain their desired results. After all, who knows better about their individual regions?

13 / 16


This mix of global and local control can be achieved by having a platform that is 70% managed by your worldwide organization, yet has 30% local control mechanisms. Putting things like communication, participating products, services, activities and benefit values under the control of your local teams will give your local managers the feeling of ownership over their own program, and avoid the dreaded syndrome. Leveraging an incentive platform throughout the worldwide channel will yield your entire channel structure on one database; deployed across different territories, regions, and theaters; segmented and personalized to each tier; with multi-language and multi-currency capabilities; with one set of standard claims and validation procedures; based on one standard currency (points); and with one reporting and analysis tool. ROI is easier this way.

10. Enablement and education Top-performing partners realize the need for an integrated approach to engagement, measurement, learning, and rewards. These vendors had to balance short-term benefits (more sales) with long-term structural changes in behavior and attitudes. It pays to be open and honest and look at all aspects of the channel relationships. Rewarding sales is not always the only, or even the best, approach. For example, it is easier to sell products if channels are knowledgeable, authoritative and provide high levels of customer service. If this need is acknowledged, then these elements can also be addressed within the incentive program by incorporating a training element and using mystery shoppers or other key performance indicators to measure results against agreed customer satisfaction scores. More than 80% of new programs launched include some form of an enablement component, either to educate participants on desired behaviors, or to conduct some simple training effort that will reward participants instantly upon completion of a simple quiz. Channel sales enablement is a big challenge, but we are seeing more and more vendors include an enablement or education component to their incentive strategy as a way to attain focus. Therefore, the current best practice is to build a “Learn, Sell and Earn� incentive strategy which makes it easier to communicate and consolidates your objectives under one umbrella-type points program. Keep in mind that your channel partners can collectively deploy thousands or even tens of thousands of sales and sales engineer professionals behind your products or services. Enabling all of these salespeople to have clear, compelling, and consistent sales conversations is a daunting task. Keep it simple and provide something in it for them, and you will see how they engage, learn what is it you want them to do, and take to learning your new products or services.

14 / 16


Channel Incentive Strategy What makes a Channel Incentive Program Successful? A Business Process Best Practices Perspective

  Conclusion: We analyzed 22 different clients’ channel incentive programs to identify and scrutinize the key factors that were critical to the programs’ success. Through this study, we identified seven key drivers for success, plus three new trends indicating that the market is maturing, and that the relationship between vendors and channel partners is becoming more integrated and synergistic. The top 10 key drivers for success in a channel incentive program are: 1.

Channel Relationship - Understanding the issues with your channel

2.

Organizational Commitment - Getting Buy-in from your company

3.

Program Credibility - Establishing program credibility

4.

Program Management - Designating a champion

5.

Program Measurement - Pushing the metrics

6.

Program Budgeting - Allocating the right budget

7.

Ease of Doing Business - Keeping it simple by minimizing complexity

8.

Program Communication - Using new methods of communication

9.

Systems and Tools - Leveraging a single incentive platform

10.

Enablement and Education - Including enablement components

Even more importantly, our study and experience shows that the key success drivers alone are not enough. Beyond these individual factors, we need to think holistically about our channel incentive programs. A unified approach to incentives, rewards, learning and measurement is the current best practice. We also need to communicate differently and more effectively. E-mail has become too ubiquitous to be effective as a primary communication tool, so we need to break through the clutter with compelling and differentiated communications that include reward approaches that work for different audiences.

15 / 16


About us Grass Roots, recognized for its global performance improvement solutions, helps clients achieve their business goals through innovative recognition, incentive and loyalty programs to engage and motivate employees, channel partners and consumers. Founded in 1980, Grass Roots is co- headquartered in Miami, London and Singapore and has an Expanding network of offices in 27 worldwide locations with over 1,000 employees and five international customer service contact centers. Grass Roots offers unparalleled global customized solutions that have a positive influence on attitudes and behaviors and are proven to drive employee engagement, brand recognition, loyalty, sales and productivity. Grass Roots currently services 134 of the Financial Times Global 500 largest corporations and 79 of the Fortune 500, and counts among its 2,000+ clients BMW, Bristol-Meyers Squibb, Ernst & Young, Ford, Microsoft, Pfizer, RIM BlackBerry, and UBS. For more information, visit grassrootsamerica.com

1111 Lincoln Road – Suite 700, Miami Beach, Florida 33139 - USA Phone: 305 674 7677 - Fax: 305 674 7521 - grassrootsamerica.com 16 / 16


Channel Incentive Strategy whitepaper