What's Working in Channel Partner Incentives

INTRODUCTION

Despite being a mainstay of most channel partner programs, incentives are falling short of achieving desired results. According to a recent poll, fewer than 50% of vendors believe their incentive programs work.

Leading channel consultants would not be surprised by those results. Incentive programs are missing their targets when channel leaders fail to follow best practices for truly motivating partners. To ensure a better return on investment in their incentive programs, vendors must ensure that their offers:

• Deliver mutually beneficial results;

• Align with go-to-market motions of selected partners;

• Address business or personal interest of partners; and

• Minimize participation friction.

If there’s a problem with many channel incentive programs, it’s that they are mostly what they used to be. Instead of inspiring partners to shift their focus on specific opportunities to drive revenue, many vendors continue to bundle rolled-over discounts and rebates into what can barely be described as an incentive. What makes these “incentives” even less effective is that they are generally invisible to the sales agents or marketing staff they are intended to motivate.

The lack-of-proof that these programs work is apparent. As Demand Gen Report’s annual “Channel/Partner Marketing Benchmark Survey ” discovered, fewer than 20% of the respondents described their current program’s ability to sell and market through channel partners as very effective. Nearly two-thirds rated their channel sales and marketing support as only somewhat effective.

That discontent is leading to more investment in partner programs. To ensure they achieve the goals set for their channel programs, respondents said they will ante-up more program related funds. Nearly 70% of those surveyed are planning to increase investments in channel marketing support. More than 40% plan to upgrade their channel incentives and program management tools.

INVESTING IN CHANNEL INCENTIVE MANAGEMENT TOOLS TO STREAMLINE PROCESSES

Investments in channel incentive management tools that facilitate activity are a step in the right direction. For example, as an ITA/Forrester survey noted, 51% of channel partner owners and sales reps are deterred from participating in vendor programs because of the confusing or nonexistent tracking of goals and promotions.

Consequently, removing any friction in the program to facilitate participation in a well-conceived program is critical. More important, though, is making incentive programs significantly less complex, ensuring that partners more easily understand what’s included, what they must do and what’s in it for them — even beyond the featured reward.

“We need to simplify, simplify, simplify,” stressed Theresa Caragol, Founder and CEO of AchieveUnite, a channel-focused consulting firm. “We have to take all the complexity out of incentive programs. [Channel leaders] need to get away from big, complex programs that partners just can’t figure out.”

Channel Mechanics noted the risk associated with less-then-opaque programs. Partners are not taking advantage of vendor incentive programs as “they may be too complex to understand and too onerous to claim.”

THERESA CARAGOL, ACHIEVEUNITE

“We have to take all the complexity out of incentive programs. [Channel leaders] need to get away from big, complex programs that partners just can’t figure out.”

MOTIVATING BEHAVIOR WITH INCENTIVES

A significant problem with many incentive programs is that they do not really offer, well, incentives. Instead, discounts and rebates often promoted as incentives or rewards are routinely packaged into pricing — so regularly that partners don’t necessarily regard them as an inducement for increased or desired activity. Worse, discounts and rebates typically fail to motivate individual partner staff, the people working to acquire new customers or grow existing accounts.

The risks associated with routinely repeating rebate and discount programs is that partners fully expect them to be part of the programs.

“They bake them into their revenue planning,” said Larry Walsh, Chief Analyst at Channelnomics, a consulting firm. “If you take that money away, partners perceive it as a loss. And they will move on to the next thing that will give them the money.”

With incentives, “we’re talking about how to motivate behavior,” said Diane Krakora, Principal at PartnerPath, a channel consulting firm. So much of what channel leaders consider incentives are “just built into the natural rhythm of a partnering ecosystem.” Incentive programs become more effective when they encourage partners to “shift how they’re driving renewals, how quickly they are activated or close their second deal.”

Vendors are breaking out of the molds, according to Chris Lamborn, Principal at Channel XLR8, and taking a more strategic and partner-informed approach to incentives. Channel leaders are finally talking to their partners with specific direction on what they’d like them to achieve and then asking their partners the right questions — “what are the best levers to work with you on the way you compensate your people, to educate them?”

Channel leaders should be careful to get the opinions of partners that they may not regularly consult, added Lamborn. Rather than query the typical partner advisories, Lamborn said “vendors need to get comments from a broader mix of partners, understanding some of those new-to-market partners that they’ve brought in.”

That’s especially true for channel leaders seeking to engage new partners. “If you want engagement from people you haven’t seen yet – you need to do something different. Listening is a great start,” said Ellen Linkenhoker, Insights & Strategy Leader at ITA Group, a global engagement solutions provider.

GETTING CREATIVE WITH POINTS - BASED PROGRAMS

One type of incentive offering that does seem to be appealing to more partners is the point-based program. Schneider Electric, a global provider of energy management and automation solutions, was running a point-based program based solely on partnergenerated revenue. But when the company significantly expanded its overall channel initiative, the company reimagined its mySchneider rewards program to reward partner activities related to the entire customer journey.

The mySchneider IT Partner Program focuses on enabling diverse and evolving business models and allowing partners to differentiate their business by becoming a strategic advisor and expert in their market across multiple IT competencies.

Schneider’s partners have access to a new portal where they can monitor their activity.

“Transparency of those program was really top of mind when we brought back the program,” said Eileen Bishop, Director, Channel Marketing & Strategic Execution at Schneider. “Partners have visibility to all the ways they can earn and improve their points and check the status.”

Schneider is working with a third-party provider to support its partner program and the rewards it offers. “We intentionally wanted to make sure we had a very diverse group of options to provide our partners,” continued Bishop. “Everyone has different interests and things that motivate them to earn those points.”

It’s clear that making incentive programs more personal will drive engagement. According to an ITA/Forrester study, more than 75% of the partner respondents said personalization of incentive offers would significantly increase the amount they would influence or sell a vendor’s products or services, especially if they were aligned to the industry, the partner’s route to market and the related products or services.

SEGMENTED INCENTIVES & MULTI -AUDIENCE PROGRAM DRIVES AGENT SALES

How a Fortune 100 insurance company increased independent-agent-sold policies by infusing sales and non-sales incentives.

Engaging 40,000 independent agents with internally managed regional programs is no easy feat. Neither is measuring the impact of SPIFFs and contests while also bearing the administrative burden of running so many small concurrent incentives.

But when a Fortune 100 insurance company opted to segment its audience with a tiered approach, reward both sales and non-sales activities and manage it all on one streamlined engagement portal, participation soared. Within 10 months, the program exceeded 160% of the company’s enrollment goal and 5,000 previously dormant agents are now selling policies.

The incentive program, designed and implemented by ITA Group, first required the operations teams to keep a close eye on activity across the first few months to start building what would later become five core segments: Bronze, Silver, Gold, Platinum and Ambassador. Each segment promotes agents’ progress and inspires them to unlock new awards at each level.

To help differentiate the program in the market and adopt best practices in incentives and loyalty, non-sales behaviors were built into the strategy and geared toward each segment. The goal of the non-sales behaviors was to increase activity in areas that lead to higher sales — such as gaining knowledge, understanding how to use enablement tools and attending virtual events.

Personalizing The Experience

Critical to the success of the program was the design of a portal that engages the agents with messages tailored to their segment, updates each of them on their progress and what action to take next and keeps them earning for both sales and nonsales behaviors that make them experts in the insurance field. With all information in one place, agents have an overall view of ongoing program progress and can redeem earned points and marketing credits.

Plus, they have all the pertinent data and reports at their fingertips, including details about performance, engagement, payouts and enrollment. They can even track program performance to multiple budget centers — a must-have for bringing on additional audiences.

Motivating Communications Drive Enrollment & Capture Attention

A comprehensive communication strategy was created to inspire agent participation. A program guide provides all the information agents need to get rewarded for their work. An enrollment video reminded them of how easy it is to be recognized for making an impact. Segmented communications congratulate agents for a job well done. Personalized communications nudged agents to up their game by notifying them when they’re close to moving to the next tier and congratulating them on achieved goals.

Exceeding Expectations, Reaping Quick Results

The program reached significantly more agents in the first year than expected, including new selling agents who now actively take advantage of the program. The insurance company’s goal for the first year of program operation was to reach and enroll 65% of contracted and certified independent partner agents. Within 10 months, the program exceeded 160% of the enrollment goal and is still growing!

TAKING A BROADER VIEW OF INCENTIVES

Channel leaders that have implemented differentiating incentive programs — whether based on old-school tactics or new ideas — are getting the attention of their partners. For example, an IT company implemented a pretty sophisticated incentive program that rewards top performers with an activity-filled trip to South Africa. The points-based program, which was managed and monitored by a leading channel incentive solution provider, was clearly a success. In a competitive market, the program generated a 10% increase in targeted sales, achieved 110% of its goal and (equally important) received a top-rating from the partner participants.

Incentive programs that reward partners with travel to exotic destinations or other unique experiences or events are getting the attention of more channel managers. “Everyone wants a new experience,” said Caragol. “I want to go to Iceland, I want to go to Greenland, I want to go to the Superbowl. Especially as we come out of Covid.”

While cash may be king for many partners, rewards can take other forms, according to channel consultants. “I like the use of business development funds,” said Caragol, explaining that rewards that can actually contribute to the ongoing success of a partner.

The incentives could include marketing training, a website redesign or support for new SEO initiatives. Other companies are offering incentives that support leadership development or coaching on another aspect of business operations. “When vendors invest in their partners’ people, those partners are much more likely to stick with them.” Offers like these are especially popular with smaller partners who are finding it difficult to acquire the talent to grow their business.

Vendors are also well advised to incentivize their internal staff to support their partners, said Krakora. Incentivizing internal fields teams to help partners drive revenue can result in ongoing collaboration, ensuring a better understanding of the value partners bring to the sales cycle.

INCENTIVIZING CUSTOMERS TO BOOST PARTNER BUSINESS

Another strategic use of incentives to drive channel revenue is to reward endcustomers. “We’re seeing some companies elect to create programs that incentivize the end-user, rather than the partner,” said PartnerPath’s Krakora. These initiatives enable partners to engage their customers with discounts or other rewards to support lead generation and sales.

Poly, a provider of communication and collaboration equipment, implemented a voucher program designed to encourage customers to recycle older equipment through its authorized dealers. As reported in the inaugural edition of Channelnomics’ Channelnomics Quarterly, the program connected customers with partners to arrange the return of used equipment. The customers received vouchers to buy new replacement equipment at discounted prices.

Early data revealed that the program generated new business and enhanced customer stickiness, while enabling partners to generate additional profits.

An initiative implemented by the ITA Group for a client in the building supply industry offers a good example of how companies and their partners can drive incremental growth by incentivizing the customer. By assigning customers a goal beyond their previous year’s business, and unlocking earnings when they’ve reached it, the plan guaranteed retailers a positive ROI by offsetting program costs.

The comprehensive program supported on a custom web platform includes views personalized for each stakeholder audience, encouraging engagement according to their role in the program. And ITA Group managed program administration, lessening the administrative burden for program owners.

As is the case for many channel partners, retail stores, often lacking marketing expertise or background, benefited from a communications investment that doubled as consistent customer marketing.

The results were impressive. Targeted customers versus non-targeted customers increased their purchases by 187%. The program generated $82 million in average annual sales revenue with $15 million in average growth margin. Over the life of the program, the annual average ROI was 447%.

Ultimately, whether incentives are directed toward the partners, internal teams or customers, how the rewards drive engagement with the buyer is critical.

“Typically, our partners are working with customers, helping them identify solutions, which could include a multitude of other products,” said Scheider Electric’s Bishop. “What our new rewards program is about is incentivizing them to make sure that they’re asking those key questions and identifying opportunities.”

DIANE KRAKORA, PARTNERPATH

“We’re seeing some companies elect to create programs that incentivize the end-user, rather than the partner.”

CONCLUSION

Incentive programs can effectively compel channel partners to pursue vendoridentified opportunities, even learn and adopt new tactics to engage targeted prospects. But with a growing number of vendors vying for partner attention, incentive programs must be crafted more carefully.

Program goals should be appropriately partner-centric — how will the effort impact their bottom line or future of their business? The activities need to be clearly defined and well-supported. Bottom line, all aspects of the program, from partner engagement to reward fulfillment, need to be streamlined to boost partner satisfaction and participation in future events.

About ITA Group. We provide integrated engagement solutions that uniquely align, motivate and inspire your employees, channel partners and customers.

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Demand Gen Report is a targeted online publication that uncovers the strategies and solutions that help companies better align their sales and marketing organizations, and ultimately, drive growth. A key component of the publication’s editorial coverage focuses on the sales and marketing automation tools that enable companies to better measure and manage their multichannel demand generation efforts.

TERRY MOFFATT