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Best Practices for Channel Sales Incentive Programs

Updated on May 2, 2013

Channel Incentive Programs from Quality Incentive Company

Quality Incentive Company - Memphis, TN
Quality Incentive Company - Memphis, TN

Boosting Market Share and Sales with Channel Incentives

The Challenge of Channel Sales

If you sell products through distributors and agents, one of your greatest challenges is effectively managing the numerous, varied relationships you have with your channel partners. If products move through several distribution levels before reaching the end-user,you may not even know who all your resellers are. Channel loyalty and incentive programs – often called dealer reward programs, reseller programs, distributor incentive programs or agent reward programs – have proven effective tools for identifying the key players moving your products through the channels, communicating with them and promoting product sales. What follows is a list of best practices that Loyaltyworks (http://www.loyaltyworks.com), a company that specializes in B2B incentive programs for channel sales and distribution,has accumulated through over 30 years of working with channel incentives.

  1. Get Senior Management Buy-in and Involvement
    Without the support of a top executive or senior level sales manager you’re dead before you start. To be successful, a channel incentive program needs a champion with the authority to make decisions, break ties, allocate resources and make changes to the program in response to developing circumstances.
  2. Define Business Objectives and Strategy from the Get-Go
    List your business objectives in plain English. Everybody must clearly understand what you want to do and why.
  3. Carefully Select the Audience
    Incentives work best when carefully targeted. Rather than enroll every one of your customers, focus your top customers and those with upside sales potential. Knowing who you want to act and then structuring a program to directly address their needs and wants will produce the best ROI.
  4. Define Your Sales Goals
    Set clear and reasonable targets so everyone knows what you want to achieve. Use numbers and don’t worry about “leaking” sensitive data to your competitors; they probably already know how you’re doing. Make the goals rational, data-driven and a slight stretch.
  5. Clearly Define All Program Structures
    Ensure that every program participant knows “who does what to whom”. Use diagrams and be very clear about which behaviors are desired and which aren’t. The best outcomes occur when everyone knows the rules.
  6. Put a Limit on the Number of Behavioral Objectives
    Channel incentives will create motivation, but don’t ask too much. Keep it simple – don’t ask for overly complicated behaviors. If participants can’t repeat back the desired actions in a simple sentence, then it’s too complicated. Try to concentrate attention and effort by focusing on specific product sets or lines of business rather than your entire catalog or every SKU.
  7. Offer a Value Proposition that Resonates with Participants
    You need to communicate a value to your channel partners that will get them excited. Remember, they’ve seen a lot of promotions, so create a clear, honest value proposition that explains what you want to accomplish and what’s in it for them when they buy into your vision.
  8. Set Appropriate Awards
    If you go with a point-based incentive solution, the point levels have to accumulate at rates fast enough that program participants can project how soon they can redeem points for desired rewards. Similarly, the points awarded for each desired action has to be perceived as an appropriate reward for the effort expended. Be fairly liberal with points and assume that the program reward cost will ultimately represent between 1-3% of your sales revenue volume, so allocate a sufficient program budget. As a rule, in the most effective programs, participants earn enough points to get a meaningful reward (e.g., a domestic round-trip airline ticket) worth about $400 within the first 6-12 months.
  9. Award Points Monthly
    Once people enroll they begin to watch their points accumulate. This often evolves into a stimulus-response cycle where the timely posting of point awards can greater create greater motivation to earn and redeem points. This effect is especially important in the fourth quarter when many people typically redeem their points for holiday gifts. Timely awarding and reporting of earned points frequently drives more point earning behaviors.
  10. Communicate Frequently
    You cannot over-communicate your channel incentive effort. Tell your participants what you’re going to do, when you’re going to do it, how you’re going to do it and what’s in it for them. Then tell them again. More communication results in higher engagement and more enrollments, points earned and redemption. Effective messaging and contact strategies include promoting the program in end-user newsletters, periodic e-mails to stimulate action, prominent display of the program on your Website and on-site signage at your locations. It helps if you can deliver the message in a distinctive way. Use colors, imagery and slogans to build interest and attention. Segment the messages to appropriate audiences – ex. channel owners and leaders receive different treatments than channel salespeople and customer service reps. Don’t limit communications to a single medium and don’t worry too much about frequency because you’re probably competing for attention with several competitors.
  11. Involve Your Field Sales Team
    Your sales force is the face of your channel incentive program. Keep them up-to-date and include them in the program - reward their efforts to promote the program and/or enroll appropriate participants with points. Make it as easy as possible for salespeople to explain both the mechanics and the value of participating in your program. Position messages about the program as “good news” that reps can deliver to their accounts.
  12. Collect Data from Multiple Sources
    I
    f you aren’t measuring what’s going on in the business you can’t measure the impact of a channel incentive program. Get order data on products from your internal departments. Gather data from channel partners. If possible structure the program so that you can capture purchase data from end users. The more data you gather from different sources in the sales process, the better you can assess the value of your incentive program.
  13. Conduct On-Going Measurement Analysis and Adjustments
    Sales channels are dynamic and the marketplace changes daily. In fact, your channel partners and their interactions with end users might be your best tool for getting an early warning about market and competitive developments. Collect and analyze your program data to really understand what is happening, how your program is driving business and determine what adjustments you need to make.
  14. Anticipate and Manage the Program Life Cycle
    Every initiative starts off with a bang, ramps up, coasts, cools off and then needs to be re-energized. Anticipate and plan ahead for this predictable cycle and prepare ideas, themes, special events, promotions, special offers and varied communications to lift the energy level or your program when it hits a lull.
  15. Test, Learn and Modify
    Most of our programs follow an “implement – reinforce – optimize – expand” development sequence. Don’t over-engineer your incentive program. Consider launching with just the basics in place, even if that means to rely on manual processes. Get your participants to understand the value of the points currency early on. Measure all elements of the program at the 6-12 month period, then make appropriate changes. We see “simple” programs that outperform “complex” programs every day.

Check out our other hubpage on the effectiveness of "Cash vs. Non-Cash Incentive Programs"

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