In the dynamic landscape of sales and distribution, B2B companies constantly seek innovative strategies to incentivize their channel partners for enhanced performance and market penetration.

When set up well, valuable incentives can be a powerful way to foster partner loyalty, increase partner engagement, and accelerate your indirect sales.

This article delves into the realm of effective channel incentive programs, elucidating their types, significance, implementation tactics, and the pivotal role of channel incentives management software.

What is a channel incentive program

A channel incentive program is essentially a program designed to provide incentives or rewards to members, specifically channel partners such as distributors, resellers, wholesalers, retailers, field sales, and others who successfully achieve predetermined targets or milestones.

Therefore, a channel incentive program is a way to incentivize and reward channel partners for reaching the desired goals and milestones in their sales journey.

A channel incentive program becomes an essential tool for manufacturers, distributors, and wholesalers to impact the effectiveness of their sales strategies. Incentives are used to improve direct sales performance, orchestrate partners’ behavior to align with your business ethos, and encourage loyalty.

Why You Need Channel Incentive Programs

Having a well-oiled channel machine is crucial. It gives you more reach, more customers, and, most importantly—loyalty. And incentives are that ‘fuel’ to keep your machine running.

Builds relationships

Effective channel incentive programs builds and strenghthens relationship with channel partners and helps to grow your business.

These things help increase your brand’s loyalty and generate higher profits for your business. Choosing the right incentives that your channel partners appreciate will help you build successful and rewarding long-term relationships.

Builds Loyalty

Effective channel incentive programs deliver a high customer reach and turn your target audience into loyal customers.

The more memorable experiences you can create for your customers, the better the chances of retaining them. Since channel partners are your direct connection to consumers, incentivize them to incentivize end consumers.

Increases your market share

These programs increase your brand’s market share by widening your channel network. When chosen well, incentives and rewards can build strong relationships with your channel partners, creating memories and unique stories for your brand.

For instance, a holiday trip as an incentive can generate a buzz. It will not only be talked about by the recipients among their family and friends but also something that will carry those stories forward to the people they know.

Greater return on investment

With an increased distribution network, your product also has a broader reach, which means you enjoy a more extensive consumer base. This allows you to improve your market share and encourage product adoption across various sectors and geographies.

A wide customer base also means a more significant sample to test new products and offers.

Increased brand recognition

If customers see your product everywhere, it won’t be long before it becomes the industry’s gold standard. Thanks to referral marketing, the most powerful marketing tool in sales history.

Enhanced Reach

The wider your product reach, the more credit your brand will garner to enhance brand recognition. Encouraging channel partners to promote your products through incentivization is a two-pronged strategy that allows you to market your brand and raise customer awareness.

Types of channel incentive programs

The kind of program you design and the incentives you roll out depend primarily on the objectives you are looking to achieve.

With that said, here are the various types of channel incentive programs to be familiar with:

Sales incentives

These are among the most common channel incentives, where milestones are set for partners that reach a certain margin, sales volume, or exceed goals for incremental growth. These are long-term programs built to boost general sales across your company’s products.

SPIFs (Sales Performance Incentive Funds)

These are performance-driven incentives that the sales team of a channel partner receives after meeting particular goals such as selling specific products. Sales performance incentive funds are extremely useful in increasing sales and driving short-term spurts during sales slowdowns or off-season.

MDFs (Marketing Development Funds)

These educational or monetary incentives are used to enhance local brand awareness and recognition. Manufacturers provide these incentives to their channel partners to generate brand awareness and sell certain products.

For instance, channel sales partners can use market development funds to organize a marketing seminar, conduct webinars, purchase radio advertisements, or exhibit space at trade shows.

Channel rebates incentives

These are volume-based incentives that are designed to motivate your channel partners to sell a specific volume of products that would enable them to earn their incentive and transfer the benefits to their customers. In channel rebate incentives, a channel sales partner must sell a specific volume of products to get the right incentives.

Co-Ops or Cooperative marketing funds

These are disbursed to enable your channel partners to conduct marketing activities that help increase brand awareness and drive sales pipeline growth. They are earned over time as a percentage of prior sales and awarded to channel partners after a particular behavioral milestone.

Deal registration incentives

These programs are designed to encourage your channel partners to refer clients and be rewarded for the referrals that convert to sales. While this is a complex type of promotion to pull off in the FMCG world, it is not impossible.

All you need to do is think outside the box. Here’s some inspiration for you to get that referral program incentive in place.

Value-added reseller incentives

Value-added reseller incentives are the rewards channel partners receive when they add some additional value to enhance an existing product or service. The value addition can be in the form of an extra feature, integration, or product.

8 tactics to boost ROI

Designing channel incentive programs that are engaging, productive, profitable, and overall effective is both an art and a science. Try one or all of these eight tactics to create a powerful program that’s worth the investment.

4 Tactics to Create Engagement

Keep Track of What’s Worked (And What Hasn’t)

You should keep track of what kinds of channel incentive programs you’ve tried and how each has performed. One major reason for doing this is so that you have a track record of what has worked in the past— and what has fallen flat.

Think Creatively

Think Creatively Doing what’s worked in the past is not the only factor for designing new programs. Part of the reason so many channel incentive programs fail to generate demonstrable ROI is that they’re repetitive and, frankly, boring.

If your programs’ effectiveness begins to stagnate, differentiation is the answer to revitalizing your programs—differentiation from other manufacturers and differentiation from your own past initiatives.

Optimize the Partner Experience

Optimize the Partner Experience Understand each of your partners’ expectations to optimize their experience while they participate in your channel incentive program.

Keep Things Fresh

Keep Things Fresh Timing matters when it comes to channel incentive programs. Programs that are too short don’t give channel partners enough time to get up to speed and engage. Too long and it starts to feel pointless and stale.

4 Tips for Inspiring Productivity

A channel incentive program that actually inspires productivity is the result of careful planning and purposeful execution. These four best practices will teach you how to get your partners participating and looking forward to next time.

Tailoring Programs for Individual Strengths

Tailor incentive programs to each channel partner’s specific needs and strengths. Recognize that not all partners require the same incentives.

For instance, a partner proficient in marketing may benefit more from incentives aimed at improving other aspects of productivity, while one struggling with marketing might require support in that area.

Utilize partner analytics to identify areas for improvement and design targeted incentive programs to enhance partner capability and productivity.

Meet Partners in the Middle

The Goal Gradient Effect teaches us that energy and interest decrease after an initial excitement period. This effect is especially applicable for sales teams with lengthy closing periods.

Let’s say your sales team takes an average of four months to close an opportunity. In that case, there will be a gradual decrease in stamina as the opportunity progresses through the stages.

Communicate Regularly

Incentive programs are no Field of Dreams. You have to do more than just build it to get participants to come. The answer to this is to communicate. Communicate to your channel partners before the program starts.

When you’re one month out, give them a heads up of what’s coming down the line. Give them time to digest, understand, and ask questions.

Communicate again when it’s time to kick off the program—and especially over the duration of the program. Reminders, progress reports, and “warnings” when the program is almost up are all opportunities to increase how productive the project will be.

Communicate once the program has ended to share interesting performance timelines and stats and congratulate the winner if the program was a contest.

Make the Programs Personal

Encourage channel partners to share their specific business plans with you so that you can craft your incentive program in a way that also moves them closer to their goals.

Key metrics to measure the success of a channel partner incentive program

Have a system in place that helps you measure your partners’ performance against your strategic intentions to understand how effectively your program is working and whether or not you need to make amendments. Data is the secret to measuring your success.

With data in place, focus on building these metrics for your program:

Channel sales recruitment metrics:

• The total number of partners
• Recruitment quota attainment
• Partner attrition rate
• Percentage of partners recruited by channel
• Average cost of recruiting and onboarding a new partner
• Average length of time to recruit and onboard a new partner

Channel sales success metrics:

• Total number of partner deals registered
• Average value of a partner deal
• Percentage of accepted partner-submitted deals
• Percentage of closed partner-submitted deals
• Average sales cycle length
• Percentage of partners who registered a lead in the past month or quarter

Channel sales training and support metrics:

• Percentage of partners using provided sales and marketing collateral
• Percentage of partners who attend optional events and/or ongoing training
• Average partner satisfaction score
• Percentage of partners who have attempted certification
• Percentage of partners who have completed certification

Channel sales profitability metrics:

• CAC for partner sales versus direct sales
• Retention rates for partner sales versus direct sales
• Cross-sell and upsell arts for partner sales versus direct sales
• Collect data under these heads and analyze them in light of the goals you have set out for your program to understand where you stand, the areas you are doing well in and the areas that need improvement.

Channel Incentives Management (CIM) Software

Channel incentives management software are vital to Overcome the Challenges of Running Channel Incentive Programs.

Channel incentive management (CIM) software allows businesses and channel program managers to better organize and manage their partners and incentivize them to sell more or prioritize certain offerings.

These solutions are responsible for designing, tracking, and modifying channel incentive programs across the partner ecosystem.

CIM software seeks to increase the reach of channel partners by creating combinations of incentive programs such as rebates, discounts, sales performance incentive funds (SPIFs), market development funds (MDFs), and activity-based incentives, among others.

This software provides businesses and program managers a dashboard to manage one or multiple channel incentive programs.

Solutions in this space enable organizations to configure incentive programs depending on channel partners’ objectives and size, such as a regional or global incentive program.

Get started with Kademi: https://www.kademi.co/

Get started with Channel Mechanics PRM: https://channelmechanics.com/

Get started with Karrot: https://www.thekarrot.com/

Final words

Now you know what channel incentives are for, and what the most popular types are. Which type of channel incentives will suit your business best? Is it obvious or would you like some expert support?

Our support to implement channel incentive software is an excellent starting point for your efforts, the ideal way to set everything up, keep it under control, and keep it working smoothly.