Here at QIC we’ve had a recent surge in requests for channel sales programs, and this brings to mind one of the primary program design challenges common to these types of solutions.
Channel Sales Background
Before discussing that specific challenge, let’s briefly review the characteristics of channel sales programs.
- First, these programs are typically used in industries with multi-step distribution. A product or service provider sells through an unaffiliated third-party to the actual user of the product or service. Think of a manufacturer of plumbing fixtures selling to distributors who in turn sell to plumbers.
- Second, given this multi-step distribution, the product or service provider typically does not have good first-hand information about the ultimate user of the product or service. This is problematic, because many providers want their incentive programs to motivate specifically those unknown parties to buy their products or services.
- Third, since the providers don’t know the actual users, they (by definition) don’t have information about those users’ purchases of the providers’ products and services.
I’m sure that you can see where this is headed.
The Program Design Dilemma
Let’s return to the specific challenge to which I referred in my opening paragraph. You might think that the main problem is identifying the product or service users, i.e., the customers. Actually, an effective on-line enrollment tactic addresses that problem quite simply and sufficiently.
What is far more difficult is obtaining the user/customer purchase information. This is the specific challenge that requires careful thought and solution design. At the core of that design process is the trade-off between ease-of-use for the Program Participant (i.e., the customer) and data verification and control for the Program Sponsor (i.e., the product/service provider).
In short, Program Participant ease-of-use and Sponsor Control are largely inversely related. The two tables that follow offer simplistic views of that relationship, using the two primary purchase information considerations – submission method and approval process. As you would expect, the colors are pretty much self-explanatory – green means good, red means bad and yellow is somewhere in-between.
Here’s the Program Participant view:
For example, a channel sales program that offers the Program Participant an on-line purchase data submission capability and then awards points without any approval or audit is the easiest to use – from the Program Participant perspective.
However, looking at it from the perspective of the Program Sponsor, that specific program design offers the least control, as the following table indicates:
I invite you to compare other combinations of data submission and approval to truly understand the trade-offs for Participant and Sponsor.
Having presented the dilemma, it’s important to note that the impacts on both Participant and Sponsor can be mitigated by effective program design. For example, at QIC we’ve employed a model in which the Program Sponsor provides us with a file of approved products, which we then use to validate an on-line data submission (or claim) by the Program Participant. This design does not apply in all cases, but when it does, it provides the Participant with an easy-to-use program while still affording the Sponsor with 100% verification.
In closing, I hope that your primary take-away from this post is an awareness of the inherent challenges in designing channel sales programs. I say that not to dissuade you from considering them, because they can be and are very powerful. Rather, I encourage you to call on your industry professional (like QIC!) to assist in crafting a design that is both easy to use – and in control.