Channel Sales Incentive Program Best Practices

Make the most out of your channel partner relationships

If you depend on distributors, dealers, agents and resellers to bring your products to market, a channel sales incentive or loyalty program (sometimes called dealer reward programs, reseller programs, distributor incentive programs or agent reward programs) can help you engage your many channel partners to stimulate sales. Through years of research and experience, QIC has identified a number of key factors that promote channel incentive program success. From setting strategic goals to measuring results, these best practices have proven over time to drive program participation and ROI.

1. Rally Senior Management

To be successful, a channel incentive program needs a champion with the authority to make decisions, allocate resources and adjust the program as circumstances change. Without the support of a top executive or senior sales manager, a channel program could fail before it ever gains traction.

2. Define Business Objectives and Strategy First

The strategy, goals and objectives of the program must be well-defined up front and clearly communicated. Every program stakeholder (including the sponsoring company, channel partners and customers) must understand what the program aims to accomplish, and their role in the process. Program goals should be data-driven, measurable and reasonably challenging.

3. Be Selective About Your Audience

Like any marketing effort, incentive programs are most effective when targeted. Rather than enroll every one of your channel partners and/or customers, focus on those that represent the most value to your organization, and those with the greatest potential upside. Knowing who you want to influence and then structuring a program that directly address their needs will generate the best response.

4. Understand Your Data Requirements

There are a several possible target participant groups among your channel partners – dealers, dealer sales reps, dealer customers. Once you have decided which of these participant groups are most influential, you need to identify the data associated with their activities – and how to obtain it. Understanding this step is critical to the design of the program award rules and measurement.

The more data you gather from different sources in the sales process, the better you can assess the value of your incentive program. Get order data on products from your internal departments. Gather data from channel partners. If possible, structure the program so that it enables you to identify and capture purchase data from end users.

5. Create a Value Proposition that Resonates with Your Partners

The program itself needs to communicate enough value to your channel partners to get their attention. If you decide to implement a point-based reward solution, the number of points awarded for an action or behavior must be perceived as fair for the effort being expended, and point awards need to accrue at rates fast enough to keep program participants excited about their progress toward the rewards they covet (more on this in #8). In the most effective programs, participants earn enough point value to get a meaningful reward (e.g., a domestic round-trip airline ticket) worth about $400 within the first 12 months.

6. Clearly Define All Program Structures

Ensure that everyone involved in the program knows the “rules.” Be very explicit about the desired behaviors and activities being rewarded, and how rewards are earned.

7. Limit the Number and Complexity of Program Rules

Try to keep your program rules as simple as possible – asking for overly complicated behaviors will discourage motivation and participation. One way to keep a program fresh and effort-focused is to use it to promote just a few key products (or product lines) during a specific sales period — and then feature different products at other times

8. Allocate a Realistic Reward Budget

As a rule, B-to-B channel incentive programs can generate strong levels of participant engagement and activity (and drive incremental sales) with reward costs running between 1-3% of sales revenue. Be sure to allocate a sufficient budget for program reward redemption.

9. Award Points Frequently – and Consistently

One pattern we’ve observed in our points-based reward programs is that reporting point awards often and on a predictable schedule drives more point-earning behaviors. Once program participants earn points, they start to watch their points accumulate. This appears to create a stimulus-response cycle where the appearance of new point awards creates more and greater motivation to earn and redeem additional points. While more frequent point awards might drive this behavior to greater heights, it’s sometimes not practical from an operational standpoint; we’ve found monthly awards to be a good compromise.

10. Communicate, Communicate, Communicate

Effective communications are crucial for getting a channel incentive program off the ground and rolling. As mentioned in other best practices, program stakeholders need to clearly understand things like strategy, goals, roles; and program participants need to understand the program value proposition, reward structure and rules. Communications that mark the program launch build the brand and drive participant awareness, interest and enrollment. Ongoing communications promote product sales and encourage participant engagement, reflected in more point-earning and reward redemption behaviors. Communications can also be used to reposition the program, aligning it with evolving business objectives. Employ every available medium to increase visibility to your channel partners — and then leverage their engagement with the program to convey key marketing messages, strengthen your brand, increase product knowledge, education and more. Make full use of “sticky,” program-related communications to get your messages across: monthly statements, program Web site, email updates, newsletters, blogs, social media — and if you’re really ambitious, create your own “app” for the program! Be sure to allocate a sufficient communications budget.

11. Include Your Sales Team

The involvement of your sales force is critical to the success of your channel incentive program, and often it pays to include them in the program – literally. Set up rules within the program that reward their efforts to promote the program (i.e., by talking to customers, enrolling participants, etc.) with points. Support them by developing materials that make it easy to explain the program rules and the value of participating. Position messages about the program as “good news” that gives reps another “reason” to reach out to their accounts.

12. Track, Analyze and Adjust

Monitor and analyze your program data to get an understanding of how your program is driving business activity, and determine changes that will improve performance. Your program activity should be tracking the behaviors of your channel partners (and potentially end users) and could yield early warnings about market and competitive developments.

13. Manage Program Life Cycles

All Channel incentive programs follow predictable cycles — and to maximize results, you need to plan ahead for expected rises, plateaus and declines in activity. Special offers, promotions and special events are tactics that can reinvigorate a program that seems to be sluggish. And no channel incentive program will last forever — so your plans should also include thinking around when a program should be retired…or refreshed/relaunched.

14. Crawl, Walk, Run

Don’t over-engineer your incentive program, at least at first. Even if you have a grander vision, consider launching a simpler program with just the fundamentals in place. Launch cleanly. Get your participants to understand the value proposition and rules. Communicate effectively. Measure all elements of the program up to the 6-12 month mark, then make appropriate changes and additions. Test progressively adding layers of complexity to the program and see if they yield an actual benefit.