Channel Incentive Program Mistakes to Avoid

Working with a professional channel incentive provider, or simply familiarizing yourself with valuable industry software, can help you master all the details so your program works like a well-oiled machine. And regardless of who’s at the helm, understanding the potential pitfalls can help enormously in planning and managing your channel incentive promotions to meet their full potential. Find out some of the more common mistakes, including:

• not segmenting your audience appropriately;
• establishing the wrong time frame;
• not communicating regularly;

Content Summary

Not setting appropriate goals
Not segmenting audiences to assign promotions and appropriate rewards
Not investing enough
Establishing the wrong time frame
Making the rules too complex
Not establishing constant communication
Underestimating the success of your program
Failing to optimize digital tools
Not learning from previous campaigns

Considering 75 percent of all sales are done through indirect channels according to the World Trade Organization, you are likely running a channel incentive program already.

Though incentives for sales personnel have likely been in effect since business began — and though technology has streamlined the entire process, many companies remain unfamiliar with the idea of formally structuring incentive or rewards programs to motivate other partners within their channels.

That means multitudes are missing out on the chance to drive added revenues, move key merchandise, draw new customers, improve their pipelines, ramp up customer loyalty, boost market share and/or gain a range of other advantages. In other cases they’re familiar with the concept and trying valiantly to run such campaigns, but are either overwhelmed by the work involved or not seeing enough return on investment to justify their expenditure.

That’s because channel incentive programs can have a lot of variables. And if each one isn’t well executed, the entire system can fail.

The bottom line, however, is that figuring out how to make them work could be well worth your while.

Recent research by the Silicon Valley Research Group shows incentive programs can spur partner sales and profits by as much as 40 percent.

“If organizations want more of their channel to be committed to them, their products and their programs, it’s incumbent on them to provide a program experience that’s valuable,” advises Devin Ferreira in ACHR News, an online news publication for the HVAC industry. “That means understanding channel partners’ needs, providing effective, timely solutions and forging meaningful relationships.”

Working with a professional, or simply familiarizing yourself with valuable industry software, can help you master all the details so your program works like a well-oiled machine. And regardless of who’s at the helm, understanding the potential pitfalls can help enormously in planning and managing your channel rewards to meet their full potential. This handy guide discusses how to avoid some of the most common mistakes that occur if a rewards program isn’t well planned and executed.

Not setting appropriate goals

Significant thought should go into exactly what you hope to accomplish, whether that involves better sales of a given product, better conversion rates, the establishment of a broader customer base or some other goal that’s highly relevant to your business. Then you must decide what level of improvement is realistic and attainable so you can apply specific metrics to those goals. Instead of just anticipating higher average sales, for example, your goal might be to boost your average sale 15 percent and raise average items per purchase to 3.2. Failure to fine-tune such goals could cause widespread confusion while making your ROI difficult to objectively determine.

Not segmenting audiences to assign promotions and appropriate rewards

To ensure you’re offering the best possible rewards to your dealers and distributors, it’s important to use all the data at your disposal to learn what’s likely to motivate them most.

That doesn’t always happen. A WorkStride study of midto large-sized U.S. manufacturers recently determined 42 percent of channel rewards programs remain unsegmented, with the instigating company using the same promotion and terms for every partner. Still, four of five said they’d likely have more success with their programs if they could better customize rewards.

They’re right. Unsegmented campaigns waste your money by operating under the premise that everyone performs at the same level and wants to be rewarded the same way.

You don’t have to offer the same deal to every partner; each may be suited to a different reward and/or structure based on staff demographics, geography, established sales processes and bottom-line potential for driving your business. While your best-performing partners might respond well to receiving hefty rewards for meeting new levels in a tiered Sales Performance Incentive Fund (SPIF) promotion, untried or lower echelon partners may be better-suited toward less expensive rewards such as individual SPIFs or even simply entry in a monthly drawing for a reward of nominal value. Similarly, if certain dealerships are staffed with highly competitive, type A personalities, you might spur higher revenues by offering rewards only to their top seller(s). If you’re aware your partners don’t want to take time to learn about your program, you could enact an “X for Y after Z” structure that promises a reward or access to an exclusive promotion in exchange for training or coaching. Team rewards may be better-suited to staffers who already work productively together, while games of chance may appeal to those who seem bored with more traditional rewards programs.

The good news? Today’s digital tools can go a long way toward helping you segment your partners into understandable categories so you can choose your reward systems strategically, not by default.

Not investing enough

Not every campaign has to be expensive, but if you cut too many corners you could shoot yourself in the foot by limiting your potential for success. If you structure your campaign correctly, your ROI should be well worthwhile. In the WorkStride study, 80 percent of the manufacturers were seeing a positive ROI on their channel incentive programs all or most of the time, and 18 percent reported significant increases over year-to-year sales.

Establishing the wrong time frame

The timing and length of your campaign should be strategically determined after considering your sales cycles, the sales cycles of your partners, the nature of your promotion, your target audience, the seasonality of your product, the offerings of your top competitors, the possible impact of current events and a host of other factors. For example, your distributors may be hard-pressed to earn your rewards if they’re asked to sell tropical vacation timeshares just after a hurricane, or to pitch lawnmowers while everyone is still shoveling snow. The interval is also key. If your promo runs too long, partners could lose interest; if it’s too short, they may not get a chance to hit their selling stride. You must also decide how many promotions you wish to run concurrently.

Making the rules too complex

Your partners have a lot on their minds besides your promotion. If your product is too time-consuming to learn about or your rules too confusing to follow, they may ignore your entire program. You must find ways to make your product easy to understand and the logistics of your program simple to remember. That may involve in-person training, an online course, a website optimized just for your promo and/or pamphlets that summarize relevant information. Your goal should be full transparency; for example, you’ll want to acknowledge selling challenges related to your program and offer industry-specific suggestions for generating leads, overcoming objections, answering customer questions, etc.

Clearly, there’s much room for improvement in that area. In the study cited by Ferreira, fewer than half of the partners using channel rewards classified the content provided by the sponsoring organization as “very useful.”

Not establishing constant communication

To keep your partners updated, engaged and motivated, you must set up a system allowing for continual two-way communication. Participants should know who to contact if they have a question or issue, and you in turn should have an easy way to contact them with daily updates, progress reports, messages of encouragement, confirmation of when they’ll receive their awards and other key information. In the WorkStride study, 68 percent of channel partners tied the success of their programs to their sponsoring organizations’ ability to communicate effectively.

“Of all the key program elements, administration, communication and support seem to be most important to top-performing companies,” Ferreira emphasizes. “Partners increasingly expect channel knowledge to be a two-way street, so the more partners can learn about their individual partners and the challenges they face, the better.”

Underestimating the success of your program

You will be well ahead of the game if you use all the tools and data at your disposal (including data gleaned from past experience) to accurately predict outcomes so your program stays on track. If you make guesses about the logistics, you could exceed your rewards budget or run out of product, frustrating your partners, damaging your credibility and perhaps keeping partners from wanting to work with you again.

Before launching your campaign, do your homework so you have a clear idea how many people and organizations will participate; how much product they’re likely to sell; what your partners need from you to succeed; how the extra orders will be fulfilled; how communications will be facilitated; how rewards will be distributed and all other pertinent details. When in doubt, flow charts can help give you and key stakeholders a visual representation.

Failing to optimize digital tools

If you haven’t optimized the top-notch channel incentive software on the market — or hired a third-party professional that can do that on your behalf — you’re likely jumping through unnecessarily manual hoops.

Today’s tools can do everything from fine-tune audience characteristics to track sales and rewards in real time to send automatic reminders to your partners. Still, you’re not alone if you’re not using such technology to its fullest capacity. A WorkStride study found 44 percent of manufacturing managers running their own channel rewards programs are dissatisfied with the accuracy of their sales tracking, 40 percent think they spend too much time on administration and/or rewards, and 38 percent think their programs are too time-consuming in general.

Ultimately, 70 percent think their programs need improvement and 80 percent believe their programs would be more efficient if run by a third-party platform provider.

We can’t argue with that. Hiring a pro, or at least investing in the professional tools geared toward such services, can take the busywork off your hands so you can focus more on sales strategy and profits.

These days 60 percent of the top-performing companies that use channel incentive programs are doing so through third-party management, according to Ferreira.

Not learning from previous campaigns

Because channel rewards campaigns can be an imperfect science even when you start with the most thorough data, you’re missing out on real-world intelligence if you don’t come away with new information from each attempt. Ask participants for feedback, analyze the new data you’ve gathered through your tools and think about what you should be doing differently. Then use the anecdotal and statistical info you’ve gleaned to adjust your next campaign and make it even more efficient and profitable.

Looking for more input into how to structure a highly effective channel incentive program? Discuss your goals with a WorkStride specialist who can help you determine the best possible strategies.

Source: WorkStride