Is it Time for Mid-Year Incentives to Drive Channel Partner Performance?

“How do we jump start partner focus and investments the balance of the year?” is the question many vendors are asking as we reach mid-year. By this point in time, you likely have an estimate of 2022 performance and may have a sinking feeling you are off track.

You already know which distributors, reps, and dealers are likely to miss their goals for the year. How do you start the correction now before it’s too late?

While it’s tempting to launch incentives, SPIFFs (Sales Program Incentive Funds), and bonuses into the channel, let’s think about what you want your channel partners to do. What are the ACTIONS they need to take to impact the outcomes (results) your measure?

Rewarding on outcomes alone leaves strategy open to interpretation by each channel partner. This inconsistency across the channel becomes unpredictable and unreliable.

What are the investments and actions you want your partners to focus on early in the sales process? Best-in-class vendors focus on the actions and investments that channel partners make early in the sales process as much as they focus on results.

Let’s get a little strategic by starting with your sales funnel.

As you look at the sales process:

  • Do you need more opportunities created earlier in the funnel?
  • Better win rates of the opportunities the partner is creating?
  • Better cross-selling, renewals, or opportunity expansion?
  • Which step in the sales process will generate the greatest opportunity to meet your objectives?

The incentives should be applied to actions that generate the highest return for your business.

Are your incentives any better than the other vendors?

Vendors also find themselves in a competitive battle with other vendors for the focus, investment, and mindshare of their channel partners.

Studies show that around 25% of incentive programs are completely out of alignment with partner business goals. Another 40% are either expected in the industry or nice to have. They have little impact and can be considered “happy noise.” They are fun to talk about but do little to change focus and investment. When incentives are tailored and bespoke to partner business objectives, they are more effective and differentiate your program from the partner’s other product lines.

83% of brand marketers believe MDF and Co-Op programs have an impact
yet, the average annual spend is 12% of the overall marketing budget

Gleanstar Research, 2015

What types of incentives are most effective?

The most common programs that drive focus and investment are extrinsic in nature. These are incentives that motivate based on a physical, quantitative outcome. Examples include:

  • Cash Bonus
  • Rebates
  • Travel Rewards (bonus trip or cover costs to annual meeting)
  • Promotional Gifts
  • Certifications or continuing educations credits
  • Future term discounts or partner tier

Often effective are programs that are intrinsic in nature which have much less cost to execute. These are incentives that motivate people based on recognition or a personal outcome. Examples include:

  • Website splash page highlight
  • Social recognition
  • Recognition at annual meetings
  • Charity donation in their name
  • Incremental vendor support

The best way to determine which incentives will have the impact you are looking for is to simply ask. Ask your partners what motivates them. Ask you partners how their other product lines effectively motivate them.

Year end bonuses, SPIFFs, and other incentives are a great way to motivate your channel partner to reset their focus for the balance of the year. When executed well, the ROI can be worth the investment. When it’s not executed strategically however, they become a waste of money, time and resources on the part of both vendors and partners.

Take advantage of aligning your channel strategy with the best practices identified in the Channel ACE model.  Take a quick 10-minute survey to assess the performance of your channel strategy against best practices found in top performing channel selling organizations.

Navigant Associates is a global training, consulting, and research firm specializing in channel sales strategies utilizing 3rd party sales and service partners. We help sales teams design and transform channel sales strategies resulting in higher earnings and customer value.

We help clients recognize performance gaps, leverage best-in-class practices and build strategies that improve partner relationships, execution skills, ultimately satisfy more customers.