Channel incentives are rewards given to partners for selling products or services. They can be in the form of cash, prizes or other types of recognition. Channel incentives are a great way to motivate and reward your partners for their hard work in promoting your brand. There are many different types of channel incentives, for example:
- Cash Incentives – This is simply paying out money based on sales goals reached by the partner(s). For example, if you have a $1 million goal set for the year and your partner reaches 80% of that goal by December 31st then they will receive $800k as part of their payout for hitting those numbers by year end. Is this the best way on managing channel incentives? Not really, it’s just the easiest.
- Prize Incentives – These can be anything from gift cards to vacations depending on what works best within your company’s budget constraints! The key here is making sure there’s something exciting enough at stake so that people want more than just bragging rights when they win something big! These are, by far, the preferred rewards by Channels. But don’t take our word for it, ask them!
How to Use Channel Incentives
To get started, you need to identify the right type of incentive. There are two main types: cash and non-cash. Cash incentives can be used to reward a channel partner for meeting specific goals or objectives, such as increasing sales volume or reducing costs. Non-cash incentives include things like discounts on products or services offered by your company (e.g., free shipping), gifts (e.g., t-shirts), and other promotional items that have no monetary value but still provide value to your partners’ business operations.
After deciding on an appropriate type of incentive program based on your own needs and goals, it’s time to establish clear objectives for each channel partner and partner group so they know what they need to do in order for them to qualify for rewards under these programs.
Types of Channel Incentives Programs
There are several types of channel incentives. These include:
- Long Term Programs – ChIPs, as we call them (Channel Incentive Programs). Giving your resellers exclusive access to economic benefits when they sell more of your product in the market, without reducing your price. Make sure they are engaged with you in a long term, methodically planned manner, so that long term bonds are created with your company, your products and your services.
- Special Promotions – If you want to increase brand awareness and get people talking about what you’re doing, consider offering special promotions like free gifts or merchandise when someone buys from a specific reseller or during an event (such as Black Friday). This type of incentive can help drive traffic to both online stores and physical locations where the products are sold by giving them something extra that no one else has access too! And your Partners will love you for this.
Benefits of Channel Incentives
Channel incentives are a great way to increase sales and revenue. They can also help you improve customer loyalty, as well as build brand recognition.
- Increase in sales and revenue: Channel incentives are designed to encourage your distributors or resellers to sell more of your products or services, instead of someone else’s. This can lead to an increase in overall profits for both parties involved because the distributor will receive higher commissions from selling more, while also passing along some of those commissions back down through their own channels (for example, if they have retailers who sell directly).
- Improved channel loyalty: When everyone in the channel is benefiting from your program, it will be a hard sell for anyone to make them change their now acquired behavior patterns. Your Channel will continue to buy and sell your product instead of your competition’s which means less effort needed on behalf of all parties involved to make certain the Channel is trained, focused and motivated.
Creating a Channel Incentive Program
Creating a channel incentive program is a great way to reward your partners for their hard work. To get started, you’ll need to identify your goals and objectives for the program. What do you hope to achieve? Are there any specific metrics that need improvement? Once those are defined, set up a budget for the incentives.
Once these steps are complete, it’s time to choose which types of incentives will best meet those needs–and how much they cost! If there’s one thing we know about incentives: they don’t come cheap! But don’t worry; we’ve got some tips on how to get the most out of your budget without breaking the bank (or losing sight of its purpose).
Managing Channel Incentives
- Ensure compliance. Make sure that your partners are following the rules, and if they aren’t, take action. If a partner is doing something unethical or illegal, it can reflect badly on your brand as well.
- Track success. Measure the performance of each channel incentive program to see which ones are working best and why, and then use that information to make adjustments where necessary.
- Make adjustments accordingly based on what you learn from tracking results over time; this will help ensure that all incentives continue to be effective in achieving their goals.
Measuring the Success of Channel Incentives
There are several ways to measure the success of your channel incentives program. The most obvious is sales, but you also need to look at other metrics like customer loyalty and customer feedback.
Be sure to measure with a level playing field. For example:
- Distributor A goes from selling 100 units to selling 110 units. Distributor B goes from selling 50 units to 60 units.
- They both grew 10 units. So, pretty much the same, right? Wrong!
- Distributor A grew by 10% and Distributor B grew by 20%.
So, be sure to measure not only volume, but also depth and reward accordingly.
Best Practices for Channel Incentives
Channel incentives are a great way to reward your partners for their hard work and loyalty. But before you start handing out rewards, there are some things you should know:
- Focus on customer needs. When deciding what kind of incentive is best for your partners, think about what they need most–and how it will benefit the customer experience. For example, if a partner wants more training in order to better serve customers with complex needs, then offering them access to online courses might be more effective than giving them cash or gift cards (which could be used on anything).
- Use data to create targeted incentives. If possible, use data analysis tools like Salesforce Analytics Cloud or SQL Server Analysis Services (SSAS) that give insight into how much value each channel partner brings in terms of revenue generation and customer satisfaction rates. So, when the time for an incentive program rollout date comes around again next year; everyone knows exactly where they stand relative other people within same company level hierarchy.
Common Mistakes to Avoid
- Not setting clear goals. Without a clear goal, you don’t know whether or not your incentive program is working. Before you start designing your channel incentives, ask yourself what you want to accomplish with them and how they will help achieve those goals.
- Not measuring success. If you’re not measuring the results of your incentive programs (and adjusting accordingly), then it’s impossible for them to be successful in the long term! You should always be tracking metrics like sales volume and conversion rates so that when it comes time for planning next year’s budget, there are no surprises.
- Not having a budget–or underspending on rewards. While this may seem obvious at first glance, many companies fail because they don’t allocate enough money toward their incentives programs–or even worse: they spend all their funds early on without thinking about future needs! Make sure that whatever amount is set aside each year will cover both initial costs as well as ongoing ones like shipping costs, printing expenses, managing the program…”
Beware the discount
It’s like the apple from the Garden of Eden, a great temptation. The magic recipe that fixes any sales budget and, furthermore, the effect is seen in the very short term, almost like magic. But is this really the best way to go? Think what reducing your price does in the long term, and the effects it has on those that have given themselves over to this snake that tricked them with its apple.
However, the reality is that, once you lower the price, it will end up staying there. And you are not going to capture more than circumstantial clients who, just like they did with your competitor, will be unfaithful to you in a short time. It’s just a matter of time before your competition lowers their price again. And there you go, again and again. And on this path, little by little you will reduce your profit margin and sooner or later, it will leave a stronger blow to your income statement than the lack of sales on any particular Q.
You now have to sell almost twice as many to achieve the same financial results.
Leaving your price firm, and using less that what a discount would be to strengthen your Channel Partnerships is by far a more lucrative proposition in the long run.
Conclusion
Channel incentives are a powerful tool for increasing sales and customer loyalty. They can be used to reward partners, incentivize new customers, or encourage existing customers to buy more.
Start by using data to create targeted incentives that will appeal to your audience’s needs. Then measure success and adjust accordingly: If a particular incentive isn’t working as well as you’d hoped, try something else!
Would you like a free consult to understand if a Channel Incentive Program is right for your business?