7 Things to Look for When Optimizing a Channel Incentive Program

Channel incentive programs are becoming more necessary in a market where channel sales rep loyalty and attention are in high demand. As we all know, making your brand stand out in the hearts and minds of your channel reps is no easy task, and its harder still to do so while also meeting your ROI and budget goals.

Recently, our channel incentive experts hosted a webinar where they shared their insight on what pitfalls to avoid while planning a channel rewards program, and it became one of our most engaging presentations to date. We decided to follow that up with these 7 keys to unlocking your channel incentive program’s full potential:

1. Keep Mind Share High by Understanding Quota Share

The direct employee incentive program is easy when the chain of command and peer pressure factor into its effectiveness, but in channel incentive programs all we have is the carrot without the stick. Having a good grasp of what your current reps’ “quota share” (read more about that and why it matters here) looks like will help you effectively make decisions on how much you should focus on winning their hearts and minds. For instance, if your brand accounts for under 20% of an average rep’s total sales in that channel, it’s probably time to increase rewards and/or promotion in your program to win their attention.

2. Manage your Run Rate Risk

Taking a page out of Jeffrey Gitomer’s book (or tweet in this case) and asking yourself “would you rather your channel partner be satisfied, or loyal?” is an appropriate inquiry when considering your run rate in an incentive program. We often make the mistake of thinking channel partners are more loyal to the brand than the WIIFM (What’s In It For Me) factor and make inaccurate projections based on that pretense. So ask yourself, are you looking to run a “loyalty” program, or an “incentive” program to optimize your channel sales?

“Loyalty” programs are effective when you have high-frequency transactions at lower price points. This is common for industries like food service, distribution, consumer products, etc. These programs are created to keep partners selling and have little interest in changing the status quo because they know they have a high quota share and a steady grip on year-over-year sales.

“Incentive” programs are excellent tools for motivating new sales or behaviors. They are attributed with fewer transactions but at higher price points (think of enterprise tech, industrial equipment, and other big-ticket industries.) Incentive programs are created to attract attention and gain new results.

Knowing which program is most useful for managing your run rate business is paramount. We often see programs that take half-measures in assuming reps that are currently selling are going to continue to sell without the promise of any new motivation, and before you know it, channel sales dip and there are hard questions to be answered at the next quarterly meeting.

3. Use Channel Incentive Software to Avoid Overspending

Many incentives are operated manually to aid the budget, but that may be exactly what opens the program up to overspending in the first place. According to Accenture’s study on channel incentive ROI, companies on average overspend by 5-10% on their incentive programs largely due to program complexity, decentralization, and data errors. All of these issues are fixed by incorporating a channel incentive software platform with your program to help automate, track, and report on the incentive from start-to-finish.

Our own channel incentive platform, Ignite, pays for itself by communicating, tracking, fulfilling, and reporting all in a single portal. Our solutions expert create a seamless integration between how you currently manage your program and managing it inside the Ignite suite.

channel incentive programs ramp up time4. Expect Slow Ramp Up

One of the most common miscalculations we’ve seen is with new channel incentive program adoption rates. We’ll see a large increase in registrations during the first 3 months of the incentive’s lifespan, but start to drastically fall off over time. You can usually attribute this to the channel reps that you already have high quota share with registering straight away. Expect diminishing returns on registrations as the program goes on and be sure to manage those expectations with direct reports and partners.

You can also take advantage of your “take rate”, the amount of rewards that are actually claimed by participants divided by the maximum rewards if every sale was claimed. If the take rate is only 25%, you can effectively quadruple your promotional offers for rewards and offer more enticing prizes knowing that only about 1/4 of them will be redeemed. This can help boost registrations during the slow-down in the 3-24 month stretch.

5. Communication is Everything

Without a doubt, the #1 mistake we see in most channel incentives is having a tiny communications budget. It’s usually the first item on the ledger to get cut but it is imperative to the effectiveness of your program. Unfortunately, it takes more than a single invite email at the start of the campaign to capture the attention of a channel rep. Companies spend high on rewards and admin time, but find their incentive becomes the best-kept secret in the channel because it didn’t cut through the clutter.

Designing a creative campaign with a catchy theme proves to draw more eyes and increase recall. Be sure to make a marketing calendar for the program itself and focus the message each time to your specific goals, whether it’s more registrations or increased reward redemption. Repeat the process for continuity and keeping it in-mind, but vary it enough so that it doesn’t become white noise.

6. Balance Your Budget

On the note of tiny communication budgets, let’s take a look at how much should be spent on each piece of the budget pie. Only 2-10% of the total budget should go to communications, which is a shame considering it’s usually the first piece that gets cut down. As we mentioned above, the value of communications for what it costs is immense and necessary to keep your program alive. In the spirit of a true incentive program, 70-85% of the program’s budget should be reserved for rewards. Anytime the rewards start to dip below that amount it tends to become less of a spiff and more of a marketing campaign.

Technology is always an interesting factor in balancing your channel incentive budget because it relies heavily on your program’s needs; namely the complexity of the rules. Including tier multipliers and split payouts are exciting additions, but will generally require extra investment in technology that may not be necessary. Administration is also flexible, however, it shouldn’t be undervalued, especially when working with an incentive professional. Hiring an incentive agency can often pay for itself when you consider the efficiency of implementation, on-going management, and accountability that they provide.

7. Ditch the Spreadsheet

Are you using a spreadsheet to track and manage your channel incentive program? There is a rule of thumb we use to determine whether or not an incentive program has become too big to only manage on Sheets or Excel:

<50 Participants or <$25,000 in Rewards = Keep The Spreadsheet
>100 Participants or >$25,000 in Rewards = Use Incentive Software

See if it makes sense for your budget (and personal admin time) to work with a third party agency to integrate a full-scale incentive software solution. No need to risk overspending on technology if you have under 50 participants or $25,000 in total rewards budget, but anything over that may be costing you in the long run.

Q&A from Other Channel Incentive Managers

After the webinar was over, we had a great variety of questions from attendees on specifics from the presentation material. Here are some of the most topical ones:

Q: With a lot of focus on NPS (Net Promoter Scores) today, do you have any thoughts on how a great or poor incentive program could impact a company’s score?

A: Reach v. Exclusivity has been measured by the IRF and can affect NPS directly. Exclusivity in an incentive program is a familiar approach, generally used to award the top ~10% of performers as a way of promoting competition and a larger reward. However, from an IRF study on the Top Performing Companies, it shows the best-of-the-best focus on reach rather than exclusivity to motivate the bulk of participants to catch up to the 10% and thus increase NPS overall.

Q: What methods of communication do you find most effective since just using email won’t cut through the clutter?

A: Let your audience guide your decision making on how best to reach them. If you are reaching out to field offices where there are many reps you’re trying to reach, it may be wise to create sales kits, flyers, and print pieces that stay up as a fixture in the office during the duration of the incentive program. Physical mail can also be easily converted from an email design and usually arrives at an in-office inbox that’s less crowded than an email inbox, providing more opportunity to be seen by prospective participants.

Q: What markers or indicators should you look at to know whether or not it’s time to revamp your incentive program?

A: Look for redemption rates and registrations slowing down and then shock the program with something big. Always keep an “overlay” program on-hand, which is generally a “grand prize” sub-program within the greater spiff that helps promote the incentive program as a whole. Points-based programs have good longevity but will tend to lose excitement over time. Mixing in a big reward like a trip to the Super Bowl or a 6-day trip to Hawaii will help reignite interest in the program as a whole.

Q: For the various generations in the workplace, do you find they’re looking for different rewards and incentives?

A: Targeting your audience is an important step in selecting enticing reward options and communication campaign strategies. Age plays a big factor in the current market, with older age segments happy to redeem their points for large ticket items, such as apparel, jewelry, or electronics while younger segments are redeeming more and more experiential gifts, like concert tickets, yoga classes, etc. There is no one-size-fits-all, but understanding your audience plays a big part in how to curate your rewards catalog.

You can find more information on how to effectively evaluate your channel audience, manage your budget, and increase participants for your channel incentive program in our Channel Partner Rewards Program eBook. Of course, you can always reach out to us directly and ask any questions that haven’t been covered. We’re happy to help make your incentive program the bright spot in your channel!

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Michael Pisterzi

Author Michael Pisterzi

Marketing Manager | Tech-centric marketer with a dedication to relationship marketing in the incentives & events industry.

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