The first step, the most important step, is defining your goals. The #1 mistake made by frantic companies is racing to implementation without clear, concise, written goals.
What factors are critical to the success of your channel?
Market share
Pipeline generation
New product sales
Partner loyalty
Channel enablement
They should be tailored to reflect today’s realities of your markets, your customers, and your target audience. Increasing sales is the most common incentive objective; however, there are countless types of program goals:
When putting your goals in writing, strive for SMART goals:
Choose just one or two clearly focused goals so program participants can channel their efforts effectively. For example, instead of saying, “Increase sales,” state your goal as, “Increase sales by 12% in the healthcare vertical market between July 1 and December 31.”
Be sure your goals involve quantifiable activities that can be measured easily. For example, a salesperson’s success can be measured by tracking increases in units sold, orders, or new customer contracts — in dollars or percent growth.
It’s tempting to set the bar high, hoping to achieve dramatic improvement and excite everyone in the process. However, overly-ambitious goals can backfire if they seem unattainable to the program participants, which could demoralize them.
To be meaningful and have a long-lasting impact, your goals must align with the company’s overall objectives. Is retaining key customers the priority? Or is the company investing resources to grow a new product line or market segment?
Consider any seasonal highs and lows that occur in your business during the period chosen for the incentive and then adjust the date range accordingly. Also, be sure to consider the sales cycle when setting timeline as well.
Understanding your target audience prepares you to design effective rules and select exciting awards to motivate your channel, and ultimately, achieve your specific business objectives.
“Probably no aspect of program design has a greater impact on outcomes than understanding the audience.”
Rodger Stotz, Chief Research Officer of the Incentive Research Foundation
Average age
Male / female
Estimated income
Job roles, titles, levels
Number of participants
Countries, regions, divisions
Exclusive or non-exclusive channel partners
Product knowledge
Current level of motivation
Attitudes, interests, opinions
Level of buy-in or engagement presently
Top 20
The top 20% are your best performers (A performers). They will continue to perform no matter what you do. It’s in their DNA. They are already performing under the current circumstances.
Middle 60
The middle 60% (B performers) can go either way — switch on their buttons and performance improves; but if they aren’t meaningfully engaged, their performance may suffer.
Bottom 20
The bottom 20% (C performers) probably won’t budge no matter what you do. They might not care. They might lack certain skills. Perhaps they’re just in the wrong role.
Non-exclusive dealers, partners, or agents might sell ten to twenty different brands. Understanding your brand’s share of a typical rep’s quota is incredibly important. If you have a small “quota share,” then you likely have a small mind share and small heart share. Your promotional offers will need to be richer and your communications great to capture disengaged rep’s attention.
Dell
HP
Microsoft
Cisco
Avaya
McAfee
Palo Alto Networks
VAR Services
Other
Total
20%
12%
12%
10%
8%
8%
6%
10%
14%
100%
If your brand’s quota share controls 20% or more of a rep’s portfolio, you control a high amount of attention and influence on how a rep operates, so your channel reward will likely grab more attention than if your brand’s quota share was under 10% of their portfolio.
In this example, a channel rewards program from Avaya, Polycom, or McAfee should have a higher reward % and a higher communications budget than a similar program from Dell
Ask yourself : “Why are desired performance levels not being achieved?”
If, for example, sales of a certain product are not as high as you desire, perhaps it’s because sales reps or channel partners don’t understand the product. Sales reps won’t sell what they are not comfortable with, so add a training spiff.
Now that you’ve identified your target audience, you can focus your attention on determining the most motivational awards.
Common Trap
A common trap is for the award provider to select awards they themselves prefer rather than awards the recipient would like. Before finalizing your decision, you may want to survey your participants to see what is most motivating to them.
Global and Cultural Norms
With global channels, do NOT let your home country norm determine your global reward choices. In the USA, prepaid Visa cards are popular channel incentives, but in EMEA (Europe, Middle East, Africa) and APAC (Asia Pacific), merchandise and store vouchers are often more popular.
Simple or Motivational?
Proponents of cash rewards argue, “Everybody wants cash! Cash keeps the reward process simple. Non-cash rewards are more difficult to administer and fulfill. And, incentive programs require extra administrative work.” WE ASK: Is the goal simplicity or motivation? Minimizing costs or increasing performance?
Cash rewards require 3x the incentive cost compared to non-cash.
U.S. businesses spend roughly $90,000,000,000 on incentive travel, merchandise, and gift cards annually.
To ensure program success, it’s critical that you assign the role of Program Administrator to someone in your organization. He or she will be the key contact for the program and responsible for all the main activities. Many companies hire a channel incentive agency for their consulting expertise and ability to handle the hundreds of details.
Consider the administrative needs early on. Group travel, merchandise catalogs, and gift cards have varying fulfillment requirements. The tracking of results and participant support can seem easy, but the questions, exceptions, and surprises will consume your time.
Administrative Functions Include Ongoing…
Select an administrator (or agency) who:
A third-party incentive company can offer valuable expertise and efficiency. Incentive companies will guide you in creating an overall program design, motivation strategy, incentive rules, print and electronic communications, customizable website, reward recommendations, reward fulfillment, participant support, reporting, and day-to-day program administration.
Plus, agencies are constantly seeing and trying new things, offering fresh insight and expertise along the way.
An effective channel partner promotion, or incentive offers and rules, must be designed to achieve your objectives and budget parameters. They are the shorter outline of full-length, legal T&Cs (terms and conditions). Tell the participants what you want them to do and what they will earn for doing it. “Do this. Get that.” It’s something frequently called the WIFFM – the “what’s in it for me” factor.
Channel incentive design is a mix of both science and art. The expertise of incentive companies that specialize in channels is a unique area of expertise. They’ve seen good design — and bad design. They’ve seen similar incentives in similar industries for similar situations. “Best practices” is an overused phrase today, but true channel incentive companies will be helpful with valuable best practice expertise.
Open-Ended Programs enable all people who achieve program goals to earn awards.
Everyone Can Win
Closed-Ended Programs have a pre-determined, limited number of award earners.
Top Few Win
Plateau Programs provide awards
at different levels of program achievement.
Tier 1, Tier 2, Tier 3
Open-ended programs enable participants to win based on their own actions and therefore give participants the greatest potential control over their success. Research confirms that these programs generally have greater motivational value, because they offer accessibility to the broadest audience. These programs have the most impact on middle-level (B) performers, who have more capacity to grow. A properly structured program will have a lower net cost —
Closed-ended or “tournament programs” have a predetermined, limited number of winners. Although they have the benefit of letting you offer a larger, more impressive award with a fixed, predictable budget, research shows that they can discourage many participants, who feel they cannot win. Nonetheless, closed-ended is popular for many incentive travel programs (eg. President’s Club Trips).
Plateau programs, or tier programs, provide awards at different levels of program achievement. By awarding participants points at specific intervals of performance improvement, you not only reduce the impact of budget uncertainties associated with open-ended programs, but give people an extra reason to work a little smarter to reach the next level of performance.
Duration
Research consistently suggests that programs too short in duration often fail to achieve buy-in because it takes people too long to learn about them before they’re expected to act.
Sales Cycle
Consider the timing and length of your promotion. If you have a 6-month salescycle, then the incentive contest period should be longer. Otherwise, you will only motivate reps to close deals that are already in the pipeline.
Ramp Up
We regularly see disappointment in the ramp-up time of new channel reward programs. The sponsors always expect it to be much faster (because they are familiar with the reward program, it’s important to be the sponsor, and mistakenly they think the channel will grasp it quickly). Due to the disconnected nature of channels and lower “quota share” (described earlier), new channel reward programs ramp up slowly. There’s a quick surge initially from a small group of reps who are actively engaged with the sponsor (or just love spiffs!), then a slower but steady increase in participation for months 3-12, and finally the participation line flattens a bit until the reward program is fully ramped at 18-24 months.
Simplify
Remember to keep it simple. Your audience is much less familiar with your incentive program than you are. Too many programs are too complex, so sales reps ignore them.
The two most important perspectives to keep in mind as you develop and evaluate any incentive program are:
Participants
If you were a participant in the program, would you put forth the extra effort required to take advantage of the earning opportunity?
Sponsors
Will the executive sponsor of the incentive feel the program’s investment generated a satisfactory return?
If Incentive Program Design is the work of the incentive psychologist and Rewards are the motivational coach… then Building the Budget is the role of the wise financial planner.
Properly designed, a channel partner incentive program will be self-funding with incremental gross margin on the increased sales volume. Calculating the budget begins with the two most important perspectives of an incentive program:
Analysis of Internal Factors
Analysis of Demographics
Estimated program Budget
(based on percentage of profit contribution that the incentive program will generate)
0.5 – 2% of sales
1 – 3% of total gross profit
5 – 10% of incremental gross profit
Assuming a $60,000 annual salary:
For 12-month program: 4% of $60,000 = $2,400 incentive
For 3-month program: 6% of 3-month pay ($15,000) = $900 incentive
Key budget drivers
Watch Gross Profit, Not Sales
Many incentive advisors focus on sales as the starting point for budgeting. We think that’s dangerous in complex businesses today with wide-ranging product portfolios, varying product mix, and most importantly, sliding gross margin percentages. Some products have higher ticket prices and higher gross margin percentages (like complex, $50,000 software systems). These support larger incentive payouts. Many commodity products in competitive industries (like computer parts or electronics) have smaller ticket prices with lower gross margin percentages. These make meaningful incentives look more difficult.
Look for MDF
Today, it has become increasingly possible for resellers to get co-op marketingdollars from manufacturers, for Market Development Funds (MDF), for incentive programs promoting specific products.
Contra Revenue
This one is complex! For accounting purposes, incentive payouts are viewed by the CPAs as additional discounts off the selling price, hence
the name “contra revenue.” This charge against net sales is at the top of an income statement, whereas other sales and marketing expenses are “below the line” of gross profit as SG&A (selling, general, and administrative expenses). Many companies allow contra revenue liberally for rewards, so the incentive sponsor may only need to find budget dollars for the incentive support costs.
At Brightspot, we created the proprietary term “Budget Pie” to describe the slicing of
the four key ingredients of a successful incentive program.
Rewards
This accounts for the largest portion of your incentive budget. Whether the rewards portion of your program budget goes toward HDTVs, gift cards, or a trip to Bora Bora, it must be a meaningful investment for success.
Communications
Make this investment to capitalize on a great reward, by making sure participants know what to expect throughout the incentive program, to keep the contest exciting, and for training too.
Technology
Nowadays, customizable websites and tracking databases add efficiency, scalability, and reporting required by participants, management, and the IRS.
Administration
This element includes funds for customer service, enrollment, reward fulfillment, performance measurement, and feedback.
Budget estimates help you realize what factors must be considered before making your cost projections and just how far your dollar will go. Try our calculator to determine what you can expect to spend on a corporate meeting.
As a rule of thumb, 70% should go to rewards and then approximately 10% of the total budget for each of communications, technology, and administration. For larger programs or simple programs, the rewards percentage can be higher and support percentage lower. For programs that are small, short, or complex, the support percentage could be higher.
Like grandma’s apple pie, all the key ingredients must be properly portioned for tasty deliciousness — or here, incentive success, motivated employees, and positive ROI results
Behind the scenes of your channel reward program lies the backbone of its long-term success. More than just a pretty web design, the technology infrastructure and databases supporting your incentive are vitally important to its smooth performance, engaging UX (user experience), and ease of maintenance. If a company has less than 50 participants and less than $25,000 in awards, Microsoft Excel spreadsheets can be sufficient technology. If rewards are greater than $25,000 or participants exceed 100, then a true incentive technology platform is a must, with interactive website tools and back-end databases.
A strong technology platform that allows for quick implementation, effective
communications, a flexible back-end database, and seamless program
administration is key – and alleviates strain and ambiguity. For instance, our Ignite Platform enables quick launches and provides technical options that make set up fast and flexible.
A good technology solution will include these web pages: Home, Program Rules, Enrollment, Current Promotions, Claim Form, My Account, Award Catalog, Award Redemption, T&Cs, FAQs, and Contact Us.
Channel incentive website deliverables should include:
Home Page
The main landing page gives a motivational overview of the program. It should include visually appealing, custom, professional graphics. A clean menu should provide clear navigation to all program information.
Program Rules
This page provides a detailed, user-friendly description of the program, promotional offers, eligible products, and targeted behaviors.
Registration
A page requiring all personal information to participate in the program. Pre-registration lists can create courtesy enrollments. The registration page should capture consent to legal terms and conditions too.
Update Personal Information
This page allows participants to update their personal information at any time or change passwords.
Offers
Each eligible product (SKU) or targeted behavior can be assigned a point or dollar value. Database scoring logic should validate eligible data is submitted, calculate points, and update the participant’s total points or standing.
Claims
To earn points, participants submit achievement claim forms for each eligible sale of a promoted product or behavior being rewarded. Submitted claims require sales header information (sales rep, customer, PO#, dates, etc.) and sales detail information (line items for each product sold, SKU, quantity, price, etc.). Bestin-class incentive platforms will use dynamic data entry forms to prevent invalid claims from being submitted.
Account Status
Participants can view their points achieved, redeemed, pending, and their current balance.
Automation of Process
Participant touch points and communications can easily be automated – keeping engagement high and program admin low.
Bonus Tip
Some technology platforms afford integration with your CRM
platform, making achievement and tracking real-time.
Rewards
A catalog provides pictures and descriptions, as well as the redemption costs for travel, merchandise, gift cards, or experiential awards — including global award options.
Redemption
Participants select their desired reward, quantity, and shipping address.
T&C
The Terms & Conditions page offers a comprehensive list of detailed “legal” rules of the program. Top incentive companies can prepare a draft of legal T&Cs for your approval.
FAQs
Frequently Asked Questions should supply answers to common questions, which helps participants and reduces support requests to the program administrator.
Contact Us
This page should list all program contact information, including a dedicated phone number and email address managed by the incentive company, who should identify themselves only as “Program Headquarters,” so they remain transparent to participants.
With any incentive platform, be sure to inquire about the options to customize. Most software will allow customization of the header graphics or background colors, but better packages allow you to change the page layout and header size. More flexible packages, like the Brightspot Ignite platform, will support complex forms and scoring logic, including branching claim forms, multipliers, point splitting, accelerators, or prequalifying conditions.
Far too often, the channel promotion strategy is an afterthought late in the incentive launch. Like any successful marketing effort, an effective incentive needs a comprehensive campaign strategy, creative theme, targeted messaging, and communications timeline to support your incentive deliverables and create top-of-mind awareness.
In today’s world, people are bombarded with information. Emails stuff inboxes at the rate of 200+ per day. Users glance for a fraction of a nanosecond, with their index finger on the delete-key, rapidly clicking like a teenage video gamer. It’s vital that your promotional strategy not depend solely on a few emails; your message must break through the clutter.
Theme
A clever, attractive theme can go a long way. Tie it to your program goals. Use the natural attraction of the travel destination or awards for visual interest. Evaluate style preferences — conservative, hip, retro, fun, corporate, or informative. Ask yourself: what do you want the audience to feel or think when they look at the graphics?
Kickoff Announcement
Custom design a promotional flyer to generate excitement and share high-level details (incentive dates, eligible employees, program objectives, rules, and most importantly, the awards). Promote the overall program and direct everyone to the incentive website for full details. Include a clear call-to-action.
Graphical Email Announcement
Convert the kickoff announcement to a PDF or graphical, HTML email and blast it to participants. Consider breaking the graphics and messages into pieces for a multi-touch email campaign.
Postcards
Direct mail postcards are making a dramatic comeback. Email marketing is over-saturated, with open rates and click-thrus declining further and further. Mail a visually-engaging, custom designed, full color, cardstock postcard to catch their attention and convey importance.
Banner or Button Ads
Consider online ads (especially for external channels). Post ads on employee intranet sites and partner portals too.
Posters
Themed, 18×24, full color posters are super billboards in large offices or in break rooms of retail businesses.
Monthly Statements/Newsletters
Electronic statements give detailed feedback on points, current ranking, and status; communicate messages from management; recognize winners; and announce new program information. For an improved user experience, personalize your message with variable content based on the user profile.
Giveaways
Tangible, promotional items generate excitement and motivation for the incentive program. When an employee uses a practical item like a pen or mouse pad, or is amused by a tactile toy like a stress ball, they are reminded of the incentive program. We recommend one giveaway at kickoff and another at program mid-point to serve as an effective reminder.
Kickoff Kits
We love 3-dimensional kits with a “thud factor” — a custom box of collateral and giveaways that makes a thud sound when it lands on a desk. Kit ideas include: giveaways, brochures, selling aids, tip sheets, notebooks, pens, posters, window clings, etc.
Remember
Use this communication tip
1 Core Message
3 Supporting Points
1 Call to Action
How will you measure and track participant progress? This is a crucial step in running an incentive program. Unless participants know how well they are progressing toward their goal, they have no opportunity to increase their performance.
Frequently, the biggest challenge is capturing the data. Can you get a file download of the channel rep information from the PRM (Partner Relationship Management)?
Once you have rep data, the next challenge is capturing the sales or performance results. Can you get a download from Salesforce (or other CRM system)? Can you get sales data from the order management system or the accounting system?
If you cannot get electronic file downloads, then you will need an online enrollment form, plus a sales claim form for reps to submit their eligible sales online.
As performance data is submitted via electronic file upload or an online claim submission, three important audit steps should occur.
Validation
Robust incentive platforms will validate that only eligible claim data is submitted using “business rules” technology. This electronic validation is often customized to the incentive sponsor’s requirements for eligible dates of sale, SKUs, geography (or vertical market), authorized sellers, and other qualifying conditions.
Calculation
The incentive technology should have a strong scorekeeper engine to maintain scoring logic and to calculate points earned. It verifies qualifying requirements, calculates points, and updates point totals.
Approval
The back-end system should have the functionality to batch verified sales for final approval by an authorized company manager.
Once you have rep data, the next challenge is capturing the sales or performance results. Can you get a download from Salesforce (or other CRM system)? Can you get sales data from the order management system or the accounting system?
If you cannot get electronic file downloads, then you will need an online enrollment form, plus a sales claim form for reps to submit their eligible sales online.
In today’s world of Sarbanes-Oxley and budget scrutiny, your partner incentive program must have detailed reporting to demonstrate ROI, or the newer ROO (return on objectives). Without good reporting, your incentive may be easily sacrificed at the first sight of budget cuts. You should determine the meaningful program activity reports that senior management desires and ensure reports are issued timely.
Common Reports
Items included in typical incentive reports:
Website usage statistics Monthly reports should be pushed out automatically as PDF files. At any time, a good incentive platform will empower you to pull (export) the detailed transactions to Excel for ad-hoc analysis.
Allow plenty of time to get your measurement tracking system in place. Don’t get stuck scrambling to catch up! You don’t want to launch and find your database has problems.
Determine how much lead time you need to calculate sales results or behavioral achievements at the end of a performance period.
Keep your partner incentive program fresh and exciting by adding some pizazz to the core structure. To continue participants’ interest, we recommend offering new awards, short-term contests, exciting travel trips, special drawings, spurt promotions, referral bonuses, or extra communications. You can also spice up programs with new award offers.
Fast Start
Bonus points on all performance measures during the first few weeks or month
Leader Bonus
Extra rewards for top performers (and recognition on the website)
Manager Override
The manager receives a matching percentage (often 10%) of points earned by their direct reports (which encourages the manager to motivate all their reps!)
Team Bonus
If the team meets a pre-determined goal, everyone wins
Top Performer
Grand prizes or special offers awarded to top achievers
Accelerators
Every time a rep passes a threshold, their points accelerate (after level 1, earn 150% level 2, 200%; level 3, 300%)
Early Enrollment
Earn extra points for enrolling by a specific day
Referral
Refer a friend for extra points
Sweepstakes Drawing
Earn tickets in a random prize drawing
Incentive Market Size Study, Incentive Federation, 2016
Gallup Study, State of the American Workplace
Behavioral Incentives for Sales Enablement Incentive
The Benefits of Tangible Non-Monetary Incentives (IRF)
Considerations for Hiring an Incentive Company
Incentive Budget Builder – for “what if” incentive scenarios
