Last Updated on11 minutes to read
What is a channel partner incentive program?
A channel partner incentive program motivates your partners (your resellers and distributors) to engage in certain behaviors, by offering valuable rewards that help them grow their own business.
Channel partners often vary in shape and size depending on your market and don’t necessarily have to be in your industry to be successful. Channel partners can be affiliates, resellers, distributors, independent retailers, and even value-added providers.
Basically, anyone that sales your brand and doesn’t work directly for your business can be a partner. That means they aren’t limited to only selling your brand and often will carry alternatives to your product or service.
The best way to ensure that they are putting your brand above the competition is through channel partner programs.
Benefits of Channel Partner Incentive Programs
Why are channel partner incentives vital?
The best channel partner incentives encourage partners to consistently be loyal and sell more products for you over a more extended period of time. Channel partners can boost sales, decrease your go-to-market, and provide access to new markets.
Most partner programs rely on financial compensation, and when executed correctly, will increase profits for both parties.
Incentive programs are more than a passing thought for channel partners. Partners often rely on the extra support and revenue generated to grow their business. Incentive programs can boost partner sales and profits by as much as 40 percent, often becoming a pillar in their marketing strategy.
It can be easy to develop tunnel vision and focus on one thing: increased sales. In reality, the benefits of starting a program are much more wide-reaching than that. They include:
Building solid relationships with partners –
Who doesn’t like good news? Incentive programs open up a new channel of communication where partners are excited to hear from you, especially when your incentives are valuable to their staff. Getting your partner’s senior management motivated and engaged is a great way to make sure your program sticks.
Partners often resell many products –
Chances are you’re probably not the only vendor your partners are working with – they have the option to offer additional products or services to your target audience. Meaning, they could potentially co-brand you with another vendor or provide your service as an upgrade from their basic model – increasing the sense of dependability with your brand.
Encourages partners to complete training/certification –
Sometimes a channel partner program can feel like an extra sales team, and in a way, they kind of are. Much like when you onboard a new employee, you provide your channel partners with training material and best practices, and like any good sales rep, they follow the script. After all they want your product or service work as intended too.
More easily extends your brand reach into new markets –
Channel partners help you get your brand in front of a new user base, which increases your local and even global visibility. For example, you might have picked up a large channel partner with multiple locations in Europe. If you’re a small start-up in Silicon Valley, this could be an untapped market waiting for you.
Boosts your market share –
Everyone loves working with someone they can trust, and partnering with large vendors can do just that. These more established brands can help build credibility with potential partner clients by associating your brand with a well-known and respected one.
Encourages partners to fully invest in your product’s success –
When a collaboration between your brand and a channel partner produces results, and your product is vital to their success. It reinforces positive brand interaction with your channel partner.
Taps into existing customer relationships that partners have built –
If you find a perfect fit with a channel partner, you’ll find a team that has strong local market knowledge, sales experience, and customer relationships built in.
The solidified partner relationship saves both you and your partner money –
When you both can rely on each other, and your incentive rewards one another. You can depend on your partner sales team to grow your business while saving you a ton of money in marketing and advertising.
Types of channel partner incentives
Now that we’ve covered the benefits of channel partner incentives, let’s examine the types of channel partner incentives that you could use.
Rebates are volume-driven promotions that encourage your channel partners to sell more of your product, and as a reward, they get a percentage of the sale back. Rebates can be categorized by customer type and business objective.
- Retention Rebate
- Mix Rebate
- Volume Rebate
- Growth Rebate
Rebates are the most common incentive structure. I’m sure you’ve probably had even used one in the past. For example, if you go shopping on Black Friday and pick up a nice HD TV, quite often, to get the sticker price, you’ll have to send in a form to get your discount. That means you pay the full amount in the store and receive your rebate post-purchase.
These types of promotions and rebates are a little different on the b2b side and are often volume-based, meaning that your partner will have to sell a certain amount of units to receive their incentive and pass the savings down to their customers.
Discounts on wholesale products
With B2B wholesale incentives, you deal with a wide range of customer types, from small independents to large multi-national brands. Your incentive program should be slightly different for each based on their purchasing frequencies and volumes.
The best way to keep track of the different packages is to create pricing lists and terms for each customer or persona. This will help you ensure you’re always providing your partners with the right pricing.
Your channel partners might ask for you to offer a quantity-based discount depending on how much demand your partner is experiencing. You would set up pricing tiers based on the total order, or total value, of your ordered goods. For example:
- If they buy more than 250 units, they pay $11/unit.
- If they buy more than 500 units, they pay $9/unit.
- If they buy more than 1000 units, they pay $8/unit.
By offering more significant discounts for higher quantities, you will encourage your channel partners, to place larger orders, as they will enjoy increased savings per unit.
Sales Performance Incentive Funds (SPIFs)
SPIFs are designed to inspire your channel partner’s sales team to help promote your brand over others with the promise of a reward. These incentives go to the actual sales rep (not partner).
SPIFs are an excellent way to encourage your channel partners to strive for higher performance, especially during off-seasons or slower times. The trick is knowing how to use them correctly, and which sales incentives are most appealing to drive specific sales behaviors. Here are a few award examples:
- Gift Cards
- Entertainment Tickets
- Tech Gadgets
- Weekend Getaway
- Lunch with Executives
There’s a ton of ways to reward sales efforts, and at the end of the day, it really comes down to building a flexible incentive program so you can keep your team motivated and striving for better performance – even if their taste has changed.
Market Development Funds (MDFs)
MDFs are resources that you grant your channel partners to help them with their sales and marketing efforts. These incentives can be funds or knowledge-based.
Marketers within your channel partner teams use MDFs for a wide range of initiatives, often with the goal of increasing their local brand awareness. Some examples of how they might use MDFs include:
- Fund Webinars
- Radio Spots
- Launch A Marketing Event
- Purchase A Booth At A Tradeshow
Also known as Cooperative Funding is a percent of your rebate and is often matched by your brand to help channel partners achieve their marketing goals. CO-OP funds are earned over long periods of time, rewarding your partners for their loyalty and continuing to purchase from you.
Traditionally, CO-OP funds are given as account credits. But a lot of manufacturers have realized that credits don’t necessarily create a mental link between your partners and your brand.
A more modern CO-OP approach is to allocate your credits as part of a loyalty or rewards program.
CO-OP funds are directly linked to sales, and you only pay out when a partner’s customers purchase from you, guaranteeing a positive ROI.
Deal registration incentives
Reward partners with cash for identifying potential customers and referring them, if those leads eventually buy your product. (Essentially, a partner referral program with a referral fee or finder’s fee as the referral program incentive.)
Usually, channel partners can register online, where you can check the lead quality to either approve or reject the lead. If approved, your partner has a set time frame to close the deal before they lose their incentive. Always remember it takes two for a partnership to work, and you should always provide support to your partners during this period in helping them close the deal.
Deal registration programs are a great way to analyze buyer behavior to identify and optimize a good sales cycle. Gathering early insight into your sales cycles in new markets can help you manage your direct and indirect pipeline and drives accountability for those registering for the incentive.
Channel partner incentive program best practices
How to ensure that your channel partner incentive program successfully motivates your partners? Follow these tips and best practices.
Choose what behaviors you will reward.
Meeting or exceeding monthly sales goals? Achieving a certain yearly growth? Selling the product outright (commission or rebate for each sale)? Completing training? Finding leads and then nurturing those leads to a purchase? Keeping your customer retention rate high? Etc.
You can reward several behaviors as long as the incentive program is clear and easy to understand (kind of like a loyalty program for your partners.)
Reward with cash or cashback.
Once you’ve selected which behavior you would like to change, you must decide how you will reward your partners. While we have covered plenty of rewards already, direct cash or savings is what partners really want. (Notice all the reward types listed above are some sort of cash or cashback!)
Make sure partners can easily understand your program.
Make sure partners can easily understand your program, especially what they need to do to earn rewards, and what rewards are available.
Think of it like breaking a bad habit, the more difficult it is to change a behavior, the less likely a person is to stick with it. If your channel partner program is too complicated, it creates an unnecessary barrier that can make your partner less likely to participate.
Make sure rewards are attainable.
Make sure rewards are attainable to properly motivate partners to participate in your channel partner incentive program. But that doesn’t mean it should be super easy for your partners to hit their goals, either. You want it to be a bit challenging and profitable for both parties.
Reward partners with the incentives in an accurate and timely manner.
Reward partners with the incentives in an accurate and timely manner. While you may want to make it a bit difficult to earn your rewards – signing up for your program and claiming their rewards should be frictionless. Otherwise, your partners will get frustrated and won’t participate.
Track POS (point of sale) data accurately for all partners.
Tracking your point of sale data is essential to giving partners the incentives as soon as you can after they earn the rewards. This also helps you identify top partners and identify opportunities where you may want to motivate them more. And of course, it enables you to see which sales are to new customers and which deals are to existing customers.
Consider automating your program.
If you’re still using spreadsheets to manage your sales incentive programs, your process is probably not as efficient as it could be. As your organization expands and grows, managing complex incentive programs becomes more difficult to handle – often causing manual errors and version control problems.
To combat human errors and save your team a ton of time and hassle, I recommend using an Incentive Compensation Management (ICM) solution. ICMs make gathering data, rewarding partners, and tracking programs ROI much easier.
Promote the program to make sure partners know about it!
In a competitive channel partner landscape, it can be challenging to stay top-of-mind. The best way to gain a competitive edge starts with strategic, effective, and measurable channel marketing for your incentive program. Budget accordingly and think outside the box on how to engage with your target audience.
For more partner program incentive ideas, be sure to check out our article “9 Ideas You Can Use To Incentivize Your Partner Program.”