Channel Incentive Program Best Practices
Senior Management Sponsorship and Involvement
Without a top executive or senior sales advocate you’re dead before you start. Behind every strong channel incentive program stands someone with the authority to make decisions, break ties, allocate resources and adapt the program to developing circumstances.
- Define Strategic Business Objectives at the Outset
List your objectives clearly. Use plain English so everybody understands what you want to do and why.
- Pick the Population
Incentives are best used when carefully targeted. Rather than enroll all customers at the outset, target your top customers and those with upside sales potential. The best ROI comes from knowing who you want to act and by structuring a program to address their needs directly.
- Define Sales Goals
Show everyone the goal line so they know what you want to achieve. Use numbers and don’t worry that you’ll leak critical data to competitors; they already know how you’re doing. Make the goal rational, databased and a bit of a stretch.
- Clearly Define Program Management Structures
Make sure that every participant up and down the line knows who does what to whom. Use schematics and be very clear about which behaviors are desired and which aren’t. Also, point out who are the referees and who are the scorekeepers. The best outcomes occur when everyone knows the rules.
- Limit Behavioral Objectives
Channel incentives work but don’t ask them to do too much. Don’t ask them to drive complicated behavior. Keep it simple. If participants can’t repeat back the actions needed in a simple sentence, then it’s too complicated. Try to concentrate the effort by focusing incentives on specific product sets or lines of business rather than your entire catalog or every SKU.
- Design a Resonant Value Proposition
Beyond the theme of your program, you need to communicate a value to your partners that will get them excited. Remember they’ve seen a lot of promotions. State a clear, honest value proposition that cues them into what you want to do and what they get for buying into your vision.
- Set Appropriate Awards
Point levels have to accumulate at rates fast enough so program participants can project how soon they can redeem points for desired rewards. Similarly, the point level for each desired action has to be perceived as an appropriate reward for changing behavior. Be fairly liberal with points and assume that they will ultimately represent between 1-3% of your sales revenue volume. As a rule, in the most effective programs, participants earn enough points to get a meaningful reward (e.g., a domestic round-trip airline ticket) worth about $400 within the first 6-12 months. Allocate sufficient program budgets. Minimum effective spend is $250 per participant annually. The solid year-over-year performers are spending $500 per participant and 1/8th of those we surveyed are spending $1,000 per participant or more. The formula to calculate minimum effective award budgets: # of participants x number of behaviors changed x number of rules per behavior = adequate spend.
- Award Points Monthly
Once people enroll they watch their points accumulate. It becomes a stimulus-response cycle where timely posting of points yields greater incentives to earn and redeem points. This is especially important in the fourth quarter when many people redeem points for holiday gifts. When earned points are missing from monthly statements, participants are easily frustrated. Timely awarding and reporting of earned points drives more point earning behaviors.
- Communicate Frequently
You cannot over-communicate your channel incentive effort. Tell them what you’re going to do, when you’re going to do it, how you’re going to do it and why they should care. Then tell them again. The more you communicate the more they enroll, earn points, redeem and respond. The most effective messaging and contact strategies include: mentioning the program in routine end-user newsletters, occasional usage stimulation e-mails, prominent display of the program on your website home page, annual distribution of printed catalogs and on-site signage at your locations. It helps if you can get the message across in a distinctive way. Use colors, imagery and slogans to build interest and attention. Segment the messages so that channel owners and leaders are told more and told differently than channel salespeople and customer service reps. Don’t limit communications to any one medium and don’t worry about frequency, because you’re probably competing for attention with several other manufacturers.
- Involve Field Sales
Your salesforce is the face of your channel incentive program. Keep them informed, up-to-date and use points to reward their efforts to promote the program and/or enroll appropriate participants. Reward the program administrator as well and make it as easy as possible for salespeople to explain both the mechanics and the value of your program. Frame messages about the program as “good news” that reps can deliver to their accounts.
- Collect Data from Multiple Sources
If you don’t know what’s going on in the business you cannot measure the value of a channel incentive program. Get order data from your internal departments. Solicit data from channel partners. If possible get purchase data from end users. The more data from different sources in the sales process, the better you can assess the design and the functionality of your incentive program.
- Conduct On-Going Measurement Analysis and Adjustments
Sales channels are dynamic. Things change daily. In fact, your channel partners and their interactions with end users are your best early warning radar for marketplace and competitive developments. But you need to collect and analyze the data to really understand what is happening and how your program is driving business.
- Anticipate the Program Life Cycle
Every initiative starts off with a bang, coasts, cools down and then gets re-energized. It is a predictable cycle. Anticipate and plan for this natural rhythm at the outset and marshal ideas, themes, special events, promotions, special reward offers and different kinds of communications to maintain the energy and the motivational focus throughout the program.
- Don’t be Afraid to “Test, Learn and then Modify”
Most of our clients use an implement – reinforce – optimize – expand program sequence. Don’t over-engineer incentive programs from the start. Launch with the basics, even if that means to rely on manual processes. Get your participants to understand the value of the points currency early on. Measure all elements of the program at the 6-12 month period, then make changes. We see “simple” programs that outperform “complex” every day.
