Channel partners are invaluable to businesses as they can generate a large portion of the revenue. Incentive programs are integral to channel partnerships to support the company’s sales objectives and boost sales by increasing loyalty and motivating channel partners to sell. However, the inherent risks in the incentive programs must be mitigated by instating robust processes to administer and monitor the incentive program as well as verify compliance.
However, channel incentive programs when executed ineffectively are vulnerable to profit erosion, disruption of distribution channel environments and negative impact to a brand. According to research conducted by Deloitte and AGMA (Alliance for Gray Market and Counterfeit Abatement), ineffective channel incentivization cost high tech companies an estimated $1.4 billion in lost profits each year. In addition to lost profit, the abuse of channel incentives gives rise to malpractices. It is thus imperative for businesses engaged in channel partnership to ensure an effective incentive program and avoid the common pitfalls that leads to its failure.
Pitfalls of Channel Partnership Incentives
An ineffective incentive program affects channel sales and results in significant loss in profits. Loopholes in incentive programs are often undetected due to a lack of active program management and inadequate internal controls related to channel incentives. Following are some of the common mistakes in channel partner incentivization.
- Lack of Control Over Incentive Structure
Lack of control on how incentives are structured and monitored is a common problem. Differing policies and processes such as ineffective communication or policy enforcement, varying regional processes, and a lack of specific incentive policies has often been the cause for a weak incentive program.
- Having Only Monetary Incentives
Monetary motivation for channel partners are obvious. However, programs with just such incentives may drive the CPs to the focus on only deal closures, while emphasis has to be laid on improvement in other key areas such as training, objection handling sessions, etc. OEMs that build incentive plans to support non monetary gains such as regular training, field assistance, priority customer support, and developmental connect support that lead to better long term engagements.
- Lack of Continuous Engagement Over Long-Term
Profitable channel programs are built in the long term. The most successful OEMs can boast of Channel Partners (CP) that are decades old, and have strong relationships with the OEMs. Most companies fail to engage their CPs on a regular basis, leading to loss of interest on the field. OEMs that engage the CPs across various touch points regularly can bring about high ROIs on their partner programs.
- Only Linking Incentives to Deal Closures
While deal closures are the ideal indicators for the effectiveness of the channel partner, linking incentives payouts to only closures can lead to suboptimal outcomes, especially in young channel partner programs. CP programs that provide weightage to all stages of deal movement, rather than just the end result, leads to a well satisfied channel partner program, along with providing insights to the OEM to understand which deal stages are most drop offs happening.
- Not Having Systems to Help Channel Partners to Track Payouts
KPI linked incentive programs can be complex due to the multiple products, tiers and levels that exist in the program. However, OEMs that help provide relevant tools and platforms that help the CP understand the exact rules of the incentive can greatly help ease the process for the Channel Partner.
Keeping in mind the current disruption, innovation is key to staying relevant. The following are a few ways to get ahead of these pitfalls, build a robust partnership and deliver exciting incentive to channel partners at scale.
Strategies to Improve Channel Partnership Incentives
Reports and Analytics
Gain insights on how the program is driving success and improving partner community by measuring their performance. Dashboards enriched with relevant data enables businesses to stay on top of participation & adoption rates, end customer satisfaction, partner hi-pot identification, reward utilization & custom insights on product & geography.
Analyze, model, visualize, assess and measure the results through a combination of statistics, interactive dashboards.. Use program data to make informed decisions by testing and iterating on new ideas in real time.
Seamless Partner Onboarding
Creating custom registration forms to capture relevant fields and defining multi-tiered approval workflows with inbuilt notifications will result in smoother partner registration process. Access to necessary information and resources including details of schemes, polls & surveys along with real-time dashboards will equip CPs with necessary insights during onboarding.
Automated Claim Management
Through automation of the claim submission and approval process businesses can increase efficiency, reduce manual effort and claims cycle times. Claim approvals through AI driven algorithms provide real-time analytics on approval status, past vs current claim values which are essential insights to devise robust claim management. Ability to seamlessly transfer information from partners to claims administrator will enhance partner experience.
Incentive Computation through Metrics
Metric-based configuration of incentive programs will be a game changer. It allows OEMs to design and implement a large variety of sales partner programs. Multiple KPIs, KPI attributes, qualification criteria, weightages, ranges and special conditions have to be well defined. Custom rules for different programs including qualification criteria and participant eligibility & visibility based on product, geography or any other custom field have to be created.
Incentive programs are indispensable to the success of many businesses that operate through channel partners. However, when ineffectively managed incentive programs can pave the way to ramifications that affect profitability. Effective planning, execution, and management of channel incentive programs is thus essential for the success of brand owners and channel partners alike.
Effective channel management programs will enable companies to have greater visibility into cross-functional incentive programs, and establish consistent policies with business and channel partners.