Channel Partners: Types of Programs
Targeting resellers means you probably want to address one or more of these primary business challenges:
Incentive programs targeting resellers help sponsoring companies accomplish the above through both strategically and tactically oriented activities. For example, incentive programs for resellers have proven their ability to help companies:
Organizations use dealer incentives such as special cash spiffs or bonuses, motivational meetings or incentive trips, merchandise catalogs, gift certificates, and promotional products, etc., primarily to break through the clutter; build closer relationships; and build a higher level of engagement. Central to success: How awards get incorporated into the other issues likely to affect the motivation and engagement of your target audience – the dealer principals or their salespeople.
You probably know how much revenue your channel partners generate for your business and perhaps even the profitability of your channel partners. But how do they perform in other dimensions? In addition to revenue, incentive programs targeting channel partners address such critical business issues as:
Service quality. Incentive programs targeting resellers frequently follow market research activities with end-users. Service quality (which includes customer satisfaction) is often a key component in automotive incentive programs. A company that surveys its customers or uses mystery shopper programs to determine how well the dealer, the company in general, and others in the supply chain are performing can provide a valuable measurement indicator—and one which can serve as the basis for rewards and the need for follow up training interventions that will help the dealer as much as the manufacturer supporting the program. The incentive program not only promotes quality service but provides the basis for getting real-time data you can use to improve training and recognition efforts to promote desired customer behaviors.
Technical skills. Incentive programs that include a training component with rewards for completion and mastery increase the skill and knowledge levels of the reseller’s sales or customer service personnel. If your channel partner principals perceive your incentive program as a means to produce productivity improvements, they likely will support your program wholeheartedly.
Courtesy and professionalism. As in the technical skills arena, courtesy and professionalism go a long way toward customer satisfaction and thus long-term customer loyalty. Incentive programs for resellers very frequently include “mystery shopper” elements, which allow the sponsoring company to provide a reward for such soft skills as courtesy and professionalism in customer dealings. Again, if this process feeds back useful information to the channel partner, as well as potential solutions when deficiencies get identified, your channel partners will likely increase their engagement level.
Brand commitment and loyalty. As discussed throughout this section, brand commitment and loyalty are the ultimate prizes. Your channel partner has a choice to make each and every time a customer enters their location via the showroom floor, phone queue, or salesperson’s contact list – to promote your company or the competition. Incentive programs targeting resellers can keep your brand top of mind. Rewards for performance demonstrate that your company is committed to ensuring channel partner success and that you value the relationship.
Overall display or other co-marketing support. Your organization likely has a number of programs designed to prompt your channel partners to support your product in various ways, whether by putting up displays or participating in co-op marketing dollars. Many organizations use incentive programs to draw attention to these programs and give channel partners extra reasons to participate in them. This has the added benefit of promoting sell-through, a critical factor to long-term success, since it does little good to sell products and services into a channel unless they get sold-through to the end-customer.
Channel partner programs come in many shapes and sizes depending on the objectives of the organization and the audience. Here are a few examples.
New product introduction. Introducing a new product to the channel provides a significant opportunity to create a buzz about the product or service, but also to create some buzz about your organization and overall brand. Bottom line: You want dealers or distributors to increase their commitment to your product. Today, a new product introduction into a channel can include a special dealer meeting or event to which top partners get invited, special incentives based on upfront purchases, as well as participation in co-op marketing and sales training programs.
Cooperative marketing programs. “Co-op programs” provide the reseller with funds (traditionally matching funds) based on sales performance for use in local advertising, direct mail, outdoor advertising, merchandising/point of sale materials, and even their own sales incentive programs to support your product or service, etc. As noted above, organizations often use incentives to help boost participation in these programs. Today, more and more co-op marketing programs also include funding for sales incentives, because many resellers consist of small businesses that appreciate the extra support provided by their vendors to motivate their team.
Product-specific programs. Companies offer bonus points for distributors that sell or buy more of a specific product. The risk is that the program could jeopardize the sale of other products for dealers, who have a greater interest in increasing overall sales than cannibalizing one product for another. Similarly, the sponsor may find that these programs foster greater sales of one of their products or services at the expense of another. For best results, consider a more holistic approach that includes some kind of pull-strategy to spur consumer sales and an incentive program rules structure that makes sure you’re not motivating your dealers to buy more of one product at the expense of another.
Dealer loaders. This term refers to incentives offered automatically based on a certain level of purchase. For instance, a marketer offering a retail contest featuring exciting prizes might pack one of those prizes for the channel partner into the shipment to the retail outlet. This practice is more prevalent in markets controlled by smaller businesses, since large retail chains often have policies against store managers accepting such awards.
Database programs. Database programs offer dealers and distributors a reward for providing customer names for co-op direct marketing or telephone sales solicitation on behalf of your company's product. This provides an effective way to collect valuable names in a cause that should ultimately benefit your distribution partners. Database programs work even better when coupled with door opener programs sponsored by the hosting company that provide an incentive for consumers or prospects to respond. Database programs do present challenges, however, because many channel partners do not like to share their lists with vendors. In this case, they may insist on your creating the marketing materials but letting them send it out. Needless to say, your organization can still benefit, because the consumers and prospects who respond will invariably have to register for something, from which the sponsor can usually build a database of prospects for ongoing communications in conjunction with your channel partner.
Training dealer salespeople. Properly implemented, training programs can be an incentive in and of themselves. Many dealers welcome vendor training programs, especially if they focus on critical skills that can benefit the reseller organization as a whole. This means developing training that focuses not only on your product and service, but on skill sets that can help the salespeople improve their effectiveness, no matter what they sell. To further increase the chances that your channel partners will participate, the training will help the salespeople improve their overall sales skills, and not just the sales of your organization’s product or service. Training is usually a highly important support service no matter what particular type of incentive program is being offered. These programs might offer credits for special sales training that addresses your dealers' needs, not just your own. This helps by improving the caliber of salespeople and helps you communicate with the people who sell your product.
Training should be considered for any new product launch, and it is particularly important for companies that have technical support personnel. Participants earn points for participating in the training, completing tests, etc. This type of activity also provides additional proof to the reseller that sell-through will occur, because an obstacle (knowledge or skill) has been addressed through the training program.
Sales/purchase promoters. These programs promote sales in a particular season to maximize results. If your business is seasonal, you'll want to make sure you profit as much as possible from the potential business in the strongest sales period. Similarly, you can use incentive programs to boost sales in normally slow periods.
As in any incentive program design, you have various approaches available. First and foremost, your channel partner program will need a business incentive component for dealer management. This is the “Offer Strategy” which includes such traditional business offers as rebates, cash off, dealer discounts, extra case offers, etc. In this way, the dealer principal has an enhanced ability to generate increased profits.
You have other options available for different levels of the organization as well – sales management, the reseller’s field sales organization, as well as non-sales employees.
Open-ended strategy. An open-ended strategy is one that motivates dealers to stock or sell more by setting goals above the past year's sales quota. These programs are easy to budget, because you base the award on incremental sales over a comparable period. Combine the incentive program with basic training and communications designed to make participants more effective. For new dealers, base the quota on a reasonable estimate of what they should be able to accomplish in a start-up year.
Closed-ended approach. A closed-ended approach distributes awards to the top performers in each volume category or region. This is easy to budget, but tends to reward top performers who would excel anyway.
Plateau programs. In a plateau program, you will reward dealers or distributors in an increasingly significant way for making incremental purchases, say, at 5, 10, or 15 percent above their quota or last year's performance. The idea is to push people to try harder than they would in a program geared just to an overall increase in sales.
As with any type of incentive program, channel programs can often have a self-liquidating aspect in that the full award budget gets used only if the program meets its goals. For instance, your budget might have included $100,000 in award costs, assuming that your dealers hit the goal. If your program is structured properly with an open-ended component based on results, the award costs should go down if the sales fail to live up to expectations. Today’s Web-based incentive programs can provide invaluable real-time information not only on sales by dealer or dealer/salesperson, but also on utilization of sales and training materials, presentations, promotional materials, etc.