Channel Incentive Program Design for the 2015-2016 Sales Cycle

May 15, 2015 Claudio Ayub

The Cloud has significantly impacted Partner profitability and cash flow, which is making Partners increasingly aware of the channel incentives being offered.

Channel ecosystems are in a state of flux

After networking with some of the top IT and Telecom channel marketing executives in Miami during Channel Focus 2015, it’s obvious that channel ecosystems are in a state of flux as a result of disruptive technology delivery methods, and a diminishing number of channel partners. As a result, many technology vendors and their channel partners who are going through transformation, find themselves in the implementation stage of a hybrid Cloud model. These evolving business models have put pressure on the traditional channel, because when innovation is linearly paced, channel ecosystems are effective; but if the pace of change from disruptive technologies increases exponentially, traditional notions of a channel ecosystem must be redefined. incentive program design needs to changeChannel marketers will have to consider these shifting business models when addressing loyalty and incentive program design and structure, as the new reality is that channel professionals can no longer categorize channel partners according to discrete business model types. The hybrid channel partner is the new norm, but supporting the go-to-market needs of resale, hybrid, and born-in-the-cloud partners represents several challenges. For starters, in the traditional model channel programs are heavily weighted toward rewarding partners for the traditional way of doing business. Yet a Cloud services offering will compete against the very business and revenue models that have driven their traditional business for decades. This means that vendors need to be more strategic than ever before, and consider partner intimacy – read loyalty – as the new foundation for competitive advantage when planning sales activities across their different routes to market.

Incentive Program Design is more important than ever

Engaging and retaining these new partner types is more important than ever before – which makes loyalty (and incentive program design) a key concern for top vendors. However, cultivating partner loyalty today is a complex, multifaceted endeavor that warrants a new vision, which incorporates new approaches to partner incentives. This new vision is about compelling incentive programs that motivate both, partners and their teams, to actively participate on the new way of doing business. Test cases have proven that a unified approach to incentives builds deeper relationships with Hybrid partners, improving the effectiveness of solution selling while also reducing operational costs and improving overall program effectiveness.

In the Cloud you must combine company-level rebates and individual level rewards, into a single incentive program.

Vendors need to integrate individual- and company- rewards into a single points-based system, and develop an incentive program design scheme around Partners, individuals and teams; ensuring that all stakeholders derive tangible benefits through earning and redemption opportunities that align to the Partner’s business model, and drive the desired Partner behavior. Using a single incentives platform with a points-based incentive currency, empowers vendors to rethink how company level incentives are paid out. Cash is only one option for rewarding partners at the company level. Other incentives – like marketing campaigns – ensure that the dollars you invest will be used to help increase the marketing of your solutions and services, rather than be used to purchase solutions and services from other vendors. Combining rebates and rewards programs are also key to driving your partner’s transformation of their business by rewarding the right behavior at the team, individual and company level – you can give partners points for a variety of activities to ensure that they continue to extend their business opportunities and learn about new cloud and services solutions. An incentive program design that consolidates company level incentives like rebates with individual and team-based incentives (rewards) also ensures you align all stakeholders in their earning and redemption opportunities. Combining rebates and rewards programs recognizes that a successful sale is the result of a string of productive activities (at the company, team and individual level), that when combined, lead to the sale. This is especially true for products and services with long sales cycles, where many different sales and marketing processes need to work in harmony to generate leads, nurture opportunities and maintain engagement through an increasingly complex buying process.

A unified approach to incentives builds deeper relationships with target partners, improving the effectiveness of Cloud solution selling.

Effective incentive program design requires an understanding of what motivates the right partner behavior will help you recognize and reward not only achievements, but more importantly the actions and activities that accelerate the desired result. Without visibility into the behavior of successful partners, programs can only be judged by tactical measurements, instead of how well they support the real goal of increasing partner performance. Start by recognizing best practices from within your channel, and identify the two or three behaviors that consistently provide one specific result (performance improvement). Then decide on the length of your promotions cycles by determining the frequency of the sales cycle, to then attach a consequence to those behaviors (rewards) with the result of driving performance improvement consistently and successfully across your channel. Salespeople are the ones who ultimately are intimate with the customer, so considering them in the incentive program design and personalizing their incentive is paramount. Once you have identified the desired behaviors from the individual sales representatives and sales engineers – dedicate 55% of your overall rewards budget to them. Dedicate 25% of your budget to team incentives for lead generation, lead management and opportunity registration. Reward for new and target accounts, as well as focused products. Stack incentives – by adding funding from other vendor alliances – with your alliance partners to be successful in the solution-based new channel model. Don’t structure your incentive programs to reward existing and recurring business at the individual level – ensure your rewards encourage behavior that grows new business. Channel organizations will be under increasing pressure in 2015 to demonstrate ROI effectiveness and it is admittedly challenging to point to the value of cash incentives when Vendors are unable to track the spend once they pay the incentive to the Partner. Moreover, an integrated points-based approach for both company- and individual-level incentives makes it easy for global programs to adapt to local conditions, and swap out currently valued rewards “purchased” by Partners with a single incentives currency. Send me an email if you would like more information on this topic.

About the Author

Claudio Ayub

Chief Strategy Officer Claudio brings over 20 years of global channel marketing experience to Perks. He is a loyalty marketing expert with broad knowledge in strategy development, market management and channel sales planning, who has developed and executed major go-to-market programs for a variety of vendors, including AMD, Bing, Cisco, Dell, EMC, IBM, Kaspersky, Lenovo, Microsoft, Motorola, Seagate, Symantec, and VMware among others.Claudio is a management strategist with cross-functional expertise in business, finance, sales and marketing, strategic planning, and customer relationship management; an area he has excelled at by executing complex CRM implementations, customizations, and business process re-engineering for CRM applications. He keeps current with changes in technology and is passionate about the business implications of new technology. Claudio is an avid social media user and early adopter of social CRM.

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