How to develop “smart” Incentive Programs

Be Strategic – Develop Global Business Objectives

The world of Channel Incentive and Rewards Management has become more complex in recent years. Channel incentives are usually performance-based and aim to improve the yield, reach, or mix of a group of partners and solutions. Common incentives include volume rebates, new customer bonuses, sales performance incentive funds (SPIFs), market development funds (MDFs), embedded headcount, and activity-based rewards. Modern incentive programs are experimenting with non-monetary rewards, micropayments, and gamification.

Brands are facing a number of changes in their channel partner programs. A changing demographic of partners is causing some to change their incentive strategy. It is estimated by CompTIA, the world’s largest IT association, that 75% of the channel will be comprised of Millennials by 2024. This number is even higher in sales and customer-facing roles that need the most consideration in terms of motivating behaviors.

Another significant change is the mix of transacting versus non-transacting partners. For decades, channel programs have been anchored on precious metals. These gold-, silver-, and bronze-level tiers allowed vendors to segment and focus dollars toward top tier partners.

An increasing number of partners now look more like influencers, advocates, and alliances which causes a fundamental change in how incentives programs work. Without a set-discount- or percentage-of-revenue-type target, vendors must consider how to accomplish similar behavior modification of partners using capital spending. This puts increased pressure on channel management to prove ROI and ensure that processes are in place to reduce overpayments, partner gaming, and fraud.

While channel incentives programs are growing in scope, complexity, and scale, 22% of global marketers already consider managing their channel partners to be one of their greatest challenges, according to Forrester. Nonlinear ecosystem programs that offer extensive personalization by partner type and customer opportunity are replacing traditional tiered partner programs, and it is difficult to run incentives in an increasingly diverse, highly fragmented environment. What works for one set of partners will not necessarily work for the next.

Without the benefit of the financial transaction, channel programs will need to evolve. Vendors need to be able to ensure proper attribution and measure influence around the end buyer at each stage. With the buying journey changing at the same time, this will be tricky, and advanced tools and technology will be needed to match the customer journey with the partner journey in real time.

Considering these rapidly changing market dynamics, following are Five Best Practices to ensure a sound and global Incentive and Rewards Strategy:

  1. Optimize channel incentives around changes in behavior as opposed to rewarding existing habits to drive channel loyalty.
  2. Deploy the right mix, level, and cadence of incentives to increase mindshare and loyalty of partners and to match the customer journey with the partner journey in real time.
  3. Replace traditional tiered partner programs with programs that offer extensive personalization by partner type and customer opportunity
  4. Put processes in place to reduce overpayments, partner gaming, and fraud.
  5. Think Global, Execute Local. Develop a Corporate Channel Incentive and Rewards Management Framework with common business objectives. Invite participation from regional management and allow them the flexibility to develop programs within the global framework that spell success at the local level.


Work Smarter – Leverage a state-of-the-art technology platform

The dynamic changes and increased complexity in the world of Channel Incentives and Rewards Management discussed earlier point towards an urgent need for an integrated Incentive and Rewards Technology Platform with the robust functionality capable of supporting today’s multi-faceted Incentives and Rewards Programs on a global scale.

According to Forrester, twenty-nine channel software vendors have CIPM solutions, driving $426 million (USD) in pure software revenue. Another $800 million is estimated to be driven via services, either direct or third-party. Consulting services, installation, implementation, integration, and compliance all have large downstream opportunities as well as a growing data management, automated workflow, and AI component.

Before you start the process of evaluating third party providers, we recommend you analyze your current partner program and determine gaps, add channel incentives to individual partner personas (IPPs), and conduct an inventory of your current processes and technology to help determine which technology provider aligns with current and future program requirements.

The next step is the development of a requirements document which contains sections that define overall technical related requirements such as security, mobility, etc. as well as detailed functional requirements for each software module, including MDF (with fund requests and approvals and global currencies) , Rebates, and Rewards. A detailed requirements document provides consistency in the evaluation process and assesses the capabilities of third-party vendors on a level playing field. Vendors will be able to rank the responses and tally the results while evaluating responses to the requirements document questionnaire backed by detailed product demonstrations. In addition, the overall standing of the third-party provider, their client list, and referrals will help narrow the filed of candidates.

When assessing the final list of third-party platform providers, keep in mind that the following features are “must haves”:

  • Multiple incentive modules contained in a single codebase
    • Provides a holistic experience for your partners
    • Enables security, stability, and low cost of entry
  • Cloud-based SaaS solution with set-up wizards and three-dimensional hierarchy
    • Provides a personalized partner ecosystem, groups, and assigned roles
    • Promotions, Spiffs, MDF, Marketplace, Rebates, and Rewards can evolve in tandem
  • Full integration with your Salesforce instance
    • Reduces administration and centralizes data
  • A best of breed user interface that provides a consistent, modern, and social user experience across any device
    • With interactive dashboards, progress bars, and communications for best partner engagement
  • Global capabilities including global payments in local currencies and rewards delivered in multiple countries and languages
    • Supported by fraud software and compliant tax and legal alignment
    • PCI compliant. Provides for audit trails, tax compliance, and role-based views to mitigate risk and ensure compliance
  • Cross platform analytics and reporting
    • Fully integrated cross-application reporting for increased partner performance visibility and improved ROI