Channel Incentives and Loyalty Programs
Mike Morgan, CEO, Relayware
Sales people sell for many reasons; their innate competitiveness, their desire to be the best, a need to gain approval from their management and peers and their appetite for career advancement all play a part. But by far the greatest driver of sales activity is financial compensation and benefits. Hence when a company employs a direct sales force, motivation is a relatively straightforward affair:
- Pay a competitive salary
- Pay attractive rates of commission on sales
- Offer a compelling package of benefits to the sales person and their family
- But there are also several other less tangible sources of motivation:
- Provide them with desirable high quality products that offer competitive benefits
- Generate demand and channel it to them in the form of sales leads
- Own a strong brand behind which they can feel some sense of pride to unite or at least form a positive personal attachment
- Provide them with the sales tools and resources necessary for them to do their job
- Minimize bureaucracy and red tape in order to be an easy company in which to operate
- Celebrate and reward success
- Be seen to reward performers and punish / marginalize persistent failures
- Be prepared to offer additional incentives when the business requires its sales people to go the extra mile
There are, of course many more but these are common to most companies. What is also common is that your direct sales people have a contractual obligation to sell on your behalf and yours alone. They are also obliged to meet your performance targets consistently or else put their job at risk. What is more, you manage them, you direct their actions and therefore their performance is itself a direct result of the effectiveness of your own management.
But can these principles be applied to the motivation of an indirect channel where none of these latter conditions apply? Well it is certainly the case that unless you are a market leader, indirect channel management by coercion does not work. And if you are a market leader, such coercion can only apply to the indirect channel's business - not their individual sales people. For example, you may penalize an indirect channel partner's business by offering fewer discounts and therefore less margin should they fail to meet your accreditation criteria. But this penalty may not be felt by the individual sales person at all and if it is, faced with weaker margins and less competitive pricing, the sales person will often sell a more attractive competitive product instead.
Hence, indirect channel sales people must be motivated and incentivized to sell your products especially when, as is most often the case, competitive products are available for them to sell. It goes without saying that indirect channel sales people are just as motivated by money as your own but you have little or no influence over what they are paid or how they are compensated. Interestingly however, if we review the list of less tangible motivators above, we can see a direct correlation between the needs of direct and indirect sales people from the company. It is through addressing these that you will have more success in winning over your channel sales people.
Being the Company of Choice
Indirect channel sales people are like any other. They prefer to sell brands that they know and trust and that require a minimal amount of selling to get the deal. They are also much happier having the company create demand for their products in the market without having to do all of the work themselves. With this in mind, here are a few recommendations:
- Generate demand and be seen to do it. Whether your marketing budget is $1,000 or $10,000,000 per month, give your channel advance notice of what you will be marketing, to whom, when and via which medium. This makes it much easier for them to capitalize on your activities with their customers. Give them the opportunity to leverage your marketing investment with sales and marketing efforts of their own. This sounds obvious but indirect channels are usually the last to find out about company campaigns! If you can share your campaign materials with them and even let them customize and execute joint campaigns of their own, all the better.
- Allow brand-hijacking. Your branding campaigns do little to drive demand but they do create brand awareness and brand association. Indirect channels will prefer to work with companies whose brand values are closely aligned with their own or where they can only aspire to have such brand values themselves. Quality, reliability, innovation, performance, speed. Think about this because if your brand image isn't one that your channel may want to share, they will be less inclined to proactively sell and market on your behalf. Share your branding campaigns with your channel as well your demand generation campaigns. Let them hijack your brand campaign and turn it into a direct demand generator by supporting co-operative marketing activity.
- Channel demand to your best indirect channels. When a customer is influenced to buy as a result of your website or closed-loop marketing campaign, direct them towards your indirect channels to fulfil that demand. If you don't have an indirect channel locator tool on your website yet - get one. Customers won't dial your 0845 number and hold for an agent to find out where they can buy, they may simply go elsewhere. Modern indirect channel locators don't just search on postcode. This is because geographic proximity is only one profile attribute of many. Such a tool needs to match customer size, horizontal and vertical market, product requirement, value added services requirement and so on and it must search against your most recent and most accurate indirect channel database. It should also offer the customer a choice and notify the selected indirect channel(s) (with a lead) that a referral has been made encouraging them to proactively follow it up.
- Give the leads to closers. If your marketing campaigns generate sales leads, make sure that they are given to the most appropriate person (a closer) within the most appropriate indirect channel without delay. Impose an SLA for lead recipients to respond and contact the customer and monitor the lead until it is closed whilst offering your support to the indirect channel to close it. Reduce the amount of manual intervention within the lead management process in your own company. Celebrate success and reward closers with more leads.
- Accept leads from indirect channels and reward their transparency. If an indirect channel sales person registers deals in progress with you early in the sales cycle, it allows you to offer support or intervene to help win them. Make the registration process simple and available online. Make it easy for the indirect channel to update deals and request physical or pricing support. If a deal is won, reward the indirect channel generously and if someone else poaches the deal on price, reward the registrant anyway. You probably wouldn't have won it without them. Some companies struggle to get indirect channels buy in for programs such as this due to a lack of trust or motivation. Make it worth their while, apply your rules for consistently and you will benefit from more new business, greater indirect channel loyalty and a very comprehensive sales pipeline.
- Keep it simple. In countless indirect channel satisfaction surveys, there are a number of consistent stand-out comments made by indirect channels. They say that they like to work with companies who are "easy to do business with". There is nothing wrong with being disciplined, well organized and even process-driven but being bureaucratic and forcing your channel indirect channels to endure excessive and painstaking administration or to jump through hoops unless absolutely necessary will demoralize and de-motivate them. Before applying any practice to your indirect channels or mandating any business process, think first if it will benefit the indirect channel, consider alternatives and if none exist. Needless bureaucracy is the preserve of the market leader. If you are not one, keep it simple!
- Gameify the completion of tasks and achievement of milestones.
- It's nice to be nice. Your corporate culture and indirect channel-facing demeanour matters too. Your channel indirect channels want to be treated with fairness, respect and courtesy. And no-one likes an arrogant company.
These things really do matter and can make a significant impact upon the levels of motivation your indirect channels exhibit towards working with you. As individuals we prefer working with people we like or who are like us. As companies, we should always ensure that we are:
- Easy to contact
- Sales- and marketing-led
- Keen to "do a deal"
- Show Me the Money
Many of us have airline frequent flyer card. When close to being relegated from a higher tier, we can go to extraordinary lengths to make up the annual points total. And when the airlines are having a slow quarter, we often help them out by taking them up on their offers of double points or free upgrades. We don't fly with any other airline unless there is no alternative and we do all this because of a plastic card and a free cup of coffee on a comfortable chair. But then deep down, so many of us are sales people at heart and we respond well to loyalty programs and incentives.
1. Loyalty programs. Such schemes are by definition strategic. In other words, such a program lasts for a long time or perhaps indefinitely and sets out to reward indirect channels who are consistently loyal to your brand or product range over time. There are a variety of different models most of which reward sales with points and points with rewards of some sort:
- Gift catalogues
- Vouchers with a monetary value
- Vouchers for goods or services
- Credit or debit card accounts
All such schemes can work well and some are better suited to specific countries and cultures than others. Success can be governed by local pay and conditions, type of reward, threshold for entry and the time taken / effort expended to secure the all-important first reward. But such programs can be incredibly expensive to operate, promote and fulfil. There are many marketing agencies out there eagerly waiting to take your money so consider automation in house before taking this route.
2. Incentives and promotions. Tactical campaigns can be much more effective at helping to mould behavior amongst your channel where short term goals become paramount e.g. selling out end of line product, supporting a product launch etc. But you must be lightning fast and communicate directly with the channel sales people. Don't rely on distributors or your channel account managers to do it - they won't unless there's something in it for them as well and by the time they reach everyone with the message, it will all be over. Tactical incentives are a great way of solving short term problems or creating a buzz and increasing activity for a short period of time but build them in under the umbrella of your strategic loyalty program and don't run them too frequently or too regularly.
3.Top performers. Years ago, when margin was more plentiful, companies used to treat their top channel performers to no-expense-spared ‘business trips' or ‘conferences' in exotic places. The problem was that it was inevitably the same faces every year and the events became clichéd thank-you's for services rendered rather than an effective incentive for greater performance. But rewarding top performers can be effective if properly implemented and well communicated. It is important to consider your objectives first though. What defines true success? What really makes a difference to you? For example, is it better to reward an indirect channel for winning new customers rather than simply selling the most to the one's you already had?
4. Investing in collaborative marketing. "MDF", "soft dollars", marketing rebate - whatever you call it, it has a poor reputation for delivery of a good return on investment and throughout the history of the industry, most has ended up propping up channel balance sheets. So much so that companies have introduced many restrictions, limitations or else withdrawn it all together. This is a mistake. It is also a mistake to believe that administering such funds is difficult and time consuming. A suitably-equipped external social collaboration and communication system can manage these funds with ease and link in to both your financial systems to manage accruals and credits and your portals to facilitate self-service funding applications, approvals, redemptions and ROI reporting. Giving access to such funding in a disciplined, controlled and administratively ‘low-impact' manner will encourage proper use and will facilitate comprehensive reporting and analysis to ensure your get value for money and a good return whilst motivating your indirect channels.
5. Gameification. This quite modern term describes an incentivization methodology that has been around for a while but which has become widespread since the advent of social media and mobile devices. In this context it can be defined as:
- Applying game design thinking to non-game applications to make them more engaging
- Bringing together game mechanics and marketing to create engagement and solve problems
- Giving people challenges or missions to accomplish, tracking the progress, giving them status, and giving them a reward
I have seen it used effectively to drive selling behavior but perhaps gamefication's biggest benefit is in encouraging indirect channel personnel to engage in more mundane but nevertheless important activities that help the vendor or the wider ecosystem:
- Recruitment and on-boarding
- Joint sales and marketing
- Community engagement
- Portal or mobile app usage
- Survey participation
Participation and completion of tasks can be rewarded in a number of ways for example:5
- Sales and marketing tools
- MDF or joint marketing $
- Community status in the form of a badge, such as identifying the winner as an "expert"
- Early access to content
- VIP status at events
- One-on-one time with executives
- Of course gameifying participation in your indirect channel program is incredibly complex and requires a suitably equipped external collaboration and communication solution like Relayware.
Being a Pleasure to Do Business With
Now I know what you're thinking. "Is he for real?" But I am quite serious. Sometimes, when the pressure is on, the market is tough and we just need to hit our revenue goals we forget that as marketers and sellers we're in the people business and people buy people. They also respond well to being treated with courtesy and respect, honesty and integrity. They like working with people and companies who exhibit an interest in their wellbeing and success and who in word and deed go out of their way to improve both. And they like to work with people who are essentially and for want of a better word, "nice".
Building a reputation as a company that is a pleasure to do business with takes time but word spreads fast especially since the advent of social networking. It requires you to develop a culture in your company and an ethos within your workforce that acknowledges that indirect channel employees are at least as important as customers and should be treated as such. Of course with familiarity comes relaxation and the relationship matures into camaraderie and teamwork but you have to earn this.
Unquestionably, those companies who have "partnering" in their DNA do far better with leveraging the full potential of their indirect channels than those companies who do not and those companies always score most highly in indirect channel satisfaction surveys. Being a pleasure to do business with is sometimes the most powerful incentive of all when it comes to maximizing channel performance.
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