The channel, and the strategy behind channel incentives, is continually adapting to new business models and reassessing the best ways to support the indirect sales route-to-market. It is evident that the way the channel has always nurtured and quantified Partner loyalty is no longer effective, as the Cloud has significantly impacted Partner profitability and cash flow, which is making Partners increasingly aware of the incentives being offered.
Channel incentives programs drive business transformation
Channel incentives have become a priority for Vendors and Partners going through business model transformation, because properly formulated incentives drive enablement, encourage new solution adoption, and inspire new behaviors which in turn drive incremental revenue and profitability. The right incentive program will also strengthen Vendor relationships with Partners and establish a competitive differentiation for your channel program; driving Partner loyalty.
Whether a Vendor is selling traditional software or hardware — or is expanding their solution set with more services offerings — incentives remain a key to channel success. Traditional transaction-based revenue models are giving way to recurring revenue models. Vendors know this and Partners know this. In a Darwinian channel, those that adapt, survive. And that means we are seeing an increasing number of Partners with multiple revenue streams – both transaction-based and subscription-based – as they continue to morph their business model.
3 steps to adapt your channel incentives to a changing landscape
- Keep in mind that channel incentives programs are designed to drive positive Partner behavior, strengthen loyalty and ultimately increase sales. The recurring revenue model doesn’t change these goals but the methods used to influence behavior need to be adapted. Rewarding Partners throughout the entire sales-cycle is an effective way to capture their attention, maintain engagement, and promote and drive revenue. Shifting business models requires shifting focus from deal closing to incenting Partner-led demand generation, lead management, and opportunity registration. Consider integrating pre-sales enablement to your incentives program. Why? Because many of the traditional, cloud, and hybrid Partners lack the sales and marketing skills to effectively sell your new products. Pre-sales enablement is moving beyond product and sales training and beginning to offer marketing certification to enable Partner’s to effectively drive demand. Incent partners sales teams for subscription-based sales, based on the Lifetime Value of the deal. Vendors should incent subscription-based sales on the Lifetime Value of the deal, rather than the monthly unit price; this is the true value of the deal.
- Integrate individual and company rewards into a single points-based system and design the incentive scheme around Partners, individuals and teams. Ensure that all stakeholders derive tangible benefits through earning and redemption opportunities that align to the Partner’s business model, and generate an incremental shift in the desired Partner behavior. The end goal for both individual and company level incentives are the same – loyalty and a surge on incremental sales. This approach to incentives, builds deeper relationships with Partners, which is a must for effective complex services and solution selling. Moreover, an integrated approach also enables Vendors to align their global strategy across multiple regions while still allowing enough flexibility for local implementation.
- Channel organizations will be under increasing pressure 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. Clearly, “cash is king” for many Partners, but cash incentives paid out to Partners often flow into operational costs and are not necessarily spent in ways that benefit the Vendor paying out the incentive. There are non-cash incentives that Partner organizations can redeem points for that have strong value, i.e. build-the-business type rewards like pre-packaged marketing plays, demo units, training/certification, and marketing support. These kinds of non-cash incentives target use of Vendor-provided incentives at promoting the Vendor’s products and solutions – a win-win situation for Vendor and Partner. And because metrics are available for closed-loop marketing activities, the spend of points-based company-level incentives enables ongoing ROI measurement and insight that is completely lost when Vendors pay out cash rewards.
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