Is Your Channel Incentive Program A Money Pit?
For many vendors, channel incentives are perhaps the single largest line item of cost for channel management. The costs are often so large, they require the program to be contra-revenue to be funded. This becomes a double edged sword. It lets you reward your partners, but it also makes understanding the value of your investment hard to measure.
This holds true whether the channel incentives are MDF, solutions investment funds or some other form of business development assistance.
The purpose of an incentive is to change behavior
Don’t start with your sales goals. Having X% revenue growth is the governor on your investment, it is not the business outcome you base your decision on. The real key is understanding what behavior do you need to drive. It is a question of cause and effect. Of course the goal is to increase revenues, but what is the problem you are hoping the money will remove that enables the increase in sales.
Effective channel investment programs are ALWAYS built around this tenet. They understand their real purpose is to get the partner to train their staff, conduct specific demand generation activities, implement specific proofs of concept with clients, etc.
Your operational support needs to focus on this behavior
There are many vendors that can manage payments and validate activity with very good or better customer service. This is table-stakes and should not be your sole criteria for picking the vendor that will manage your program.
Also focus on a vendor’s ability to understand the behaviors you really want to drive. Reporting, decision making criteria, success metrics should all focus on these behaviors. The value add you should seek from vendors is insight as to how the incentive program is driving these behaviors and whether the performance measures you are basing payment on adequately reward the effort reflected.
This will dramatically improve your return
Most incentive programs only pay on performance. Ironically, this means they only pay when business results meet revenue or profit goals. The trap is whether the program drove the performance or just paid for results that would otherwise have already happened.
The answer is to focus on the behaviors you want to drive. Then you can correlate whether changing the behavior results in the performance rewarded or if there is a different unrewarded cause.