As a channel management leader, you need to structure your incentives in a way that drives partner behavior. To manage your channel successfully, it’s best to follow a five step process:
Today I want to focus on the fourth step, incentives. How does your business perpetuate habitual behavior from your partners? That is the key question here. Incentives should be about driving partner behavior that, potentially, wouldn’t happen organically.
You want your partners to be engaging with their customers in a way that has a positive impact on your revenue and promotional products. At Spur, we have a very specific way at looking at incentives.
The 4C incentive model
We’ve created a model for incentivizing partner behavior that works here at Spur and is based around our company’s goals and values. When looking at incentives we measure contribution, capacity, coverage, and commitment.
- Contribution: How much revenue a partner is providing towards the company and the amount of dollars in sales they’re bringing in.
- Capability: Which product or product a partner is selling.
- Coverage: Selling to which markets?
- Commitment: How predictable and consistent this partner and their work is.
4 different types of incentives
From an incentive point of view, there are four different types of incentives.
- Transactional: Linked to cross-selling, up-sells, and deal based incentives. Per transaction basis.
- Capability: A subsidy that pays for training or some sort of after the fact rebate. The goal is to hit a certain number of product sales.
- Performance: Metric number, or sales number driven thing. Sell $10 million, you get a $300,000 rebate. Essentially, you do X and you get Y.
- Demand generation: Deal based in definition. Sell to a new customer get this additional margin or rebate. Helping win a new deal.
Each one of these types of incentives correlates back to one of the 4Cs.
- Contribution and transactional: Contribution is all about how much a partner is achieving in revenue and sales. Very similar to how transactional incentives work – incenting the partner per transaction and for how much they bring in. Hence, why cross and up-selling are large components of transactional incentives.
- Capability and capability: Normally a business pays for a partner to go through a specific type of training or program. Why? Because they want that partner to sell the product they were trained on. This motivates the partner to sell the product in order to earn their incentive or rebate. From a business perspective, it gets their desired product sold.
- Coverage and demand generation: Demand generation incentives motivate partners to sell to new customers in order to gain additional margins or a rebate. But where are these new customers? In new markets. This promotes market growth and expansion for companies.
- Commitment and performance: Performance incentives are about hitting a certain metric number. A sales number driving incentive that is really a simple trade off. Doing X to get Y. To do so requires the partner be consistent in their work and have a predictable pattern to make a realistic, but challenging, performance target. This drives sales and promotes revenue acceleration from the company’s perspective. And the partner is happy receiving the incentive.
If you’re a channel manager, you need to decide what behaviors you want to change and incentive. This is all going to vary and differ on an individual basis for many cases, for both partners and customers.
Figuring out what "C" (behavior) a partner needs to change will help you decide what type of incentive you need to have in place to make the biggest impact and drive revenues. Partner incentives really come down to aligning the right incentives to the right behaviors. This will generate the most success and have the greatest impact on your channel.