Channel Incentives: Why They’re Worth the Buzz and Why You Need Them

Businesses have long used channel incentive programs as their go-to-market strategies to align channel partners’ behavior to their overarching business goals. According to IRF, 81% of top-performing companies use channel incentive programs as a win-win solution to activate and reward channel partners while powering partners to gain more revenue.

Effective channel incentive programs enable businesses to build a lasting and profitable relationship with their resellers, distributors, agents, and retailers. But what exactly is a channel incentive program, and does your business need one? 

This article will discuss:

1. What a channel incentive program is
2. Reasons you need a channel incentive program
3. Types of channel incentive programs to choose
4. Key steps to start an effective incentive program

What is a channel incentive program?

A channel incentive program is a program that gives incentives or rewards for members (in this case, channel partners) that complete certain requirements or milestones. This program usually has specific goals to accelerate product sales, increase brand awareness, or improve partners’ product knowledge.

Channel incentives are performance-based, and they may be given in the form of cash or vouchers. Nowadays, many businesses also experiment with non-monetary sales channel incentives such as physical items, learning opportunities, recreations, and many more.

Why do businesses need a channel incentive program?

According to Forrester, over 73% of all world trade happens through a channel. Thus, the impact of channel partners on business growth cannot be overlooked. Here are some reasons you need a channel incentive program.

1. Drive volume

   Ultimately, businesses that implement channel incentives have increased revenue in mind when starting the program. Channel partners are motivated to sell more with an attractive reward waiting. The Incentive Research Foundation (IRF) found that channel incentive programs increased total revenues by 32%.
   
   

2. Increase business visibility

   Channel partners usually already have an existing customer base who purchase different products from them. Previously, these customers might not even know about your business. Channel partners help your business get discovered since incentives will activate them to promote your products more eagerly to these customers. Thus, your business will have a stronger footing in the market, especially if you are still trying to penetrate a new market.
   
   One of TADA’s clients, an outdoor equipment company, reached new markets by implementing sales incentives for their social commerce resellers. This resulted in the sales and incentive numbers’ growth of almost 1000% in the past year.
   
   

3. Improve partners’ knowledge

   Sales aren’t the only aspect incentive programs are great for. You can tweak the goal of your program so that your channel partners are motivated to learn more about your products. For example, incentives can be given if they watch a video about your product features or join a product information session. At the same time, they will be better equipped to promote your products to potential customers!
   
   This benefit is proven by one of TADA’s clients, an Indonesian pharmacy group that gives incentives in online sales and scientific knowledge classes. From 2019 to 2021, the redemption towards this item grew almost 10x, to nearly $10,000 worth of rewards in 2021.
   
   

4. Increase engagement and loyalty

   Incentive programs go beyond superficial reward schemes. They help to engage your channel partners and make them feel appreciated and valued. The emotional bond formed, in turn, increases their loyalty to your business! This way, they are more than your channel partners – they are your brand ambassadors and advocates that vouch for your business and embody your business values whenever they market your products.
   
   

5. Track program effectiveness

   Traditionally, perhaps businesses have had some channel incentives they give out manually to activate partners. The problem with manual systems is there is no way to track the effectiveness of those incentives in attaining business goals.
   
   With channel incentive programs, businesses can track the performance of partners and the usage of incentives or rewards. They can tell if specific programs and rewards are working and if others need to be re-evaluated to make partners more interested in participating.

What type of channel incentives are there?

There are many different sales channel incentives to implement that can be adjusted to your business ecosystem. Of course, you can mix and match these incentives to make your program more attractive and diverse. Here are some of them.

1. Sales-based incentives

   Sales-based incentives are the most widely understood type of incentives. How it works is very simple: partners get incentives for successfully selling your products or services. The incentives can vary depending on their sales volume, margins, the type of products they sell, and many more.

2. Activity-based incentives

   Your relationship with channel partners should extend beyond the typical buying and selling process. Incentives can be given at the moment of sales and for engagement activities that partners complete, such as training, product demos, or any other activities that suit your business goal.

3. Channel rebates

   Channel rebates are incentives given based on order size or frequency. These rewards can be price cuts for partners who order in bulk or order over a certain number of times. This type of incentive works well if you are looking to clear out inventory or improve the sales of specific under-performing products.

4. Referral incentives

   Valuable channel partners have sufficient mastery of your business and thus can be your best-qualified advocates! Use referral incentives to activate them into your ambassadors who lure more customers to your business. If your business has resellers, this incentive can work for “reseller get reseller” schemes. These incentives can be points, gift cards, cash, or other suitable forms of your choice.

5. Training incentives

   Channel partners need to be knowledgeable in introducing and explaining your products to end customers. Provide channel partners opportunities to improve their knowledge, such as quizzes, certifications, conferences, and demos. Your partners might be selling products from different businesses at the same time, but if they know more about your product, chances are they’ll be more likely to mention yours more.

How to start an effective channel incentive program?

To effectively launch your channel incentive program, here are some steps you need to take:

1. Identify the objective of your program

   Your program objective can change from time to time, but it’s still a good idea to determine one that suits your needs the most at the moment. It can increase overall sales volume, increase sales of certain products, activate channels in certain new markets, or other goals. Having a clear goal helps you move forward with other elements of your program. 

2. Determine the qualifications for incentives

   What should your channel partners accomplish to get incentives? Should they sell more? Should they bring in referrals? Should they join a product demo? Make sure the qualifications are realistic, too—partners will not participate if they feel the program is too complex.

3. Use a simple yet powerful digital platform

   A digital platform can significantly ease and streamline your channel incentive program. Channel partners will have access to the program right at their fingertips while you as a business can monitor their performance in real-time. Also, ensure the platform can be integrated with third parties for better ease of use, such as APIs for payment process and reward redemption.

4. Evaluate and modify

   Another advantage of using a digital platform is that you can obtain insightful data to be analyzed to reflect your program performance. Are your business goals attained? Does the program need modifications? Keep your program fresh with new offers, new bonuses, and new reward catalogs now and then too!
   
   

Conclusion

Sales channels such as distributors, retailers, and resellers are a crucial source of your business revenue. Your business needs to capitalize on the opportunity of activating and rewarding these channel partners with a reliable incentive program.

The program boosts sales and ultimately nurtures engagement and loyalty within channel partners, forming long-lasting bonds. Using a digital channel incentive platform, you can give various rewards to partners so that they can help you reach your business goals.

TADA can help you create the most suitable channel incentive solution. Don’t hesitate to reach out and discuss your needs with us, as we’re happy to help! Contact us today.