How to Measure the Success of a Channel Incentive Program

A channel incentive program is an initiative that aims to build a more profitable relationship with your channel partners in order to drive more sales and accelerate growth.

This program is usually designed to motivate and incentivize channel partners such as distributors, wholesalers or retailers and build loyalty to your business, leading to channel partners to promote and sell your products as opposed to competitors’.

It’s no secret that when channel partners are given specific target achievement metrics, followed by relevant and direct rewards for selling your product, they'll be encouraged to sell more. 

When done effectively, an effective channel incentive program doesn't just improve retention and motivate channel partners to sell more, but overtime creates brand ambassadors through a long-term mutually beneficial relationship.  In a vast market such as Indonesia, to successfully connect and engage with your geographically dispersed channel partners would be fairly challenging and costly without the right technology and transformative strategies.  

But first and foremost, how will you measure the success of your incentive program?

How to Measure Your Channel Incentive Program?

According to a FMI Net survey, nearly 60% of companies with incentive programs find it difficult to measure program performance. That's why so many companies don't do it consistently or often.

However, it is important to measure the success of such programs because without a clear measurement, they would be difficult to manage and may end up being a cost center with no clear ROI.

In general, you need to select some KPIs within each category to get a better understanding of what's happening with your channel partners. This can vary depending on the maturity of the program, the duration of the program, the ability to collect data, and many more.

Let's take a look at some performance metrics that can be used to measure, monitor, and optimize your channel incentive programs and help you accelerate growth.

1. ROI and profitability metrics

At every stage of the channel incentive program, businesses need to pay attention to revenue and profitability-related metrics. The most commonly tracked indicators are: 

• Total revenue across all channel partners 
• Channel program profitability
• Revenue by distributor, products and geography
• Distributor profitability

2. Opportunity metrics

Businesses also measure potential leads flow as a measure of channel partner effectiveness. The following indicators help businesses identify partners who need help to be more successful. 

• Number of leads brought by channel partners 
• Lead value brought by channel partners 
• The number of leads closed vs leads generated 
• Time it takes for a channel partner to act on the lead 
• The time it takes for a channel partner to convert a lead into a sale. 

3. Engagement metrics

Businesses are now utilizing some incentive platforms to assess how effectively channel partners keep new offers, prices, promotions, and incentives up to date. As a result, businesses are paying more and more attention to some metrics such as: 

• The number of times the distributor logs in to the platform/app
• The time the distributor spends in the platform/app

4. Marketing effectiveness and incentive metrics

Businesses also measure channel partner efforts to see how they market themselves. Businesses need to carefully monitor revenue and sales volume per channel partner for each marketing dollar provided to them. Related metrics that businesses collect include: 

• Time spent by channel partners on the program. 
• The cost of incentives per distributor. 
• The incentive program profitability based on distributor size, timing, and specific campaign.

5. Education metrics

Businesses are building the infrastructure to support their channel sales programs and expect their partners to to have a sound knowledge of their products.

To achieve that goal, businesses include metrics that indicate their understanding of your product features, benefits, and pricing. 

How do You Know If the Loyalty Program is Working?

One of the benefits of modern loyalty programs is the data that they generate. You can measure dozens of indicators to analyze whether a loyalty program is working or not.

Here are six key indicators you can use to determine if the loyalty program is working.

1. Member value 

Are members of your loyalty program worth more than your casual channel partners? If the average lifetime value of loyalty program members exceeds the average lifetime value of casual channel partners, it is no exaggeration to say that the loyalty program is functioning as intended. 

2. Share of loyalty 

What percentage of all sales transactions are linked to members of the loyalty program? Increasing sales transactions related to loyalty program members means more opportunities to gather channel partners insights to approach a larger member base, by that improving the program's ROI.

3. Incremental sales 

Does your loyalty program promote incremental sales? It is important to show that the program is driving additional sales that would not have been incurred if the program had not been implemented. You can monitor and track the following metrics from attest group:

• Which sales transactions were truly incremental in a way that i wouldn’t happened if not because of the loyalty program
• Which sales transactions would likely have occurred anyway without the need of loyalty program

4. Member frequency and spending behavior 

Does your loyalty program bring more profitable buying behavior to your members?

Segmenting members into different value groups helps to quantify and identify the members who are most valuable, who are most likely to have incremental behavior, or who are at the highest risk of churn.

5. Discount loyalty transactions

Does your loyalty program use discount offers to encourage more purchases among its members? An effective loyalty program should not be only a discount program for channel partners who will purchase from you anyway. 

6. Loyalty Program ROI

Does your loyalty program generate a positive return on your investment, and is that profit massive enough to benefit your company's shareholders?

Your CEO and CFO are likely to view a loyalty program as an ongoing investment that requires an annual return exceeding the company’s cost to justify its continued funding.

The Takeaway

Measuring the success of your incentive program is important to know that the program is working well in supporting your company’s goals and achieving the targeted ROI.

After all, the essence of a B2B loyalty and channel incentive program is to improve channel partner retention. The program gradually steals sales and profits from the competitors, while persuading your channel partners to generate more purchases from your company.

Tada is an end-to-end solution for businesses who aim to transform their B2B loyalty and channel incentive program for your distributors, wholesalers, dealers or retailers.

With a variety of features and an extensively integrated B2B loyalty & rewards platform, Tada’s technology and decade of experience can help you create the most transformative B2B loyalty & channel incentive program for your business in the most effective and efficient way.

Request your free demo now to talk about game-changing solutions for your business!