How to Measure the Success of a Channel Incentive Program

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Feb 24, 2022 • 7 min read

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A channel incentive program is an initiative to incentivize your channel partners to drive more sales. This program is usually designed to change distributors or dealers’ behavior to encourage loyalty to your business, promoting and selling your products as opposed to the competitors.

Here’s the hint; when channel partners (especially the sales employee at a distributor company or dealers) are given direct rewards for selling your product, they'll be encouraged to sell more.

An effective channel incentive program doesn't just motivate channel partners to sell more, but creates a brand ambassador through a beneficial relationship. So, 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.

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However, it is important to measure the success of this program, so you can achieve your goals better. In general, you need to select some KPIs within each category to get a better understanding of what's happening with your partner. 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 measured, monitored, and optimized to help you reach your core business goals. 

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

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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 distributor 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 be familiar with their products. To achieve that goal, businesses include metrics that show their knowledge 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.

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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 customers? If the average lifetime value of loyalty program members exceeds the average lifetime value of casual customers, 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 customer 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 customers 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.

Conclusion

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

After all, the essence of a loyalty program is to improve customer retention. The program gradually steals sales and profits from the competitors, while persuading your channel partners to reduce purchases between your company and your competitors.

Tada can be a one-stop solution for those of you who want to have your own channel incentive program for your distributors, dealers or retailers. With a variety of programs with integrated rewards, we can help you create the most suitable incentive program for your business. Request your free demo now to talk more about your needs!

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