In fact, approximately 75% of all global sales are conducted through channels. If you’re a partner who sells products or services for a preferred vendor, you’re engaging in a very important part of the world economy. But incentives are what make it all work.
Data suggests that incentive programs can boost partner sales and profits by as much as 40%. Channel partners looking for new vendors need to consider what types of incentives they offer. Here are some of the most popular vendor incentives.
Sales Performance Incentive Funds (SPIFs)
One of the most common types of incentives is known as a SPIF (pronounced “spiff”) and is used by vendors to get their sales partners to meet strategic revenue targets. They usually are granted as financial payouts but can be gift cards, entertainment tickets, tech gadgets, or weekend getaways. SPIFs are typically pitched to sales teams like this: “If you move X amount of product or schedule X amount of demos or close X amount of deals within a fixed timeframe, you get a reward.” When evaluating SPIFs by a potential vendor, ask:
- Is there a clearly defined strategy on how to close the deals (e.g., through cold-calling, scheduling more demos)?
- Who’s eligible to participate?
- What’s the timeline?
- Does the vendor provide a set of SPIF guidelines?
- How is success measured?
Like any incentive program, SPIFs can provide a great way to inspire sales teams to drive ROI. But, to be successful, they take plenty of foresight and hard work.
Vendors know the quickest path to success is to create brand loyalty among their channel partners. They also realize that a truly successful brand ambassador isn’t based solely on financial incentives; it goes deeper. A channel partner loyalty program aims to transform the relationship from a mere transactional one to a longer-term, emotional connection.
When evaluating loyalty programs, ask how the vendor measures the loyalty program’s success. Specific metrics will shine through, such as sales volume for loyalty members versus non-members, member purchase frequency and spending, and loyalty program ROI. Keep in mind that the essence of a loyalty program is to improve customer retention. Channel partners ultimately should look for customization, personalization, relevance, and value in any loyalty program.
Market Development Funds (MDFs)
MDFs are granted by vendors to channel partners to help them boost their sales and marketing efforts. These can take various forms, such as funding webinars, launching a marketing event, setting up email campaigns, and attending a conference or tradeshow. As with any incentive program, channel partners must conduct their due diligence. Does the vendor offer evidence of successful distribution and adoption of MDF funds, including a clear roadmap, qualifying criteria, program goals, implementation strategies, and KPIs to measure the outcomes?
Data shows that partners only leverage 44% of the discretionary marketing spend they are entitled to in a given year. Researching these types of gaps and understanding why some vendor/partner relationships are more successful than others is time well-spent.
Relationships between channel partners and vendors have undergone significant changes in recent years. In the “old days,” the partner’s job was to simply sell the vendor solutions. Today, partner success looks different. According to Beata Wright, “In response to changing revenue streams, partners are having to up their game and focus more on services. They’re becoming thought-leading consultants, using specialist knowledge of a particular industry or business function to add value and develop add-on applications to augment the vendor’s platform.”
Channel partners must ask:
- Does the vendor make you a true extension of their business?
- Are you more than a systems integrator?
- Does the channel owner offer a clear path to building and growing your own brand?
These are important questions to raise to ensure you meet your business vision and goals.
Incentives are a critical part of any vendor and channel partner relationship but are not guaranteed wins. If you perform your due diligence upfront regarding requirements and measures of success, there are less likely to be surprises downstream. Channel partner incentives are often either a tremendous morale booster or a source of frustration and uncertainty. And, just like anything in life, the rules of success in this game depend upon transparency, accountability, and clear communication.