2019 Channel Incentive Planning
How do you align channel incentive planning to your strategy to accomplish your organizational goals? Is it science? Is it art?
Last week, our VP of Global Alliances, Steven Kellam joined Dan Overgaag, Principal for The Spur Group on a webinar presented by Channel Focus/ Baptie & Co, where they discussed a framework for how to choose and implement the right channel incentive programs to achieve transformational goals. This article is going to provide a quick overview of the material covered in the webinar and the slide deck from the presentation is embedded at the bottom of the article, but to really get the full effect of the presentation, we recommend watching the recording of the video, available ungated right here.
Interestingly, during the preparation work of putting the webinar together, the topic of partner scoring kept coming up. Marketing is a field that is highly enabled by a ton of incredible digital tools that give us the ability to treat every partner in a way that is proportionately equal without having to treat them the same. This is great because the truth is that not every channel partner is the same. Of course, your partners all have different strengths and weakness just like we all do. They are also likely to have different needs when it comes down to what it takes for us to help them succeed and the chances are good that there are secondary factors that will cause many of them to respond differently to different types of channel incentive programs. With all of this in mind, here’s a look into The Spur Group’s partner scoring methodology, The 4 C’s Model.
The 4 C’s Model
The Spur Group have a system in place called “The 4Cs” that fits the need for a channel partner segmentation methodology. It focuses on scoring each partner in, unsurprisingly, four categories and then planning and segmenting your incentive programs based on their determined needs.
CONTRIBUTION: This measures the sales velocity of each channel partner by scoring them on a scale of one to five for each of Frequency (sales per customer), Reach (number of customers), and Yield (revenue per customer).
CAPABILITY: Here is where you score the skill level of each partner, applying the same scale to the areas of People, Focus and Productivity.
COVERAGE: To ensure that you are leaving no market to go unserved, it’s important to measure the market focus of each partner. The formula for calculating coverage is to express average revenue per account as a proportionately weighted number between one and four, then multiply it by the market size, expressed as a number between one and three with one being the smallest market size and three being largest.
COMMITMENT: Finally, on a scale of one to three, measure each partner against your baseline averages in each of the following areas: growth delivery, marketing delivery, lead delivery, pipeline delivery and brand delivery. The mean average of these is their commitment score in this methodology.
Adding these scores gives you a total score for each partner, referred to in Spur’s methodology as the revenue capacity score. It also gets you better prepared for your channel incentive planning as you should now have identified some areas of opportunity for partner enablement via sales incentives and other means.
Again, there is a lot to unpack here, and Dan does so very effectively in the webinar recording so hopefully you have a chance to give it a watch.
Channel Incentive Options At-a-Glance
To plan appropriately and ensure you’re driving the behaviours that are best going to help you accomplish your goals, take a moment to back away and look at the stakeholders in your sales channel, and the various incentive plans you could be offering to each.
Some quick definitions:
- MDF and Co-op (MDF = market development funds. These are proposal based/discretionary funds ) (Co-op = co-operative marketing funds which are co-marketing dollars and are accrual-based and contractually obligated.) Think of it this way: co-op is “their” money and MDF is yours. We did an excellent webinar a couple of months ago on the eight essentials of MDF (check it out here)
- Rebates – Straightforward and familiar. The IRS says a rebate is a reward for buying something vs selling something.
- Sell- Through Allowances – These are just a form of a rebate, but specific to retail. Think special pricing; STAs are a great response to pricing pressure on a retailer that keep their margin intact. The trend is he to use STAs to protect your retailers smartly, but you have to commit to doing them well, and that includes strong POS integration and good UX for partner/reseller.
- SPIFFs – IRS calls these a reward for selling something vs buying something. The trend is towards leveraging SPIFFs for behaviour modification.
- Rewards points – A reward (points-based) for doing something non-transactional/monetary based. These are most commonly seen as a behavior modification SPIF.
Channel Incentive Planning Framework
The below image is an excellent framework for planning your incentive programs. It is a logical and orderly way to map for incentive planning and makes for a sort of a step by step to tie in the right incentives for each of the 4C’s .
- Goals – What are you trying to achieve? ieE.g. more sales transactions, improved capabilities, more commitment?
- Target Audience – Which channel segment are you targeting? Who is most important for you out of distributors, dealers, partners, resellers, salespeople, etc.
- Behaviors – What specific actions do we want to influence? Think of deeper engagement, more enablement, more sales velocity or sales growth.
- Incentives – What are the best incentives for the chosen persona and behavior – SPIFFs, MDF, Rebates, STA and IR?
Not to belabour the point too much, but you really should check out the webinar replay if you want to see some tactical application of combining this framework with the 4 C’s Model.
In conclusion, we know many of you are working away at planning your 2019 incentive programs right now. This webinar was produced in the hopes that we could offer an evolved way of doing planning that helps you realize more ROI from your channel incentives but is still simple enough to help you avoid getting bogged down in preparation.
To summarize, the simplest way to think about it is as follows:
- Understand who the partner is. Use the 4 C’s methodology to help determine the areas where you can use your incentive programs to help best your partners succeed in achieving your mutual goals.
- What behavior are you trying to change? Every type of incentive program can be thought of as a lever for driving a specific behavioral change in your sales channel. Get clear on which behaviors in your channels you need to change with your programs.
- What incentive will work best? Understanding how each type of program functions and then matching the program to your desired goals is going to make an enormous difference in the success of reaching those goals.
As we mentioned at the top of this article, right now we are all enabled by some incredible technology that gives us the power to experiment and iterate and so we should. Not for the sake of experimentation, but with the goal of doing continuously better work with every new iteration.
Here’s the slide deck that accompanied the presentation. You can also watch the video replay at any time right HERE.