Channel incentive programs and loyalty, what’s the difference?
We often hear marketers talk about channel loyalty and channel incentive programs like they are the same thing. To help bring some clarity to the subject we thought it might be a good idea to explore the differences. An easy place to start is with the definition of each word. Merriam-Webster defines these words as follows:
Loyalty – the quality or state of being loyal or a feeling of strong support for someone or something
Incentive – something that encourages a person to do something or to work harder
Channel Incentive Programs and Channel Loyalty are Analogous to Strategy and Tactics
The difference between the two is similar to the difference between tactics and strategy. In this case, the tactics are the incentives brands use to get channel partners to do whatever it is they need them to do today. The channel strategy should be focused on building strong long-term support for the brand (channel loyalty).
Channel incentive programs offer X to achieve Y. For example, a brand offers a commission in return for the partner producing revenue. A brand might offer a badge (i.e., silver or gold partner status) for achieving a training certification. The concept is simple, but finding an X that works can often be anything but simple.
If your channel partners are non-exclusive, they likely have many voices competing for their attention. Your brand is just one voice in this mix. This means your brand’s X must be more attractive than the other brand’s X, right? Although this is a logical conclusion, it is often this pursuit that consumes a brand in tactics.
Have you ever wondered why a partner focuses on a competing product even when your product is better and you offer a higher commission? The reason is likely the other brand has achieved loyalty with the partner.
If your first thought here is to find a tactic to take the partner away, you’re lost in tactics and missing the point
Channel loyalty programs are built upon tactics, but not dependent on any specific tactic.
Channel Loyalty Programs Focus on the Big 3 Channel Imperatives
To be loyal to a brand a channel partner needs to believe the brand is committed to their success. We believe to be successful developing any distribution channel a brand must do three things right:
- Enable partners with the knowledge to be successful
- Help partners develop demand and opportunities
- Motivate partners to see those opportunities through
These three things demonstrate the brand’s commitment to the channel partner’s success. Smart brands also realize channel partners don’t always know what they need to do to be successful. Leading them to water (opportunity) and offering them a carrot to drink (sell) is frequently required. Strangely in this analogy, teaching them to drink is also required.
Now think about how these three things relate to loyalty. When you think about enablement are you focused on your products and services or best practices for running a successful dealership? Channel loyalty programs need to enable partners with skills beyond product or service knowledge. They should arm partners with operating best practices.
When considering how marketing fits within a channel loyalty program you need to think across all channels. Gone are the days of sending out a discount offer and expecting to get a sale. Partners need to learn how to engage prospects with social, mobile and digital marketing.
Word of mouth has grown in volumes across social. Brands need social advocates. Online testimonials are now critical. Local marketing has become an entirely new art form that is important across many different vertical markets. Skills necessary to build brand loyalty at this level typically exceed the partner’s current knowledge level.
Tools for motivation now go well beyond offering X to do Y. Brands need to influence partners to learn best practices and new marketing techniques. Partners might not understand the value of doing this and may see it as a distraction. The brand needs to be seen as enabling success, not distracting the partner from it.
Can you afford to lose your partners?
The world of channel loyalty is changing. Either you’ll adapt and build a stronger bond with channel partners, or competitors will disrupt with broader channel loyalty approaches.
We’ve long known the cost of retaining a customer versus the high cost of gaining a new one. The same equation holds true with channel partners. It’s expensive to build channel loyalty, but the cost of not doing it is even worse.
Can you really afford to not have a well thought through channel loyalty program? If you would like to learn more, feel free to schedule a session with our team to discuss how 360insights can assist you in building channel loyalty.