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Channel Partners: Strategic Issues

Unless you have a tightly controlled group of agents dependent on your company – still the case in some industries – you have to compete with many other companies for the attention of your resellers. Everybody wants the reseller to focus on their products and is constantly trying to come up with good reasons for them to do so. In the end, most will do what is best for their customers and for their company, which is not necessarily what is best for you. Savvy suppliers know that they have to offer programs that help resellers meet their goals of increasing sales and profits.

Before launching any incentive program, consider inviting top dealers, agents, and distributors to express their special needs and concerns. Most resellers will say that sales and profits are their biggest concerns, but that doesn't mean that adding a percentage point of margin or commission will necessarily produce a significant increase in sales. Dealers and distributors often react more enthusiastically to strategies that help them address fundamental problems, such as fighting competition, improving the training and retention of salespeople, building consumer loyalty, or building sales of a product or service category.

Remember also that it does little good to motivate a dealer or distributor to stock a lot of product that fails to sell through. Explore the value of program components that promote sell-through, such as a promotions aimed at end users as part of a push-pull approach.

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Goals and Objectives

As with any incentive program, begin by specifying your objectives, if possible, in numeric terms. Generally, you should have one primary objective and perhaps one or two related objectives. The primary objective tracks the specific results you want, such as increased sales or purchases by your resellers. The secondary or "process" objectives measure the specific steps participants can take to achieve your primary objective. Some sample primary objectives:

  • Increase sales by 10 percent in the third quarter versus the same period last year.
  • Increase the number of dealer salespeople participating in product training programs versus the same period last year.
  • Obtain a 20 percent share for a new product in its first full year.
  • Increase the number of showroom displays.

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Consider that all things were equal between your company and one of its competitors – exact same product, exact same commissions paid to the channel, exact everything. Too often, the usual assumption is that merchandise awards or perhaps a travel venue and a huge celebration at the end will tip the scales in your company’s favor. So you offer an incentive program.

The competition factor enters. Your competitor ups its commission plan and then tacks on an incentive program for the channel. So you upgrade your program … then they do. You’ve just entered a sort of incentive war. No real long-term good comes out of thinking of incentives on a strictly material or revenue basis. You’re missing out on the real value that an incentive program offers when you think that way. Why? It’s because incentive programs are not just a commodity or pricing strategy, but a way to build more productive, holistic relationships with the organizations that can move your product or service.

The question: How can you use your incentive program to differentiate your relationship with resellers from those they have with your competitors? What added value services or support will you provide that benefits their business beyond simply increasing sales for your organization. Perhaps you’re helping drive business to their business through lead generation or promotions? Perhaps you’re helping them retain good salespeople by offering desirable incentives the reseller wouldn’t normally provide? Perhaps you’re helping train employees to make them more capable of selling in general?

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Identifying the Target Audience

Determine which categories or which specific dealers, agents, or distributors can have the most impact on your business. In many business-to-consumer (b to c) industries, the role of agents and representatives has declined as the result of growing retail consolidation or disintermediation resulting from the Internet (notably in the travel industry, and to a lesser extent in financial services and insurance). Some manufacturers no longer need hundreds of representatives when only a few retailers control a large market share. Also, it has become increasingly difficult for consumer-product manufacturers to influence the promotional practices of giant retailers. Yet, many consumer and business-to-business suppliers still move considerable volume through channel partners or resellers, and no incentive program can succeed unless you determine the types critical to your success.

Identify precisely what these target audiences can do to help you achieve your objectives – stock more product, participate in marketing or training programs, put up displays, participate in co-op marketing programs, provide customer databases, etc.

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Types of Programs: Targeting Specific Actions

Is the goal to motivate dealers to switch to your products, cross-sell, stock more models, etc? Actions promoted by incentive programs might include increasing sales call frequency, making more presentations, following up on leads you provide, creating or putting up displays, cross-selling an add-on product, selling a service contract, etc. These are specific actions or behaviors that lead to desired outcomes – increased sales, improved customer satisfaction, etc.

If you are asking a reseller’s salespeople to follow up on leads within three days by making a structured sales presentation you have prepared, that is a specific and measurable action (especially if your organization has some kind of customer relationship management software.) In the course of defining specific behaviors and processes, you should also look for the obstacles to achievement. Is there any special product knowledge or other training you will need to offer their salespeople or staff? What about their need for special sales pull-through strategies such as direct marketing, co-operative advertising, lead generation, etc.? These types of initiatives not only help the reseller accomplish what it is you are asking them to do, they also lead to increased loyalty because you are demonstrating a commitment to helping them succeed.

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Capturing Maximum Participation

Participation in your program will suffer if the majority of your target audience feels that the goals are impossible or unrealistic. There needs to be an expectation of obtaining the goal by a majority of the audience, or the program will likely fail. Of key importance: The channel sales people you are targeting must believe they have a chance of earning the rewards you offer. “Is the program realistic? Is it fair? And is it worth the effort?” are the central questions on anyone’s mind, no matter the audience, especially when the reseller sales force might have several incentive programs from different vendors.

If you announce that your program will reward the top dealer salesperson in each region, this sets up a “tournament” approach, which research has found to be demotivational. This type of programs motivate only the top performers, those who feel they have a shot at winning. The middle 60 percent of performers, from whom you often have your greatest chance of incremental improvement, are likely to tune out when they see this type of program. Generally speaking, dealers within the top 20 percent of performers contribute the bulk of your business. Thus, the objective of incentive programs is not only to get the top performers to stretch a bit further, but to get average performers (the middle 60 percent) to increase their participation with your company.

It’s for that key reason that programs that reward points to salespeople for performance against themselves or previous performance often generate better results – because participants feel they have greater control of their own destinies. Participation will be higher as a result – and you’ve got a better message for the middle 60 percent, whose performance you will probably need to increase sales. .

Another question when structuring your goals: What makes your organization think that this year will be any different given different market conditions, variations in competitive threats among resellers within each region, etc.? What is your organization doing differently in terms of product, support, pricing, or other benefits to convince the reseller sales team that your product is worth the extra effort?

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Competing Incentive Program Offers

The degree of competition from other companies may have a significant impact on your program’s outcome. What types of incentives are being offered for what behaviors or outcomes? How are these incentives promoted? What support do the competitors provide in terms of communications, training, or lead generation? One of the best ways to get this information is to set up a Customer Council, in which top reseller customers get to participate in an annual social and business meeting to plan strategy and exchange information. Reseller principals invited to a Customer Council are likely to open up much more regarding competitive information when off premises and in a relaxed, convivial environment. Be certain you understand the details of any incentives being offered by your competitors. Your salespeople might also be able to provide competitive intelligence by asking their best customers for information.

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Communications Frequency/Methodology

Whether your program targets retailers, brokers, distributors, dealers, or agents, developing trust can have a significant impact on its success.

Research has identified a direct link between the frequency and quality of communication and the level of trust. In many reseller incentive programs, the reward component provides but one piece and a focal point for an overall communications effort designed to highlight the key benefits of the products or services offered.

Communication begins with getting engagement – the active participation of the target audience. That’s why most incentive programs have an enrollment component, especially valuable in reseller programs in which the sales team works for someone else, not you! Make sure each person has to indicate in writing or via the Internet that they have engaged to participate and have given permission for you to communicate with them via e-mail, mail, or whatever the designated method.

To maximize results, the reseller program must not only make sure that products and services live up to customer and reseller needs and that employees have an incentive to engage, it must also include extensive communication components – starting with getting individual salespeople to engage and sign up, and including useful information, special offers, and reminders communicated in any possible way, including:

  • Direct to the sales force in print or e-mail newsletters sent through the office or even, with permission, to the home.
  • Web-based “selling centers” where reseller salespeople can find everything they need to know about your organization’s products and services and competitive advantages.
  • Use of the resellers’ own print, Web site, or e-mail communications.
  • Attention getting contents and sweepstakes.
  • Promotional products.
  • Meetings, etc.

The challenge of program communications has become very critical in this age of media clutter. It requires the same attention as any other type of marketing campaign in terms of planning, implementation, and tracking. The Channel Partner Council can provide another venue for identifying the best possible communication media. Any reseller incentive program that makes an afterthought of communications will not foster the maximum level of engagement from the target audience.

Planning-wise, consider the current frequency of communications and methods that exist with your channel partners, and define the level of involvement you want your direct sales force or management to have in the program.

Another key issue is how will you announce and reinforce the program over time with an audience by no means captive to your communications. Getting anyone’s attention presents a challenge these days, and resellers face even more clutter than your own employees. Make sure your program has benefits for your reseller principals and sales people not only in terms of incentives but in improved knowledge and understanding of how your product can help their customers. This might include useful how-to and reference information that helps make them more effective in their jobs.

Remember also to make sure the incentive program has the simplicity necessary to get attention. Anything complicated will quickly lose your audience. Throughout the program, provide participants with useful information in digestible “blurbs,” rather than lengthy treatises. Promotional products often play a role in communications programs, because dimensional mailings have a greater chance of getting opened.

Don’t forget the personal touch. In addition to your launch kit, consider the role your salespeople can play in talking up the program benefits in their presentations and meetings. That means an equal measure of internal training and communications. Consider holding regional kickoff meetings with dealers and distributors.

How often you communicate depends on the duration of the program. Communication is essential to building trusting channel relationships.

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Support Needs

Assessing the channel’s level of support requirements will position your incentive program favorably, because it will demonstrate to your partner your commitment to helping them move it once it’s purchased. How you demonstrate your company’s partnership commitment through product or service training, co-operative advertising, local events, rebate offers, and end user marketing support tools have as much bearing on the success of the program as the incentive award. The more your program includes components to help your resellers, the more they will open their doors to let you communicate directly with the sales force.

At the planning stage, understand how you can help your channel move your products or promote your services. Define special training and communication needs and how you might fulfill them. Make sure the dealer salespeople have the knowledge to help you. Many dealers and distributors don't want suppliers having direct contact with their salespeople, so it’s important to offer training that benefits the principals by improving the overall knowledge of their salespeople, not simply information about your product.

Key questions to ask include:

  • What features currently available represent the most important differentiators of your products and services?
  • What features currently lacking would be most valuable, and in which sales situations?
  • What sales tools and marketing programs have the greatest value?
  • What tools and programs do we lack that would be most valuable if offered in the future?
  • Which of our products and services are the hardest and easiest to sell, to whom, and why?
  • Which competitors do we most frequently encounter in which sales situations, and how do we address each competitor’s positioning?

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