Sophisticated manufacturers know that they need a holistic approach to incentives if they want to continually create quality revenue through their channel partners. Running cookie cutter rebate programs will never generate the long-term revenues that they need to improve company value. Many of these organizations reach out to Larry Walsh, CEO of the 2112 Group to help them develop channel incentive programs that create highly engaged channel partners.
In Episode 11 of the Revenue Execution Podcast Series we sat down with Larry and discussed what it takes to create a world class channel. Larry and I discuss how best in class organizations go beyond channel incentives and employ what Larry calls behavior influencers.
In the fourth part of our conversation with Larry we discuss:
Behavior Influencers as the Next Generation Channel Incentives
Larry describes behavior influencers as incentives that are designed to shape partner behavior or partner performance. Some examples of this are short-term sales incentives, market development funds, training programs and other resources. Influencers are typically tiered or earned into which shapes behaviors as partners work to unlock the benefits of their next available tier. It is the combination of incentives and programs, designed to work holistically together, that has a compound effect on the actions of channel sales partners.
Market Development Funds (MDF) as an Advanced Incentive
The term market development fund has been bastardized into “marketing” development fund over the years and now we are seeing a shift back to the original purpose of MDF. Investing in partners so they can build new capabilities and expand capacities to grow their businesses. This truly helps expand the value of the vendor. The challenge that vendors are having is using systems to manage, monitor, track results, and ensure compliance. Organizations fail when they make the process to complex, when the proof of performance requirements are too high or making the access to reimbursements to lengthy or difficult. Vendors need to make these programs more efficient if they want them to be successful. Automating processes and reimbursements, applying approval workflows and monitoring compliance is necessary if you want to achieve long-term success with your MDF investments.
Rebates Continue to be Strategically Important
Rebates continue to play a strategic role for many vendors. The big question facing many of the “born in the cloud” vendors today is whether they will launch rebate programs to increase services sales. This is worth watching and may be an emerging trend in the near future. Aside from this potential trend, Larry still sees rebates an incredibly powerful tool for vendors who need to move more traditional products and it isn’t going away anytime soon.
Traits of Truly Engaged Partners
Truly engaged partners who have their own business plans and well-developed profit models exhibit several traits that their less engaged peers do not. Engaged partners leverage vendor offerings such as pre-sales support, joint business planning, territory coverage modeling, and co-selling programs. These same partners see these programs as more valuable and more worthy of responding too than monetary awards. Monetary incentives are still important, but these non-monetary offerings tend to be more strategic in nature and provide a clear long-term benefit to your most engaged partners. These engaged partners get a lot more attention and a much higher return on investment. For vendors who offer these non-monetary programs there is a clear benefit as well. Larry and the 2112 Group just released a report that shows that vendors who are easier to do business with are more successful. In fact, they have a 3X share of their partners wallet vs those vendors who are difficult to do business with. Conversely, vendors who are more difficult to do business with often have to pay more to get the same level of performance.
We wrapped up the podcast discussing the difficulty many vendors have trying to make things simple. As vendors increase in size, they tend to become more risk averse, they layer on more processes, and become more difficult to deal with. These vendors and mid-size vendors that need to become more sophisticated need to start with simple programs and phase in new requirements over time so that they can tier their programs to reward their most engaged partners.
Larry has great insights into the market and provided us with a lot of great ideas on what it means to use channel incentives like Rebates and MDF as a competitive differentiator. Click here to listen to the entire podcast.
If you or your company would like to read more about the outlook for the channel in 2019, you can get 25% off the 2112 Group Channel Chief Outlook for 2019 by using the following link and entering MODELN when you order. The 2019 Outlooks delves into recent research on channel performance outlook and confidence, areas for channel growth and success, how you can better measure partner value and more.