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Overcoming the Challenges of Channel Incentives in the Digital Era

by Gloria Kee , Director, Product Management December 11, 2018

The digital era has changed the way High Tech B2B channel partners are purchasing products, regardless of whether the product is software, hardware, or services. Every major study released in 2018 has shown that B2B purchasers are shopping like B2C buyers. By the time channel partners officially begin the procurement process, the buyer has already done most of the research about the product and its company. The challenge for the channel chiefs of these products is to understand how they can better leverage channel incentive offerings to swing their buyer.

In a recent study released by 2112 channel chief outlook report 2018, 68% of all channel chiefs are increasing incentives to drive partner sales.  Across High Tech and Manufacturing, channel chiefs are increasing the channels and demanding more complex incentives to better incentivize their product’s success in their respective markets. Despite the increase in channel incentives, there are several challenges that face these channel chiefs.

A 2018 study by Deloitte/AGMA found that that 3%-5% of a high tech’s company revenue is spent on indirect channel incentives. On top of this, 70% of these companies’ revenue comes from the indirect channel.  To add to the complexity, 67% of the high tech market has more than 5,000 channel partners, but only 51% of channel chiefs can well identify where their product ends up. This inability to effectively manage the sale and incentives of their channel has cost High Tech companies $1.4 billion in annual profitability.

So what do High Tech companies need to do in order to successfully overcome these challenges?

Here are 5 best practices of the high tech market based on a study by Deloitte and AGMA.

  1. Alignment – Reassess internal stakeholder alignment to ensure everyone has a clear understanding of the incentive’s structure, purpose and execution
  2. Visibility – Enable visibility into the operation and ROI of the offered channel incentive
  3. Enablement – Train and educate internal and external business stakeholders
  4. Communication – Develop and grow channel partner interaction
  5. Validation – Track and reconcile payments and pricing requests

In an era where HT companies are facing increasing global competition it becomes crucial for them to look into an automated solution that can support these best practices.

To learn more about how Model N can help you implement and automate these best practices, go here.

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