As a tool in a vendor’s toolkit, channel incentive programs are pivotal tools in transforming channel relationships, influencing positive behaviour change and driving performance.  

The Incentive Research Foundation (IRF) found that non-cash channel incentive programs could increase total revenues by 32%, increase market share by 30%, and increase net operating income to 19% of revenue.

Engaged, motivated channel partners enable brands to build steady, long-term relationships with customers and create important revenue streams. 

Throughout this complete guide, we explore actionable insights and our best practices for designing and implementing effective channel incentive programs founded on our 60+ years of domain expertise.

• What is a channel incentive program?
• The importance of channel incentive programs
• Types of channel incentives
• The benefits of channel incentive programs
• Channel incentive program best practices

What is a channel incentive program?

The business-to-business (B2B) channel has evolved from strictly a transactional, fulfilment function to more of a fluid ecosystem comprised of partners, distributors, influencers, and brand advocates, all aiming for customer excellence. 

Channel incentive programs can support multiple vendor objectives, including boosting sales, increasing brand awareness, and building partner knowledge and channel loyalty.

Traditionally, a channel incentive program was a reward-based plan offered by a manufacturer to motivate partners within their distribution channel with layered incentives comprising discounts, rebates, commissions, and recognition of top performance; however, many channel incentive programs are evolving. 

Today, the most effective channel incentive programs go beyond simply offering rewards for transactions and have become part of a wider channel enablement strategy, motivating engagement, learning, and channel loyalty with targeted communications and incentives, personalized goals, and performance monitoring, fostering wider channel ecosystem collaboration. 

The importance of channel incentive programs

Successful channel partnerships are co-beneficial, expanding the reach and depth of sales for vendors and increasing end-customer satisfaction for partners. 

With as much as 75% of world trade flowing through indirect channel sales, optimizing this experience for all stakeholders must be a key priority to ensure profitability and satisfaction across the journey. 

This is where channel incentive programs come in. 

As a critical tool for motivating partners, effective channel incentive programs can help vendors stand out in an often-crowded market and be highly effective at driving and changing partner behaviours. Without one, partners may prioritize products with more lucrative channel incentives or lack the knowledge and enthusiasm to effectively advocate for your brand. 

When motivating sales channels, it’s important to understand that the vendors and partners are unique businesses with individual values, goals, and objectives. 

Impactful channel incentive programs are mindful of this in their design, linking vendor strategic goals while remaining sensitive to partner objectives. By offering targeted incentives and rewards, channel incentive programs can motivate partners to prioritize your products, invest in training, and be loyal to your brand.

Types of channel incentives

Financial incentives such as channel rebates, marketing development funds, and discounts are typically targeted at the partner, as opposed to the partner representatives, and are used to drive sales within specific product lines or target overall revenue growth.

Non-financial incentives

Often used alongside financial incentives, non-financial incentives such as non-cash rewards like merchandise and incentive travel, channel enablement support like provision of marketing resources, access to training and certification, recognition, and exclusive offers/rewards such as events are a great way to foster broader channel engagement and channel loyalty.

Performance-based incentives

Performance-based incentives are directly linked to performance and work well when able to reward individual channel partner representatives. Incentivizing activity such as sales volume, margins, and deal registrations, as well as engagement with activities such as training, promotes continuous improvement and establishes a clear link between effort and compensation. Consideration should be made to ensure any performance-based channel partner incentives are aligned with any in-house activity the partner may offer its representatives.

The benefits of channel incentive programs

The benefits of channel incentives are that they can:

Increase brand awareness and brand recognition

In an often cluttered and noisy landscape, channel incentive programs can be a great way for vendors to differentiate themselves, capture and keep mindshare.

Drive product sales

Whether the objective is to increase sales volume, product mix, or grow share of wallet, channel incentive programs can be highly effective at motivating incremental sales performance. Well-designed, segmented incentive structures will look to improve performance across the entire bell curve. 

Just a 5% uplift from partners in the middle 60% of the performance bell curve can yield upwards of 75% versus incentives only focusing on their top 20% of performing partners. 

Accelerate product adoption

Motivate training and certification engagement with integrated channel incentive programs that recognize and reward training participation and sales activity.

Support market expansion

Channel incentive programs can be a great way to improve channel readiness by supporting partners’ onboarding and focusing partners on desired behaviours and routes to sales in new markets. Through these programs, you can drive mutually strategic partnerships, creating a win-win for the manufacturer and partner to accelerate growth, increase market penetration, increase brand exposure, and support geographic expansion. 

Nurture brand advocacy

Invest in high-performing partners with recognition and tiering incentives to encourage growth and loyalty, improve partner retention, drive consistent, collaborative referrals, and build mutually strategic partnerships. 

Improve operational excellence

Leverage channel incentive program data to monitor performance and take timely action, engage field sales managers, gain access to the next layer of the channel, improve, and recognize partner collaboration, and improve feedback loops.

Channel incentive program best practices

Strong channel partner relationships are not built overnight, and building an effective channel incentive program is a complex task. Based on our experiences delivering channel incentives globally, here are some top tips to put you on the right path:

1. Get personal

Understanding the ambitions and aspirations of channel partners is the first step towards cultivating strong and profitable channel partnerships. Incentives are most effective when the individual feels they have a unique advantage; when the program has an idiosyncratic fit. Intelligent program design will help a participant or channel partner to feel that what is asked of them is within the scope of their role, and they feel equipped and ready to act.

2. Consider channel maturity

Different partners evolve at different rates. Consideration of the channel maturity and go-to-market strategy in each country your program will serve is key. Flexible program design enabled by technology ensures seamless transitions for all as partners mature in their markets.

3. Measure engagement

Measure the strength of brand-channel partner relationships and understand the moments and touchpoints crucial in building a stronger relationship. BI WORLDWIDE Canada, jointly with KANTAR, has developed the affection matrix model that assesses partner preferences and performance to categorize them into one of four categories:

1. Vulnerable channel partners are neither driven by ‘performance’ nor by ‘preference’, and are neither satisfied with the brand nor prefer it.
2. Engaged channel partners are satisfied with a brand as well as recommend it. Driven by both ‘performance’ and ‘preference’, they don’t face many roadblocks in their dealings with the brand and want to continue to work with it the next year.
3. Trapped channel partners aren’t satisfied with the brand but still end up recommending it. The reasons might vary from a tendency to resist change, a reputation-driven mindset, a lack of other options to move to, or more. Driven only by ‘preference’ the brand is often replaceable for these channel partners, and it’s only a matter of finding a more trusted and reliable brand.
4. Unattached channel partners are driven only by ‘performance’ and their relationship with the brand is purely transactional. Partners in this category feel brands are dispensable to them and will be replaced at the slightest inconvenience.

4. Target the right partners in the right way

A brand’s largest partners might also be the most demanding, eating into profits. Consider tailoring initiatives to the audience(s) that produce the best incremental results. The best partners likely share similar attributes. Leverage data and insights to create personas, then recruit, onboard, and target the right partners.

5. Be cautious of rewarding existing channel habits

The focus of channel incentives should be on rewarding behaviour change and the right behaviours. Structure your incentives to focus on incremental performance.

6. Both the journey and the destination matter

To achieve outcomes, rebalancing and rewarding the right behaviours along the journey matters. Both leading and lagging metrics should be considered when formulating a channel incentive strategy. Driving short-term goals, growth, and long-term advocacy should all be considered.

7. Keep it simple

Whether accessing via desktop or mobile, your program must be worthwhile and easy to use. User-specific communications are critical to attract and maintain engagement. Use your home screen to quickly call out highlights to entice and inform, and ensure navigation is clear and directive.

8. Make it memorable

An engaging and creative identity ensures your channel incentive program stands out and is memorable. Behavioural Economics (BE) theories tell us that information is remembered more easily the more we’re surrounded by it. We overestimate the importance of information that comes to mind easily and consider it our frame of reference. A vivid, simple brand for a channel loyalty program which engages installers and sets the tone is important for success.

9. Differentiated rewards strategy

If you want to motivate your channel, your incentive program needs to stand out from the crowd and offer something the participants can aspire towards. A points-based rewards system alongside a culturally relevant and exciting Rewards Marketplace offers participants the opportunity to be rewarded in a way that’s meaningful to them, increasing the emotive impact of the program and driving brand intimacy and advocacy.

10. Execution matters

Don’t minimize the importance of execution. A sound channel strategy is where it starts, but execution brings ideas to life. Brands that employ expert design along with the necessary systems and frictionless operational efficiencies stand out in the crowded channel.

11. Don’t focus on the tech

Too often, we see brands start with a platform-first mindset. Yes, a technology solution will be an enabler in your channel incentive program implementation, but it’s the program design, the integration of that program into your existing channel ecosystem, and the ongoing analysis and insight-led adaptations to your strategy that will deliver measurable results.

Impactful channel incentive programs are designed with care

The most impactful channel incentive programs acknowledge that each sales channel has its own unique set of opportunities and challenges.

Impactful channel incentive programs are designed sympathetically to overcome barriers and focus on incremental performance and behaviour change to maximize results.