Driving Partner Sales through Incentives

Posted: 5/7/2012 by Norma Watenpaugh

Following our last Deal Registration blog post, many readers have been wanting to know more about how to incent partners to register a deal and examples of how "best in class" incentive programs work. Simply put, the purpose of incentives is to influence the behavior you want from your partners through rewards. The issue lies in which partners should you reward, how and with what to reward them.

Incentives can take several forms. The most common method is to award an additional discount off the sales price of the deal, with typical incentives ranging from 5% to 15% off the reseller's normal sales price. Many incentive levels are structured around program tiers where channel partners in more advanced tiers enjoy greater discount incentives. This ensures your most trusted and faithful partners are rewarded for their loyalty. It also drives lower tier partners to engage in the behaviors needed to move to higher tiers and in turn, receive better incentives. This structure encourages more loyal partners and strengthens the value of a vendor's channel program.

Another way to create incentives is through rebates. Other programs provide additional MDF funds. Each incentive choice has their advantages. Rebates are paid after the fact and are harder for channel partners to carry to the bid price but enhance partner profitability. Additional discounts can increase partner competitiveness on the bid price, but can also serve to erode the street price of a vendor's products or services and negatively impact partner profitability. Incentives awarding additional MDF funds encourage partners to invest in future growth. Quality in the end is better than quantity. You want strong sales while still maintaining your brand's reputation and value.

Incentives that focus channel sales activities into targeted markets, products, or specializations enhance partner profitability by providing the additional financial incentive for sales that close in those designated segments. They also help to align channel sales to vendor strategies for growth. Let's say you have a new product you're launching and it needs exposure in the market. You may give partners larger incentives for selling this product than for an existing product that's a cash cow.

If you intend to offer incentives based on multiple criteria, be sure to determine whether incentives are stackable. In other words, can a partner earn an incentive for a specific technology sale and a second for a vertical industry at the same time? Carefully examine how the various payouts add up and impact your overall pricing model.

Also be aware that the more complex your incentive model becomes, you will require more flexibility and sophistication in your partner management system to manage it such as a Special Pricing Module. Since money is on the line, partners will need clear line of sight on what incentives they've earned and accurate reporting.

Special Pricing Solution Benefits:

  1. Incent desired partner behavior consistent with your company's sales goals.
  2. Increased visibility into pricing decisions.
  3. Increase revenue and improve gross margins through smarter, faster competitive responses.
  4. Improve partner loyalty.

About our Guest Blogger

Lisa Heydorn, Professional Services Manager at Requisite Software, has over 15 years of experience with channel operations in high-tech, telecommunications and manufacturing industries. She is a proven leader with strong skills in project management, customer service, execution, and on-time delivery. At Requisite, Lisa is responsible for the Channel Management solution.

Responses to Driving Partner Sales through Incentives

Sean

I have worked as a channel manager for 3 different vendors, one of them was a software product. We gave upto 50% discount MSRP is if the top Gold partners hit on all cylinders 30% for Gold level, then add 10% for Deal Reg then on back end another 10% in MDF. In the end of the day how much can you still afford to give discounts off the MSRP and still make money as the vendor? Where is that line at 50% off or 60% off list price?

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