OK, you want to develop an incentive program targeting the point in a sales process where it has the most influence: the transaction between a reseller sales rep and their customer/end user. Great! There are two approaches one can take—a choice of whether it’s a SPIF program or loyalty program. The selection of either will depend on your program goals, budget, and timing. I hope to make your decision easier with this entry.
Let’s start with the definition of each, or even better, their distinctions:
SPIF programs are really viewed as short-term incentive programs. The duration of a typical SPIF program can be as little as a few weeks to as long as a year. The primary goal of a typical SPIF program is to address a short term sales need, such as depleting inventories of an end-of-life product. A typical SPIF program can be quickly deployed, and is designed to influence as many sales outcomes as possible during its limited life.
Loyalty programs, on the other hand, are typically longer-term programs. Loyalty program objectives that not only address product sales (as stated above with the SPIF program), but also are designed build relationships with participants through ongoing interactions. These interactions may take several forms (emails, snail mail, quizzes, etc.) which are intended to establish a sustainable bias toward your products over time with that participant.
Both approaches have their place, but how do you know which one to use? Here are some key characteristics of each that will help you decide:
Pros: SPIF programs can be quickly deployed. Administrative requirements and program infrastructure can vary from highly manual processes (spreadsheet and fax machine), to dedicated online promotion micro sites that centralize all claiming and administrative activity. For this reason, SPIF programs are ideal for short term programs as the costs for set-up and administration are minimal. SPIF program infrastructure is designed primarily to facilitate administrative processes.
Cons: A drawback to launching any channel program or promotion is the resource requirements needed to generate awareness and promote participation. The effort to do this can far exceed the administrative infrastructure in terms of costs, manpower, and ramp-up time. Many otherwise efficient SPIF programs have failed due to poor communication to, and buy-in from, potential participants, and thus resulted in low levels of involvement and claim activity.
Pros: Loyalty programs directed to resellers sales reps are as much about building a relationship with that rep as it is about generating sales (the relationship being the means, to the end of generating incremental sales). Your relationship with an individual participant may even transcend that of a given reseller in that if the participant changes jobs, he or she may still be eligible for loyalty program participation. The resulting continuity allows you capitalize on the momentum you have created within the relationship building process. Therefore, this is an ideal incentive program structure if you are targeting certified personnel who will remain certified despite their place of employ. What’s more, properly designed the loyalty program infrastructure would accommodate dynamic award structures, so if there is a tactical need to promote a specific product or activity during a given period, the infrastructure can be configured to adapt to those changes as needed. Finally, the time and investment required to ramp up the program during the recruitment phases occurs only once per participant, future program enhancement and any changes to rewardable activities can easily be communicated, and accommodated, within the system. As such, this is an ideal approach for channel marketers who would otherwise plan and execute a number of tactical SPIF programs serially.
Cons: The drawbacks are few in number, but may be insurmountable in execution. Loyalty program inherently have a more complex infrastructure that can come with an increased price tag (in terms of both time and money), and the time-to- market can be greatly extended versus a simpler SPIF program for a number of reasons. Therefore, a loyalty program may not be practical in many instances.
Considering the pros and cons of both, loyalty programs are the more effective and efficient option over the long run. Therefore, it is the best approach if targeting reseller sales reps with incentive programs is going to be a staple in your channel marketing mix.