February 2010 Feature

Reward Program Best Practices:

Communicate, Measure, and Adjust

Every vendor offers at least one reward program to help drive sales and increase its channel partners’ mindshare. But these programs often fail to address their objectives or realize their true potential. Why?

When vendors design programs, they fail to answer the one question that’s most important to their customers and channel partners alike: What’s in it for me (or WIIFM)? What’s more, they make certain assumptions that everyone is equally interested or understands the program as well as they do. In addition, they frequently don’t have the means to accurately track and evaluate the program’s performance.

Creating a Value Proposition that Expresses Value to the Partners

Channel partners are usually involved in several vendors’ partner programs, yet each vendor thinks it has equal or a majority mindshare. Your channel partners are businesspeople too, not just local reps for your product. As such, they are interested in three things: new sales to existing customers, new sales to new customers, or increasing overall transaction value or margin. You have to demonstrate how your program is going to help them achieve at least one of these goals. Otherwise, you won’t get the mindshare you think you deserve.

In addition, every program has to begin with the ultimate consumer, since marketing is about sell-through not sell-in. Many of us in channel marketing get too focused on the channel and forget this basic premise. But armed with this insight, you have the basis for crafting the ultimate value proposition. Once that’s identified, the next step is to identify what your partners need to capitalize on this opportunity, perhaps special incentives of their own, sales and marketing assistance, or training. Each of these program components needs to be designed to address the unique challenges of your partners to enable them to help sell your program more effectively.

One Size Does Not Fit All

The core values and structure of your partner programs may be common, but you should have different elements targeted to specific partners or partner segments that make the program more relevant for them, so they will embrace it as much as you do. Don’t assume any one program is ideally suited to the needs of each of your partners.

Identify those partner segments and individual partners you need to make the program a success. And make sure your objectives line up with their go-to-market strategy. Each partner type has a different role in the transaction process. The program needs to have something in it for each of them.

Get to know how your program aligns with key partners’ go-to-business models, and then tailor the components that best fit those models. For instance, some partners don’t participate in vendor SPIF programs when payments are made directly to their salespeople, so you may consider deferring those expenses to offer marketing or advertising support — or include the flexibility to remit rewards to the reseller company level instead.

Communicating Your Program to Your Partner Network

The biggest mistakes vendors make are assuming everyone knows their program as well as they do — and that partners know everything about their products and how to sell them.

Don’t assume everyone’s read the email announcing your program and understands it. Partners receive so much messaging every day, they filter out communications. And don’t assume they know all about what you sell. Your partners sell many different products from many different manufacturers.

Every program needs its own communication strategy — email, personal selling, telesales, Web sites, direct mail, seminars and even advertising. Tailor this communication mix to each of your channel segments, placing most of the emphasis and resources on those segments — or individual partners — required for the program to succeed. Don’t use a “one-size-fits-all” communication strategy, as chances are it will underdeliver. This is one key area where most programs fail.

Instead, take these steps:

Number 1: After you identify the partners you need to be successful, as well as their people and functions, tailor your communication strategy to reach them. For partners that aren’t that important to your success, send an email or post the program on your Web site.

Number 2: Focus on what’s in it for them. Partners need unique messaging — why to sell the product.

Number 3: Have a way to get your partners to acknowledge they understand the program. You can do this with advance registration, since it confirms their acknowledgment. Or try a fun, interactive quiz, where participants can win a prize by demonstrating their knowledge about the product or program in return for a prize. Or offer first-responder bonuses.

You want your partners to get and embrace what you’re trying to do. Make your program fun.

Key Considerations for Long-term Programs vs. Short-term Promotions

Launching any new program requires a lot of preparation and ramp-up time, and its infrastructure typically requires a large investment. Often overlooked is the human cost to administer and support the effort. It’s costly and takes a long time to build momentum. In fact, it’s amazing how long it takes to build awareness of a program, acclimate the partners to it and get them using it. Despite this being the information age, adaptation can take two to four months — or even longer.

Designing a flexible, longer-term program is frequently the better way to go, since it allows you to benefit from the momentum over a greater period of time and the infrastructure is already in place. This is the new trend, often referred to as partner loyalty programs. These programs typically combine several individual elements into a common program infrastructure tailored to address the needs of each partner segment. However, there is the wear-out factor with long-term programs, so you have to keep refreshing them over time, which you will want to do anyway to address specific challenges and opportunities as they occur.

Evaluating a Program’s Success

To begin, your metrics should align with your program objectives. And specific goals should be assigned to those objectives that become measurable.  There should be a clear overall business objective — that may be to “Sell X units of ‘Widget A,’” which is a good example of a clear business objective with a measurable goal.

However, there are other metrics to consider too. These are secondary objectives that — when achieved — contributed to the attainment of your overall business objective. Failure to achieve these secondary objectives will help you isolate what is, or is not, working with your program. A good example of a secondary objective may be “X percent of channel partner participation in the promotion.” These secondary metrics are most often tied to each program strategy.

Ideally, you want to isolate the effect of the program on your program goal so as not to let other factors influence your evaluation of success. You can do this by comparing its performance against a control group whenever possible.

Finally, and possibly most important, don’t forget the subjective metrics, since they reflect how your program is perceived by key stakeholders. Talk to your partners about how the program went; why they didn’t participate; or, if they did, what they didn’t like about the program. I find this is often the source of the most insight and helps you build a library of best practices that will make future programs even more effective.

Learning and Adjusting a Live Program

This is where the importance of the secondary objectives comes into play. There should be metrics assigned to different phases of the program life cycle.  Linking metrics to your sell-in strategy by using specific goals aligned with the program launch and deployment — and understanding all those metrics — is necessary to make your program a success.

Monitor closely those partners you need to participate to make the program a success, and be very hands-on with them. Measuring success in key partners is critical.

Apply Key Learnings to Future Programs

Based on your objective and subjective metrics, you can create best practices to enhance your program or make it better so partners participate more.

Plus, you can improve your model with each program and better align your program to your key partners’ go-to-business models.

You don’t have to reinvent the wheel. And you don’t wind up “handing out tickets to people who are already standing in line for the movie” by rewarding intended behaviors. Instead, use your learnings to design a program that focuses on ideal behaviors or behavior modification.

However, it is my experience that many programs succeed or fail not because of the program’s design but its execution. Maintaining and enhancing a list of best practices will ensure that a program is more successful than the last. Each of these best practices should contribute to at least one of two business outcomes:

  • Program Effectiveness — its ability to achieve the desired business outcome.
  • Program Efficiency — its ability to contribute to a faster time to market, lower costs or reduced administration time.