July 2011 Feature

Optimize Your Incentive Programs to Get the Most Out of Your Investments

by Anna Johnson

Whether you want to generate more demand from existing customers, find more qualified leads, or close more deals, there is a corresponding incentive program to influence the behavior and performance of your channel partners in helping you to achieve your goals. However, before you start pumping dollars into your SPIF or MDF program, consider the following suggestions to help optimize your investments.
The Top 10 Focus Areas- 2011
Channel Management Insights sat down with Megan Pulliam, General Manager of Channels at Hubspan to learn how to make the most out of incentive programs. We asked Megan what advice she has to turn “bland and boring” into programs that sing to channel partners and deliver bottom line results.

Balance your incentive program portfolio to support the entire sales cycle from prospecting, nurturing, and closing deals

The first step in optimizing your incentive programs is to take a step back and look at how they work together to support your partners throughout the sales cycle. “Vendors often make the mistake of leading and promoting SPIFs to the channel without proper consideration of what type of joint marketing is required to qualify and nurture a prospect into signing a deal,” says Megan. “If you are investing in SPIFs to reward partners for closing deals and don’t have a robust MDF program to support demand and lead generation, then you’re setting your partners up for a very difficult close,” Megan continued. When you take a step back and see an imbalance in your incentive program portfolio, you can quickly make investments in under-served areas in the sales cycle. Once the adjustments are made and your channel utilizes the programs, you will see performance improvement from demand generation to closed opportunities.

Let the opportunity at hand drive the discussion around incentives

Not all vendors and partners see eye-to-eye on the sales opportunity. It’s important to have a conversation with partners and learn as much as you can from them about the different opportunities they see for your products and services. With your partners’ help, you may uncover ways to market and sell to prospects that you never considered before. When you come to consensus about the opportunities and the plan to win them, then it’s time to discuss what incentives will support the partner in seeking qualified opportunities and closing them. “Sometimes vendors jump in and start pitching their incentive programs without understanding the opportunities at hand. It’s a case of putting the cart before the horse,” says Megan. “Instead, let the opportunity drive the discussion around incentives. That way, vendors are using their resources to enable partners to close business rather than designing an incentive program that distracts them from closing business.”

Don’t expect every partner to participate in the incentive program

It would be nice if all partners were the same. If that were the case, vendors could easily predict behaviors and outcomes making it easy to develop incentive programs where one size fits all. However, reality sings a different tune. Partners come in a variety of shapes, sizes, and personalities. The beauty of a diverse partner ecosystem is that it can handle and adapt to the variety of opportunities that prospects throw their way. “As beautiful and necessary as a diverse partner ecosystem is,” comments Megan, “it would be wrong for a vendor to expect every partner to buy into an incentive program and perform well.” Megan continued, “I’ve seen companies continue to invest in incentive programs for nonperforming partners and channels with the hopes of increasing sales.” Instead, she reminds vendors to stay focused on the business opportunity rather than the partner profile or some other criteria to determine the viability of an incentive program. If the partner isn’t performing, then you need to consider that the business opportunity simply isn’t there and there isn’t any magic incentive program to change that reality.

Conclusion

So how do you know if your incentive programs are working? If you ask a channel sales manager (emphasis on sales), they would argue that being able to track leads to opportunities, and opportunities to deals closed would be the key performance indicator of any incentive program. “Traditional marketing metrics such as click-throughs on e-mail campaigns or new leads from events are useful to track,” says Megan. “But at the end of the quarter or end of the year, its deal size and number of deals that matter to both the vendor and the partner,” she concludes.

Here are the key takeaways when optimizing incentive programs:

  • Use incentive programs to enable your channel to find qualified opportunities and close deals faster. Partners are savvy and see incentive programs dressed up with a lot of bells and whistles as distractions rather than an enabling tool.
  • Every level of demand chain has different motivations—distributors have different motivations than resellers who are looking to grow their business and protect existing revenue, and their sales reps have still other motivations that are more personal. Incentive programs need to be tailored to each audience that appeals to their motivations.
  • Always keep your eye on the opportunities and design incentive programs around them.
  • Expect that some partners will not adopt the incentive programs and some may adopt but won’t perform well. Instead, learn from nonperforming partners and change your investments accordingly. Uncovering areas where not to invest is just as important as discovering where to invest your time, money, and resources.