Over $7 trillion in products are sold through wholesale distribution channels in the U.S. each year. Distribution channel partners are vital for most companies to get their goods and services to market. Distributors can wield enormous power carrying thousands of products and generating billions of dollars in annual sales. Many employ hundreds or even thousands of salespeople. A supplier able to gain just a little more focus from the people in these channels can reap huge rewards quickly.
It’s no wonder U.S. companies spend over $17 billion on channel incentive awards each year, according to the Incentive Federation. The simple fact is, if your products are sold through independent distribution channels, you need strategies and tactics to influence your channel’s people to align their goals with your sales. Otherwise, your competitors’ programs are probably bleeding share from you.
Channel incentive programs are designed to gain the time and discretionary attention of your partners by:
• Gaining increased shelf space by encouraging distributors to shift inventory away from competitors to your products
• Driving sales by prompting channel reps to demonstrate your offerings and rewarding them for moving customers from competitive products
• Improving margins with rewards for changing the mix from commodity goods to more profitable value-added products
In 2010, researchers from the University of Southern California and the University of Central Florida, led by Dr. Harold Stolovitch of the Université de Montréal, found that properly selected, implemented and monitored non-cash incentive programs increase performance by an average of 22 percent. Team incentives can increase performance by as much as 44 percent.
But before you launch a new program, you must be prepared. Remember the caveat here is you need to run the right program and implement it correctly. Here are five things you need to remember as you develop your channel incentive program:
1. Define your goals.
Be specific and include a time frame. Set realistic targets based on your previous sales or on an objective look at the market. “Increasing sales” is too broad of a goal and won’t tell you who to engage in your program. “Increasing category sales by 12 percent in six months” is specific enough to help you develop the right program.
2. Gain channel management support.
You wouldn’t want someone telling your people what to do. Make sure you tell your channel partners your plans and get their buy-in.
3. Maximize engagement within budget.
No one has unlimited resources, so use your rewards budget wisely to get the most number of people engaged. Start at the top of the channel and move downward as long as the rewards justify the participants’ efforts.
4. Remember, share matters.
The greater share of your distributor’s business you have, the more attention you get. The big fish will have different programs than the smaller competitors. Plan accordingly.
5. Learn the rules.
Program rules are designed to drive behaviors, so keep them simple. Make sure any rules are meaningful, measurable and movable. Build rules to engage your middle performers. As a group, they have the greatest potential to generate results.
Taking time to clearly define your goals and gain channel management support helps build the right program to meet your needs and ensure active partners. Then, effectively utilizing your budget to maximize engagement, designing your incentives around your share of the channel volume and implementing the right rules will power the engagement and performance your program needs. Always remember, if you’re not engaging your channel partners, someone else is.
Want to learn more? Get a link to our recorded webinar at www.hinda.com/channel for more details on operating a successful channel incentive program. Or visit www.hinda.com to find out about engaging, inspiring and rewarding incentive programs.
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