How to Use Incentives and Promotions to Create a Symbiotic Channel

How to Use Incentives and Promotions to Create a Symbiotic Channel

by Kenneth Fox, CEO, Channel Mechanics

Incentives and Promotions

Compensation drives behavior

“Compensation drives behavior”, it is one of the maxims on which any channel program is based. Channel sales teams have been using a combination of incentives and promotions within the context of a special pricing incentive fund formula (SPIFF) to spur sales for as long as anyone cares to remember.

It’s not precisely clear which came first: The term SPIFF itself or the acronym now ascribed to it.  There are references to the term SPIFF being used as a slang term in sales as far back as the 1850s. Cloth manufacturers, then known as drapers, used the term to describe sales promotions for items that had either gone out of fashion or were considered end of stock items that needed to be moved out of inventory. Nobody was thinking much about formal sales formulas in those days, so chances are the notion of there being a unique pricing incentive fund formula may be a modern appendage.

 

The trouble with SPIFFs is….

That much of the same thinking about incentives and promotions employed well over a hundred years ago still permeates the channel today. IT vendors still try to use SPIFFs to drive sales of outdated equipment in a way that the leadership of a channel partnership doesn’t always appreciate. The leadership of many channel partners is trying to drive sales of products that create the most amount of opportunity for the organization to drive high-margin services. If the IT vendor is offering SPIFFs and other incentives directly to the sales representative without the approval of the leadership of the channel partner, they can severely damage the relationship. The leadership of channel partners can become quite incensed when they discover a vendor has essentially highjacked their sales teams.

 

The news on the usage of incentives and promotions is decidedly mixed. A survey of channel executives that attended a recent Channel Mechanics webinar on channel automation, found more than half of attendees only launched two to four incentive and promotions programs in the last year. One of the primary reasons for such little reliance on these programs is that most channel managers don’t have real-time visibility into whether these offers make a difference in terms of increased sales.

 

Hope is not a strategy!

A channel automation platform such as that provided by Channel Mechanics changes that equation. By delivering actionable insights into channel sales, it makes it simpler to experiment with different offers to see precisely what offers resonate with channel partners in a specific region or vertical market. A modern channel automation platform also makes it much simpler to launch those incentives in collaboration with distribution partners. Today many channel managers resort to a spray and pray approach in the hope some offer will have an impact. Everyone knows, of course, hope is not a strategy.

 

The Channel Mechanics platform make it possible for channel chiefs to implement a more programmatic approach to the management of incentives and promotions. Channel leaders, for example, can be kept proactively informed what levers a vendor is willing to push or pull to drive sales in a specific quarter, month or even a given day that aligns with the strategic goals of the partner. After all, sales alignment needs to be a two-way street. A channel automation platform also serves to prevent overly exuberant product teams from launching rogue promotions into the channel to make a short-term sales goal at the expense of the business relationship.

A genuinely effective channel is built on ecosystems that extend across multiple symbiotic relationships. Understanding precisely how those relationships work requires a channel automation platform that enables a channel manager to see in real time how partners react to various economic stimuli.

We invite you to view a demo of the Channel Mechanics platform. We’re confident you’ll have a new appreciation of just how dynamic relationships driven by compensation across your channel ecosystem really are.

 

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