In part one of our “Incentives Demystified” we ask: Are SPIFs always effective? And what is needed to develop effective incentive programs that ensure the money being invested to reward partners and manage/operationalize the program, give vendors the desired outcomes? Followed up next week when we ask “what impacts the effectiveness of different Incentives in delivering desired results?
Every frequent traveller, and even every holiday traveller, more than likely has at least one frequent flyer membership. People generally tend to stick with one membership to accumulate frequent flyer miles that can be exchanged for air tickets, merchandise, or hotel discounts. Frequent flyer programs can be impactful in driving mindshare and lifetime loyalty among their customers.
Increasingly, this form of incentive program is being adopted by B2B vendors for the sales and pre-sales representatives of their partners. Partners represent multiple brands. As such you need an incentive program to entice your partners’ sales reps to sell your products over another. Also known as the Sales Performance Incentive Funds (SPIFs), the objectives are to gain mindshare and drive traction among the partners’ sales individuals. SPIFs can come in the form of monetary rewards or accumulated in the form of reward points. These can then be exchanged for merchandise, vouchers, or travel. It can be time-bound to drive immediate sales results or long-term to drive loyalty.
The effectiveness of SPIFs depends on the types of partners you are targeting. Local system integrators (SIs), Independent Software Vendors (ISVs), and Value-Added Resellers (VARs) usually don’t restrict their sales representatives from directly benefiting from vendor Incentive Programs. However, SIs and mid-to-large partner organizations, generally do not allow the receipt of such incentives by the sales reps. This is because the expectation is for sales reps to sell ‘value‘ without any preference for a specific brand. Sometimes, a business relationship manager in the partner organization may be assigned to claim the rewards on behalf of the organization for all the sales made by the reps. These rewards are often put towards internal sales contests. As a result, the objective of encouraging the sales reps to advocate the brand cannot be realized.
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Sales reps in large government resellers are highly unlikely to participate in SPIF programs for compliance reasons. When it comes to Distributors, there is a need to enable a two-tier program that allows the tier-2 partners to be incentivized, to be effective. Therefore, it is essential to get to know your partner types and their incumbent policies around incentives from vendors. It also means you might need to create different types of incentive programs to drive sales performance among different types of partners effectively. Not to mention that the partner ecosystem is evolving. New partner types such as consulting firms and IoT device manufacturers are coming into the scene. These changes further add to the complexities of compensation and incentives.Therefore, to drive different sales behaviors across different partner types, different incentives schemes need to be put in place.
If $1 spent gives you 1.4 points, 2.5 points are required to exchange for 1 mile, and a minimum of 6500 miles for a travel ticket, how much do you need to spend to redeem a travel ticket? How’s that for a brain teaser or a math exercise for the day? This is a typical example for a credit card incentive program with a frequent flyer membership, enabling travel with spending. When it comes to partner incentives schemes, it does not need to be this complicated. So the easier it is for partners to know what they need to do to earn the reward they desire, the more likely your program will succeed.
Steps to simplicity: The goals of the program should be clear. The terms and conditions simple to understand. And the process to redeem the rewards straightforward.
Besides making the program simple and clear, the redemptions of the rewards should be hassle-free. Firstly, the partner rep should have clear visibility to the points earned, the rewards he or she may redeem, and be able to make the redemption easily.
Then, once a partner redeems the reward, the delivery of that reward should not take long. If you have good partner coverage, with partners spanning across multiple regions and countries, your incentive program must support multiple currencies and languages. Logistics support teams capable of speaking different languages should be available to address partners’ inquiries on their rewards and redemptions.
Your incentive program may be very simple and attractive. However, if the process of redeeming the rewards is a painful one, chances are your program is not going to give the desired outcomes.
*Stay tuned for the next blog on “Incentives Demystified”. It will discuss the different types of incentives and what each type of incentives can do for your partner business.
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