Channel Renewal Sales Incentives

Renewal Sales Incentives - Channel Mechanics

Maciej Danielski, WW Inside Sales Manager  |  

calednar Channel Mechanics12th Mar 2020

Renewal Sales Incentives

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This article in our Renewals Sales series focuses on the topic of Renewals Sales Incentives when your primary go-to-market is via the channel. In order to start thinking about incentives for Renewals Sales, one needs to have a defined set of KPIs that allows for the analysis of historical performance. These data-generated insights will dictate where and when in the process, an incentive might be of importance.

 

But first things first – what outcomes do you want to achieve and what behaviours do you need to “incentivize”?

 

Think about this age old business quote in the context of incentivizing your partners:  “Tell me how you’re going to measure me and I’ll tell you how I’m going to perform”

 

Let’s start with outcomes. If your current renewals sales rates are below your industry peer group average, or less than 70% for example, then a key desired outcome should be to drive up your renewal rate by a certain percentage amount, year over year. So firstly, define the target renewals rate you want to achieve . This may take several quarters or even years to get to the target, but at least define it. Then, based on the current view, start to think about the incentives you need to offer to achieve these outcomes.

 

Timeline based Renewal Sales Incentive

In the previous article on Measuring Renewals Sales Performance, Jim Kelly elaborates on ‘Time Based KPI’s. Understanding how early or late your customers decide to renew, should give you an indication of how well in advance they should be contacted about their upcoming renewal.

You need to reverse-engineer this process and ensure that the chain of communication all the way from vendor through to customer, happens in a timely manner and allows for unforeseen delays. As a result, you can now be deciding to implement a timeline-based incentive for your channel partners. For example all renewal customers must receive a renewal quotation 120 days in advance of contract anniversary.

 

Percentage or Value based Renewal Sales Incentive

With a well-defined desired outcome, vendors typically set quarterly renewals goals for each of their participating partners with metrics including:

– Renewal/Retention Rates

– Number of Multi-Year Deals

– Overall $ Value

 

Consider here measuring and setting goals for Sales Renewals of particular Product lines or Service Offerings. Is there a particular part of your business that has a poor retention/renewal rate that should be the focus for improvement?

 

Types of Renewal Sales Incentive Program

The next step, once KPI’s are selected, is to decide on which type of Renewal Sales Incentive might work best for your partners to motivate them to achieve/exceed such goals, KPIs or desired behaviours as laid out above.

Some research into what appears to work in your industry would be wise here. In addition to financial modelling of the cost and Return on Investment (ROI) of the program. If you have historic data on your renewals process available, modelling can be conducted to predict a variety of potential outcomes and help set thresholds for performance vs. rewards.

Consider too if the incentive would be at the partner company level, for example Rebates. Or at the individual salesperson level, for example SPIFFs or Sales Incentives. The incentive could be that meeting/exceeding targets acts as a trigger for eligibility into other existing Partner Programs, such as Market Development Funds (MDF), discount programs, niche rewards, etc.

Programs that offer additional benefits for securing the renewal and additionally creating upsell and/or cross-sell opportunities, are typically well received by channel partners.

 

 

Our Top 5 types of Incentive Programs for Renewals

    1. Rebates (e.g. a percentage of Renewals Sales value paid back to the channel partner after end of a given period)
    2. SPIFFs (Sales Incentive reward to individual Salespersons)
    3. Competition type rewards (e.g. vouchers, holidays for the Top 10 Partners/Salespeople in a region/country)
    4. Eligibility Trigger type rewards (e.g. entry to one or more Partner Program benefits like MDF)
    5. Discount Type rewards (e.g. enables additional discounts for the Partner on Services sales)

 

The No Incentive Route

But what happens if a vendor chooses not to incentivize partners on renewals business? You might think that nothing else happens and you continue to see renewal rates of 60% to 70%. This might be the case if competition didn’t exist. In most cases, those 30% to 40%  of customers that have not heard from the vendor or the channel partner well ahead of the renewal anniversary, may already have decided to purchase a competitor offering. And worse still, may have procured it from the same partner that resells your products!  Beware that it is becoming common practice for vendors to incentivize indirect sales by driving ‘rip and replace’ programs. This is especially so for commodity type products. And the most suitable time to do this? Why it’s at the point of renewal of course.

 

 

How Channel Tooling Impacts Incentives

Of critical importance to manage a successful incentive program, whatever type is chosen, is to enable the participants to manage and track their Renewals progress over the timeframe of the incentive. You can offer any type of incentive desired, but to motivate partners, they need the tools to succeed!

It is still common practice in the Channel to provide renewal pool data in an ‘analog’ way. Here spreadsheets with thousands of rows of sensitive information are sent via email every quarter by vendors to their distributors and resellers. The amount of work and effort that goes into producing these files by vendors is enormous and an unnecessary overhead. It’s not a maintainable, flexible, nor a scalable solution. Once such inefficient practices are flagged to leaders and decisions are made to make changes, many vendors will start looking into building some sort of custom scripts or put together a team to develop a custom tool on top of their existing channel technology stack. This, in time, will result in its own issues, e.g. an employee leaves and there’s nobody who knows how to maintain it or fix a problem.

 

COTS

Instead, vendors should consider a Commercial-Off-The-Shelf (COTS) solution. One that solves operational issues, enables partners to secure renewals and ultimately contribute to a vendor’s revenue growth. Modern, channel partner oriented ‘digital’ renewals platforms are now available which are designed to be flexible and configurable, provide future-proof agility and are easy to use by both the vendor and their partners. Most importantly, they are easily and quickly connected via APIs to other IT systems such as ERP platforms to upload POS data daily, weekly or worst case, monthly, to allow channel partner renewals sales performance to be displayed on-demand. Fast reactions and course corrections are a daily must for vendors.

 

The ability to go from a designed renewals incentive program with a desired outcome, to roll-out in a single click in real time is no longer a ‘nice-to-have’. It’s a modern business imperative to maximize revenues. 

 

Conclusion

This article touches on the importance of running renewals incentives via the channel. Clear understanding of today’s renewals performance, and the tangible reasons for the results will help vendor to define and design the right type of incentives to secure best in class renewal rates.

Rolling-out channel renewal incentives globally, by geography/country, by product, by partner level or any other factor in today’s business environment, is crucial. Adopting a modern COTS renewal platform can provide competitive advantage by allowing you to refine, adjust and “tune” your renewal incentives in real time, based on live results insight and analysis.

 

Our Top 5 Tips for Incentivizing Renewal Sales

    1. Understand your Renewals Sales Performance in granular detail and identify root-causes for any below par performance.
    2. Define the desired outcome and incentivize the right behaviours to achieve it.
    3. Beware and plan for a competitive attack at time of renewal.
    4. Replace your ‘analog’ renewals workflows and tools with an agile, scalable and future-proof ‘digital’ Renewals platform.
    5. Keep a close eye on the incentives results, refine and fine tune where necessary to maximize the returns

 

 

Further Reading on Renewal Sales: 

    1. Renewal Sales 101 | The Business Opportunities and Practical Challenges
    2. Driving Renewals Sales via the Channel
    3. Securing Renewals … Data is King
    4. Measuring Renewals Sales Performance
    5. Renewal Pricing Strategy for Direct and Channel Sales
    6. Service Contract Renewals – When is the right time to start?

 

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