Channel Partner Incentive Program Best Practices

Apr 19, 2022

A great channel partner incentive program can be the difference between a profitable, growing channel partner network and an expensive, ineffective network.

If you’re implementing a new channel partner program strategy and want to ensure you set it up for success, you’re in the right place. We’ll also cover some best practices that often get neglected but can significantly improve existing channel program success.

Let’s start at the beginning: objectives and strategy.

1. Clearly define objectives and strategy

It may seem trite to start here, but many large and successful organizations struggle to set OKRs effectively.

What behavior are you trying to create, and how does it align with the business objectives?

Determining the strategy and objectives for your channel partner incentive program is the key to success. It creates a compelling reason for investment and provides a lens through which you can make better decisions.

Get specific on your objectives and KPIs. Ensure your OKRs are measurable and realistic. Forecast the impact of incentives on the business to determine which incentives will drive the right behavior to reach those goals.

2. Involve all relevant stakeholders

One of the most common mistakes we see in channel partner incentive programs is the lack of communication with stakeholders about the program objectives and measures of success — internally and externally.

First, involve senior leadership as your channel partner program champions. They will advocate for the program at an Exec level and ensure you can secure the resources to drive success.

It’s also critical to involve key stakeholders at the partner organizations and their internal sales counterparts. Everyone involved in the incentive scheme needs to understand its purpose and their role within the program. Discussing your goals with partners is the best way to ensure your incentive program has a value proposition that resonates with your partners and that its goals are reasonably attainable.

The involvement of your internal salesforce is vital to your sales incentive program’s success. First, you need to avoid vendor-partner conflicts in the program. Second, your sales team can help move the needle for partners, helping to promote the program and build better relationships with your partners.

3. Use Real Data to Model Budgets

Budgeting out your sales compensation spend is a must. We encourage you to go a step further and integrate your historical data into forecasts using contemporary data analysis and statistical modeling tools like Monte Carlo simulation.

Channel partner programs create a wealth of raw data, but many large enterprises struggle to use that data effectively because of inefficient data-management processes. That is largely because legacy ICM software was designed to keep your compensation team in an execution role.

Successful partner programs have a strong grip on their data and can analyze it with very little time or resources; they’ve elevated sales comp to a strategic center. That enables them to identify the strengths and weaknesses of the program in real-time, adjusting incentives that aren’t producing the right behavior before they impact business results.

Effective data management also allows sales comp teams to get more strategic with their budget modeling. It’s one thing to estimate potential revenue and return on incentive spending using a couple of scenarios. It’s a different ballgame when you can model thousands of quota attainment and sales volume outcomes and use historical data to predict the probability of each occurring accurately.

4. Define/Be Selective

Do not incentivize every channel partner. Rather than spread resources thin including all partners in your program, focus on how you can reward partners that bring the most value and with the greatest upside potential.

Limiting the scope of your program will allow you to better tailor the incentives to your top-performing channel partners. That will help you create channel sales incentives that resonate with your top partners without requiring as many resources as a holistic incentive program.

5. Communicate

Channel marketing is already messy and obscure. If partners need to invest significant time and resources to understand or benefit from the incentives, they won’t do it.

Communication at every stage of the incentive program planning and implementation is critical to its success. That means involving the stakeholders early in the planning and ensuring the structure is easy to understand and communicated to partners and any internal stakeholders effectively and frequently.

For best results, partner sales teams need to know what to do to get the incentives and what they did to earn them when they succeed. That means detailed, real-time, next-best-action dashboards and regular automated notifications on results and milestones. Use every medium that makes sense for your partners and use them often.

Communicating your compensation plan effectively will get your partners excited and engaged in the program and help them get the best results for them — and you — throughout its lifecycle.

6. Plan for Product and Program Life Cycles

All products and services have a fairly predictable lifecycle. Partner incentive programs are no different.

To get the best results, plan for the expected growth and decline in activity with timely SPIFs, kickers, and one-off incentives. Those will ensure get products off to the best start and mitigate any drop-off in transactions as products reach the end of their lifecycle.

No incentive program can last forever. Even the best loyalty programs eventually retire, so ensure you plan to relaunch or reinvigorate your program well before seeing that inevitable decline in engagement.

7. Analyze and Optimize

If it wasn’t already obvious, we’re a big proponent of the power of data to drive results. Effective data management and manipulation giveForma.ai’s platform its superpower predictive capabilities.

The forecasting and scenario modeling doesn’t stop at the planning stage. Organizations with the most successful channel partner incentive programs continuously monitor and analyze their data to understand how the program drives business activity and which incentives drive increased sales.

They can identify incentives or partners that are underperforming or deviating from forecasts and quickly model and implement changes to rectify them.

Ongoing strategic analysis and optimization are only possible once you elevate your sales comp team to a strategic role. They won’t have the time to monitor and analyze if they’re busy managing data uploads and partner disputes.

8. Personalize Incentives

People are different, and your partner companies are different too.

What incentivizes one sales rep may not work for another. Channel partners are equally unique. The most effective partner incentive programs ensure their incentive offerings are personalized to their partners. That is why it’s important to limit the scope of your program and involve stakeholders in planning. That allows you to understand what type of channel incentive will drive behavioral changes.

One-size-fits-all rarely fits anyone well. The same goes for incentives — especially when your partner network spans different currencies and cultures.

Your ability to tailor incentives to produce the desired behavior in each partner organization will determine your program's success. That’s why we encourage you to be selective about who and what you include in your incentive program; each partner included adds to the complexity of the whole program.

Unless you’re using a next-generation sales performance management tool like Forma.ai, you will struggle to implement individualized incentives without a massive resource load and a lot of stressful errors.

9. Get the Right Tools

If your team is still using spreadsheets, legacy ICM, and a cluster of business intelligence tools to report on your channel partner program, it won’t be as effective as it could be.

Sales compensation teams at most mature enterprises are trapped on the “payroll treadmill.” They are too busy managing data uploads and rebuilding rule logic in their ICM software to analyze the program's effectiveness in a meaningful way.

What works for a 50-person organization will not work for a 150-person org, and incentive programs get exponentially more difficult the larger and more complex the business becomes.

Channel partner incentive programs are the largest, most complex incentive endeavor you can implement. Attempting to administer a partner program using the same tools and processes as your internal incentive program will burden your administrative resources and limit program effectiveness.

Find and invest in purpose-built tools to handle the complexity of a channel incentive program or expect your incentive program to be incredibly expensive and limited in impact.

Data Drives Channel Partner Incentive Program Success

If there is one area that we recommend investing in to ensure your channel partner incentive program gets off to the best start, it’s your data management processes and tools.

Poor data handling practices cause the bulk of incentive program effectiveness. They limit sales compensation analysts to an execution role, working in spreadsheets or programming ICM software rather than analyzing and optimizing the incentive program.

We advise all our customers to elevate sales comp to a strategic role in the organization by implementing sales compensation automation software like Forma.ai. The right data management tools can eliminate human errors and integration problems, releasing your analysts to work on optimizing the incentive program instead.

Here’s the secret to channel partner incentive program success in a paragraph: Get your data inflows clean and automated. Use modern data analysis to understand where partner incentives can drive results and have meaningful discussions with the partners you’ve identified. Then, keep coming back to that data to analyze and optimize your program performance, and communicate that information widely across the organization and channel partner network.