Research on the Best Practices for Sales Channel Incentives

  • The findings reveal that the right incentive program can increase sales through the channel. The survey reports that a majority of respondents indicated that an effective incentive program increases sales of a particular vendor’s products by up to 40%.
  • Total revenues increased by 12% over the desired 20% increase
  • The company increased marketshare in 9 of 12 markets to a level in excess of 30%.
  • Net Operating Income increased to 9% of revenue over the desired 10%
    • The financial results created, expressed as incremental above the projected company plan, specifically created by the ROI Incentive Program included:
    • Incremental increase in revenue of 12%
    • Incremental decrease in SG&A Expenses of 5%
    • Incremental increase in net operating income of 9%
    • Incremental decrease in outstanding Accounts Receivable of $42,500.00
    • Incremental decrease in Accounts Receivable collection by 7 days
    • Incremental decrease inventory valuation of $38,300.00
    • Incremental increase in inventory aging of 4.6 days
      • The incentive program yielded the following Return on Investment (ROI):
      • Total Incremental Improvement: $ 3,934,700
      • Total Incremental Costs: $ 3,186,900
      • Total ROI: $ 747,800
  • Define, propose, review, fund, and memorialize the incentive program
  • Notify channel partners whom are eligible to participate
  • Track, validate, and calculate accurate payments to partners
  • Analyze, model, visualize, assess, and report on the incentive program results
    • Factors that are essential to assessing incentive performance include:
    • Partner performance, comparing sales performance pre- and post- introduction of the incentive
    • Product sales performance, comparing sales pre- and post- introduction of the incentive
    • Sales by partners participating in the incentive as compared to partners not eligible to participate
    • Sales of products covered by the incentive compared to products not included
    • Geographies, partner categories, and product categories of incentivized versus non-incentivized sales
      • After new incentives are defined, communicating to the partners with accuracy and timeliness about the program becomes a critical next step in engaging the partners. Systems that assist channel managers with communications will help speed the process by::
      • Providing accurate lists of eligible partners
      • Providing accurate eligibility information on the combinations of factors on which partners will get paid
      • Providing the accurate timeframe governing the program
        • iv. Companies that sell through multi-level sales channels must maintain focus on four key business objectives in order to get maximum value from channel programs, partners and products:
        • Increasing channel revenue
        • Reducing the cost of channel sales
        • Gaining actionable intelligence
        • Improving partner engagement
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